Wednesday, March 02, 2005


Lindsay Graham and George Bush have used the possible solution of solving the social security problems with an increase in payroll taxes as a Tall Straw Man. The strategy has worked well. A few months ago, Americans in general thought little about the need to revise the plan. Now, individuals are writing editorials saying the plan needs to be fixed and the way to do it is to tax the rich. Others are writing that the way to fix the plan is not to raise the taxes but to do something else.

David Broder, one of the TV talking heads and an editorialist for the Washington Post, is promoting the democratic Tall Straw Man. Most of the budget cuts Bush proposed were in broad categories of services. Broder takes the spending caps proposed and applies them to specific programs to make it sound as if Bush is stealing from the widows, orphans and single mothers. The attempt is to gain leverage for the horse trading ahead.

The democrats want the public to be so upset about budget cuts that they will fight harder to "save" social security. Bush wants to pass reform and is willing to trade off with special interest as might be needed to get the more important task done. Polls are showing a wax and wane pattern. The public is now more concerned about budget cuts and more aware that something must be done to "save" social security.

Obviously both sides believe they can "win". I am a biased republican. My economics and business background and my republican bias make it clear to me that reform is a "win" for the whole country. I am also a fair poker player having won on balance for 37 of the past 38 years. It is clear to me that Bush has the stronger hand. When push comes to shove, I believe compromises will be reached. The compromise will include private savings accounts.

Unfortunately, the accounts will not be available until near the end of this business cycle. Smart investors will invest fairly aggressively now and then very conservatively when the accounts are finally available. Drop me a line if you would like get a little advice from an old retired guy.