Nancy Pelosi on “This Week”

February 7, 2005

I suppose I’m beyond being truly appalled or even surprised by anything Congresswoman Nancy Pelosi says, but I can’t help commenting on her appearance yesterday with George Stephanopoulos, mainly about Social Security. Right out of the shoot she placed her arrogance on full display.

When George asked her about former Congressman Tim Penny’s proposal to peg future SS benefits to prices rather than wages, she refused even to address it because Tim Penny was not a big enough player in her view. When George asked her whether she could accept Penny’s proposal she said, “Well, no, Tim Penny is not in the Congress now nor was he part of the leadership when he was here.”

Excuse me, Nancy Pelosi. Is Penny’s idea good or not? He’s still an American citizen isn’t he? Or do you, champion of the common man that you are, only consider ideas from fellow elites? When pressed, though, Pelosi got to her real objection to Penny’s idea. Her predictable reaction is that by switching the index from wages to prices you are “slashing benefits.” My understanding is that this particular type of indexing was implemented by Jimmy Carter in 1977 or so and that it results in SS benefits increasing at a faster pace than the cost of living.

In effect, beneficiaries are getting a raise beyond that of the population. And to her and her follow libs, a change in the plan to tie benefits to the cost of living instead of a higher figure is “slashing benefits.” This is the same concept Rush has talked about for years with Congress’s base line budgeting. Any reductions in the rate of increase are treated as spending “cuts,” when they are no such thing. But how can you even have a dialogue with people like this when they refuse to play on the same field of language?

Pelosi also summarily dismissed the idea of raising the retirement age. Yet she then had the audacity to say:

But here’s what we’re saying. Let’s go to the table. No preconditions. Let’s sit down with the president. Put everything on the table. See what the impact is on the beneficiaries. See what the impact is on our deficit and our budget, and go forward in a bipartisan way.

In other words, we will establish some preconditions — such as no reductions in the rate of increase of benefits and no reduction in the retirement age — we’ll take things off the table at the very beginning, then we’ll say we’ll say that everything’s on the table. We’ll say we want to approach this in a bipartisan way, except that any ideas that Republicans have — such as the change in indexing, retirement age, and personal accounts — will be considered partisan and off the table. (And, by the way, Pelosi did say personal accounts could not be considered because they would increase the deficits and anything that would increase the deficits were unthinkable — even though “everything’s on the table.” Right.)

It’s one thing for Pelosi and her lib buddies to obstruct and oppose any idea Republicans put forward on this — that’s their prerogative. But to pretend they’re being bipartisan and open in the process is just a bit much to take. But this same theme recurred repeatedly through the interview.

Perhaps even more insulting was Pelosi’s misrepresentation of the financial condition of Social Security. Here is just one of her brilliant statements on the subject:

When the president artfully says in his State of the Union address that in 2018 more money will be going out from Social Security than coming in, it’s frightening to people but the fact is there’s a $1.8 trillion trust fund to cover that that Ronald Reagan and Tip O’Neill provided for. That means that now we want more money, as much money coming in but it doesn’t mean that it’s bankrupt. That means it’s $1.8 trillion. That would be a bigger figure if we didn’t have the gigantic deficit that the president has, so we have principles.

This is quite maddening. As intellectually honest people will concede, the fact that there may be $1.8 trillion in IOUs for Social Security is meaningless. We’re talking about the federal government here and it’s overall debt. These trillions of dollars in IOUs are from one branch of government to another. When the government pays those funds off it will be increasing its debt load. I’ve written about this before, but to make it simple and understandable I want to quote from a David Frum piece on National Review Online. Frum writes:

If you or I held hundreds of billions of dollars of Treasury bills, we’d think ourselves pretty comfortably provided for. So if T-bills are good enough for Bill Gates and the Bank of Japan, why aren’t they good enough to secure the future of America’s retirees?

NRO readers, being a sophisticated bunch, have probably already spotted the fallacy here. If Fred writes an IOU for $10 to Jim, Jim has an asset. But if Fred writes an IOU to Fred for $10, he has not created an asset for himself – he’s created a reminder notice.

And that’s the situation of the Trust Fund.

One branch of the US government (the Treasury) owes another branch (the Trust Fund) a bunch of money. The question is not whether those IOUs are legally binding. Of course they are. The question is: Does the existence of those IOUs in any way make it easier for the US government to pay Social Security benefits? And the answer to that is of course not.

That’s why the crucial fact about Social Security is not the legal question of how many bonds it has. The crucial fact about Social Security is the economic question: When will the demands on the system exceed the system’s revenues? Currently, the crossover point is estimated to be thirteen years from now.

See the point? The $1.8 trillion dollars are worthless because when they are paid off it will just be an accounting entry from one part of the federal government to another. If the $1.8 trillion were a receivable from a third party it would represent real wealth. That is not to say, as Frum points out, that the government won’t stand behind these IOUs, because it will. But it will do so with government money, which will have to be financed by the federal government or paid out of general revenues.

This will cause the deficit to go off the charts. So who is Pelosi trying to fool here? She says her main principle is that we will not increase the deficit no matter what and yet her refusal to consider ideas to fix the problem will do precisely that in the long run: increase the deficit. Pelosi said in response to yet another question:

I said we’d put everything on the table and we consider it in the context of what does it mean to the beneficiaries, what does it mean to the deficit?

Again, everything’s on the table, except things we don’t agree with. So anything the president proposes that does not fit within our suggested approach to the problem, is off the table. Liberal marvel sometimes at how President Bush was able to garner a majority of the votes. Conversely, to me it is amazing that Democrats are able to get even 40% of the vote. But as Tocqueville and others predicted as to the American republic– and I paraphrase — once the public figures out it can vote itself money from the public trough, the republic will be in jeopardy. Perhaps we shouldn’t be so surprised.