Little Progress On New Union Contract

The American Federation of Government Employees (AFGE), the labor union that represents most Social Security employees,  has posted an update on how its contract negotiations are going with Social Security. It is dated June 15 but it was just posted this week. It shows that there has been little or no progress.

Republicans Coming To Their Senses?

An increase in the debt ceiling is needed to keep the August Social Security checks from being delayed or reduced.  From the Los Angeles Times:

Republican leaders in the House have begun to prepare their troops for politically painful votes to raise the nation's debt limit, offering warnings and concessions to move the hard-line majority toward a compromise that would avert a federal default. ...

At a closed-door meeting Friday morning, GOP leaders turned to their most trusted budget expert, Rep. Paul D. Ryan of Wisconsin, to explain to rank-and-file members what many others have come to understand: A fiscal meltdown could occur if Congress fails to raise the debt ceiling.

House Speaker John A. Boehner of Ohio underscored the point to dispel the notion that failure to allow more borrowing is an option.

"He said if we pass Aug. 2, it would be like 'Star Wars,'" said Rep. Scott DesJarlais, a freshman from Tennessee. "I don't think the people who are railing against raising the debt ceiling fully understand that."

The warnings appeared to have softened the views of at least some House members who, until now, were inclined to dismiss statements by administration officials, business leaders and outside economists that the economic impact would be dire if the federal government were suddenly unable to pay its bills.

Freshman Rep. Steve Womack (R-Ark.) said the presentation about skyrocketing interest rates that could result from downgraded bond ratings was "sobering."

Grand Plan In The Works?

From Larry Kudlow writing at National Review Online:

As has been reported, [Senate Minority Leader Mitch] McConnell is negotiating now with Sen. Harry Reid for a large-scale package that will allow the debt ceiling to rise unless overturned by a two-thirds vote. If a White House debt-ceiling deal comes through with $1.5 trillion of spending cuts, that will be part of the package. Right now, it’s not completed because enforceable spending caps have not been determined.

The key part of the new McConnell package is a joint committee to review entitlements in a massive deficit-reduction package. Unlike the Bowles-Simpson commission, this committee will be mandated to have a legislative outcome — an actual vote — that will occur early next year. No White House members. Evenly divided between Republicans and Democrats. No outsiders. This will be the first time such a study would have an expedited procedure mandated with no amendments permitted. Also, tax reform could be air-dropped into this committee’s report.

Greg Sargent writing in a Washington Post blog reports that the McConnell package would force a major review of entitlement programs, such as Social Security and Medicare, with Congress being forced to vote on entitlement changes.

The Republican leader in the Senate wants to make sure there are Congressional votes on cutting Social Security and Medicare in an election. That sure sounds like a winner for Republicans!

Meanwhile, Senator Jim DeMint (R-SC) is pledging to do everything possible, apparently meaning a filibuster, to force the U.S. into default.

"If You Argue With A Fool, You've Got Two Fools"

 From John Avlon writing in the Daily Beast:

Call them Debt Ceiling Deniers. Believers in faith-based fiscal policy. Math-challenged cause-and-effect-skeptics. ...

The costs of courting conservative populists should be clearer than ever to reality-based fiscal conservatives inside the Republican Party.  Their “all-or-nothing” meets “what, me worry?” negotiating stance is not only the newest symbol of D.C.’s dysfunction—it is beginning to have an impact on the entire U.S. economy. ...

The fact that defaulting on our debt would raise interest rates—deepening the fiscal hole we’re in by compounding the size of our deficit and debt overnight—is not addressed.  Instead we are greeted with nihilistic bubble talk—at its best, economic incompetence and at its worst evidence of tactical Leninism—the belief that “the worse things get, the better they are for me politically.” ...

If you argue with a fool, you’ve got two fools.  Nonetheless, I thought a reality check might help some of the Republicans in Congress currently deciding how they’ll vote as we pedal ever closer to the cliff that is the August 2 deadline.

So I reached out to two former Republican chairmen of the Council of Economic Advisors, with presumably impeccable fiscal conservative credentials: Michael Boskin, who served under Bush 41, and Glenn Hubbard, who served under Bush 43.

"A real default would have severe ramifications in financial markets and the economy.  We need to maintain the full faith and credit of U.S. government securities," says Boskin, now a senior fellow at the Hoover Institution.  "The deficit and debt are primarily a spending problem that could condemn us to stagnation or stagflation if not seriously addressed soon. So trying to leverage the debt ceiling increase into spending control makes economic sense...The worst outcome is a default with no real spending control."

