Fred Hiatt's Accountability Liberals Don't Know Arithmetic

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Monday, 13 February 2012 05:50

It's always good to get a silly caricature to begin the week and Fred Hiatt at the Washington Post is happy to supply one. He presents us with the divide between "nostalgia liberals" and "accountability liberals."

The story is that nostalgia liberals are opposed to means-testing Social Security while accountability liberals say "the only way to protect benefits for the poor is to scale back expected benefits for the wealthy." Nostalgia liberals support traditional public schools, while accountability liberals support charter schools and testing. More generally, "accountability liberals put more stock in market forces and individual empowerment." Of course the picture of "nostalgia liberals" is a ridiculous caricature by someone who is a charter member of the "accountability liberals" masquerading as a neutral voice.

Starting with Social Security, those familiar with arithmetic know that almost no money can be saved by cutting benefits for the wealthy. The only way to save substantial money is by extending a means test down to people earning $30,000 a year, which does not ordinarily pass for wealthy.

Also, contrary to what Hiatt claims, Social Security is not a subsidy to middle class and wealthy people, it is a government-run insurance system. The middle class and wealthy pay for their benefits.

Hiatt also seems to think that an aging population is a new story. It isn't. Fifty years ago there were five workers per retiree, today there are three. In spite of the declining ratio of workers to retiree, we still enjoy higher living standards today than we did 50 years because of productivity growth. Productivity growth is of course continuing which is why we will have no difficulty supporting a larger population of retirees and still have rising living standards, assuming that the gains from productivity growth are shared widely.

The real problem is of course our broken health care system, as every analyst knows. If the United States paid the same amount for its health care as any other wealthy country, then we would have budget surpluses in the long-term, not deficits.

The point about schools also misrepresents reality. The accountability liberals have been calling the shots in school policy for two decades and have little to show for it. It is hard to see this drive as anything more than a glorified effort to bash teachers' unions, which is the one area where it clearly has been successful.

Contrary to Hiatt's caricature, there are plenty of ways in which some who he dubs "nostalgia liberals" would be happy to embrace market forces, such as ending too-big-to-fail banks that enjoy implicit government protection, less stringent patent protection for prescription drugs, and more open trade for highly paid professionals like doctors and lawyers. But acknowledging this fact would undermine the caricature, so Hiatt would not venture into this territory.