We talk about the Villagers a lot on C&L, and you'll hear the term used in many progressive blogs as well. Tom Friedman is a high ranking beltway Villager and Rick Santelli is a free market CNBC/wingnut Villager. Remember, he did his rebel yell that helped kick off the tea party by blaming homeowners for the mortgage crisis instead of his Wall street pals who actually created it. However, Santelli told us that the economy was healthy right before the meltdown. Anyway, this is what you get when you put two Villagers together on one screen. The debate was about Social Security. Rick Perry, the new tea party favorite calls it a Ponzi scheme. Obviously Santelli wants to privatize it so he and his CEO pals can make tons of cash off of the backs of the middle class again and put their retirements at risk.
They'll attack it from any angle, even if it's an insane one. I hadn't heard that Social Security is like a chain letter before, have you?
Texas Gov. Rick Perry stuck to his claim during last night’s presidential debate that Social Security is “a Ponzi scheme.” The media are getting a lot of mileage out of that sound bite, and the Ponzi-scheme debate is very much alive this morning. On Thursday’s “Squawk Box” on CNBC, CME Group floor reporter Rick Santelli, known to some as the father of the tea party movement, challenged New York Times columnist and Rick Perry critic Thomas Friedman on that claim. “I’d just like to know — you know, I was watching that debate last night, although it really wasn't a debate,” Santelli said. “It was like a weird press conference. But I would like to know — does Mr. Friedman think Social Security is a Ponzi scheme?”
That led to a heated back-and-forth between Friedman and Santelli:
FRIEDMAN: No, I don’t think it’s a Ponzi scheme.
SANTELLI: Earlier in the show you said that we’re putting a burden on our kids that’s unsustainable. What’s the definition of a Ponzi scheme?
FRIEDMAN: It’s a program that made promises that it cannot keep in full and it needs to be fixed and reformed.
SANTELLI: Isn’t that exactly what a Ponzi pyramid is?
FRIEDMAN: I don’t think it is a Ponzi scheme as a criminal endeavor.
SANTELLI: No, no — forget the criminal side. You need more people to perpetuate a myth because if the people stop the myth is known to all. That’s my definition of a Ponzi scheme. Let’s call at it chain letter, a pyramid scheme. Isn’t that by definition what Social Security is? Take the legalities and fraud out.
STEVE LIESMAN: Why is it a Ponzi scheme, Rick?
FRIEDMAN: It is pay as we go. Ronald Reagan fixed it. Why can’t we fix it?
SANTELLI: What does Ronald Reagan have to do with my question?
FRIEDMAN: What does your question have to do with reality?
MICHELLE CARUSO CABRERA: We brought it up.
SANTELLI: You can’t decide that more people is the only thing made Social Security work. We have a real issue because many people in government seem to like to read your work.
FRIEDMAN: What makes Social Security work is fixing Social Security in terms of the population demands.
SANTELLI: I didn’t ask if we should fix it or not. I asked if it’s a pyramid scheme.
FRIEDMAN: Your question is idiotic. That’s what you asked.
SANTELLI: You’re idiotic. I’m done. I feel good.
FRIEDMAN: So do I.
Santelli is a Wall Street gasbag who won't ever need Social Security to live on when he retires and he's upset because Tom gets a lot of attention from his beltway pals. Screaming about bailouts is one thing, but calling the longest running social program a pyramid scheme or a chain letter won't set off waves of protests from the tea party since many of them receive it. Friedman at least understands that it's not a Ponzi scheme. However, Friedman also believes that the middle class and poor need to start sharing the sacrifice even more.
On the first question, I suppose that Friedman and Mahbubani want to see taxes increased or benefits like Social Security and Medicare cut. Both of these steps would mean real sacrifices for low and middle class people, but how exactly do they help the recovery?
Remember our problem is too little demand. So we make people sacrifice by paying higher taxes. How does this increase demand? Or we cut their Social Security benefits or make them pay more for their Medicare. Again, this would imply real sacrifice, but how does this spur the economy?
Are there businesses out there who are saying that they will not hire or invest today because Social Security and Medicare are too generous? Will these businesses decide to hire more workers and expand their business if the government cut these benefits?
In more normal times, there was at least a plausible argument that this could be the case. The story would go that reducing the deficit would lower interest rates, thereby encouraging businesses to invest. (Actually most research shows that investment is not very responsive to interest rates.) However, with interest rates already at post-Depression lows, it is difficult to envision them going much lower, nor that there would be much additional investment even if they did. In other words, Friedman and Mahbubani seem to be calling for pointless sacrifice.
The second part of the story is who they want to sacrifice. The top 10 percent of income distribution received the vast majority of the gains from economic growth over the last three decades. A grossly disproportionate share went to the top 1.0 pecent and the top 0.1 percent. It might be reasonable to expect that the big gainers over this period would be the ones who should be doing the sacrificing.
But not in Thomas Friedman's world. In his world, sacrifice must be shared equally. Those who are incredibly rich and those who are barely getting are both called upon to make sacrifices for the greater good. That's Thomas Friedman justice.
Friedman happens to be a very wealthy man. (h/t Atrios)