While you’re digesting that considered opinion, here’s Glenn Hubbard, advocate/architect of the Bush tax cuts and dean of the Columbia Business School.  “The debt ceiling must be raised—not doing so is irresponsible,” Hubbard emailed.  “The real discussion needs to be about to stabilize, then reduce America's burgeoning debt-to-GDP ratio…From here, the most sensible path would be an agreement on spending reductions.  Then should come a debate (post-raising the ceiling) over reducing entitlement spending versus raising taxes.  That debate can also address raising marginal tax rates (as the president proposes) versus limiting tax expenditures (as the [Bowles-Simpson] commission proposes).  These debates will be the domestic policy stage for voters to judge in 2012.”

Not Going Quietly

Ephraim Feig

Social Security recently did a major reshuffling of its information technology workforce. In the process Dr. Ephraim Feig, who was the Associate Chief Information Officer for Vision and Strategy, left. Apparently, Feig had produced a plan for modernizing Social Security's information technology systems. That plan was not approved by Social Security management. Reading between the lines, it appears that Feig took this anything but gracefully and either quit or was let go as a result. Feig has posted his complaints and his plan online. As best I can tell, one of the major sources of disagreement is that Feig believes that Social Security's planned new national data center is unnecessary. He recommends rebuilding Social Security's information technology systems from the ground up in a completely different way that he describes in only the most general terms. Here are some quotes from his plan (emphasis added):

There is no evidence that the quality of SSA’s [Social Security Administration's] services is significantly improving because of IT [Information Technology] investments in the past decade; there are areas where we know that customer satisfaction is actually down (customer satisfaction with our 800-number phone service dropped significantly). ...

SSA has gotten to the point where the more it invests in IT improvements the less efficient it becomes. In the past eleven years, SSA spent on IT a total of $4.1 Billion above the baseline (the average IT spending during the 1990’s), but it has gotten a lot less than that in return. ...

There are numerous reasons why SSA has not investigated truly modern alternative architectures. The first is that it is comfortable with what it has and scared of changing. There is good reason to be scared of big changes; historically, most have either failed or turned out to cost a lot more than originally anticipated. ... 

 SSA likes to view its enterprise as very large and complex. This justifies its requests for larger and larger budgets and also emboldens it to claim that it is efficient. SSA brags about new highs in daily transactions. It is not in the Agency’s DNA to try to simplify its processes and to reconsider its enterprise as relatively simple. The reality is that, when it comes to transactional IT, compared to modern large enterprises, SSA is moderate. ...

Our approach to modernization at SSA is entrepreneurial; we design and build a modern system from the ground up, and we transition to it, gradually retiring the old.

I do not understand IT well enough to evaluate Feig's plan but I have to be sympathetic with Social Security management. As Feig acknowledges, Social Security has been burned repeatedly with expensive IT projects that did not work. A complete rebuilding of Social Security's IT systems from scratch based upon only the vaguest of plans would have to be a hard sell.

What Else Can They Say?

From Social Security Emergency Message EM-11051 that went out to Social Security employees yesterday:

If an individual inquires about payment of Social Security or SSI checks due to concerns about the federal debt ceiling, provide the following response:

“We’re sorry but we don’t know.”

And Here's Why There's An Inpasse

The National Journal did a poll of Congressional insiders on the possible effects of failing to raise the debt ceiling by early August. 61% of Democrats thought this would have catastrophic consequences but only 15% of Republicans thought so. 3% of Democrats thought there would be only minor consequences while 29% of Republicans thought so.

A 1,000 point drop in the Dow might change a few minds. I know readers of this blog are more worried about Social Security checks and paychecks but stock market turmoil is going to happen well before the checks stop going out.

Is Cantor The Obstacle To Social Security Checks Going Out In August?

From TPM Media:

Behind the scenes, leading members of both parties have concluded that House Majority Leader Eric Cantor (R-VA) is an impediment to resolving the debt limit standoff, and should back down. Now, Democrats are publicly calling for him to get real or go home.

"House Majority Leader Eric Cantor has shown that he's shouldn't even be at the table," said Senate Majority Leader Harry Reid (D-NV) in a blistering floor speech Thursday morning. "And Republicans agree."

In a press conference shortly after Reid's floor speech, one of his top deputies, Sen. Chuck Schumer (D-NY) explained the Dems' frustrations.

"He is basically standing in the way," Schumer said. "It can't just be Eric Cantor deciding everything. If Eric Cantor decides everything, I fear we'll be in default."

Of course, if Democrats would just give Cantor what he wants, there would be no problem.