World's Biggest Margin Account

A few posts back, I tried to (satirically) make the point that in the current 'idea-assessing' environment in the U.S., the government could propose just about anything, no matter how idiotic, and the reaction would depend more on the 'spin' than it would on how idiotic the idea was.

Turns out, I needn't have bothered, since the Bush administration decided to demonstrate it for me. Last week they announced (admitted?) that they were planning to fund Bush's plan to partially privatize their Social Security accounts¹ by borrowing roughly $1 trillion (maybe $2, but who's counting).

My first reaction was, "So they want to borrow a trillion dollars, give it to the population to invest as they see fit, hope that people earn a return above the interest paid on the borrowed money and then reduce people's benefits accordingly once they retire? i.e. They want to set up the world's largest margin account?²

But people seemed to actually be taking it seriously as a proposal, so I was starting to doubt my initial reaction. Luckily, I happened upon Paul Krugman's article in the NY Times which reassured me that it was Bush, not I who was going crazy.

If you're interested in this issue, I highly recommend reading his article. In fact, if you want to read one American columnist (and you also care about my opinion) than I'd recommend Krugman - alas he is taking a break right now to work on a textbook, but he'll be back in a few months (I'll let you know).


¹ For those not following this too closely, the U.S. Social Security Program is similar to the CPP in Canada whereby tax revenues from people currently working are used to provide payments to the retired. Bush wants to change the U.S. system so that each person's taxes fund their own retirement. It's not a bad idea, but, since retirees are depending on the current taxpayers for their benefits, if the taxpayers start keeping that money for their own retirement - it leaves a bit if a gaping hole, so you need to inject a lot of cash into the system to make the transition.

² A margin account is when you borrow from your stock broker to invest more money. If you invest $5,000 but borrow $4,000 of it, then if the value of your investment goes up to $6,000 then you have made a 100% profit (because you invested $1,000 of your own money and now it's worth $2,000). Of course if the value of your investment goes down from $5,000 to $4,000 you've lost all your money (since you owe $4,000 and that's all your investment is worth). The net effect of buying on margin is to increase the risk , without any net improvement in your odds (plus you have to pay interest). So it only really makes sense if you're pretty confident about what you're investing in (or you're just a gambler at heart).

Partisanity = Part-insanity

I followed a link from View From Seymour, to George Lakoff's writing on the topic of framing discussions to highlight the values you want to highlight.

Despite the protestations of being non-partisan, the page read (to me) as follows:

1. Conservatives are using framing to get their message out and it is proving to be an effective weapon in the battle for American hearts and minds

2. Liberals need to adopt use of this weapon as well.

3. Here's an example of how to do it.

Leaving aside the (interesting in its own right) theory of framing discussions, I was struck most by yet another example of the incredibly partisan nature of discourse in the U.S.

It seems that when writing about something with potential bearing on U.S. politics, no study or source can be quoted without either: a) defending the non-partisan nature of the study/source, b) admitting that the study/source is a partisan for your side but arguing that what they say is still at least somewhat valid or, best of all, c) noting that the study/source is actually from the opposing team.

The underlying assumption (by Democrats) is that Republican supporters will twist the facts (and make things up), to the extent that what they say is not even worth listening to (unless it supports a Democrat point) and the same is true in reverse.

At some point, I wonder if the concept of objective truth gets lost. Consider a random voter, Mr. X, who is faced with a referendum on a flat tax proposal. Mr. X could try to figure out whether a flat tax will be good for him and the country or not, but if everything he has available to read is just pro-tax or anti-tax spin and is probably just lies, what's the point? If all Republicans are going to support it whether they think it's a good idea or not and all Democrats are likewise going to oppose it, then he will be unable to get any sense of a general consensus of opinion on the topic. In the end, Mr. X will just vote for whoever best framed the issue in terms of his values, or better yet, just vote for whoever seems the most trustworthy (i.e. vote for the person with the most symmetrical face).

Even on something as clear and straightforward as global warming, the 'teach the controversy' approach can create an appearance of two sides with equally valid but different points of view, both of which are just trying to 'spin' the issue to their benefit. And then the reaction is to say, 'who knows who is really telling the truth?' Living inside this us-against-them, all-spin, U.S. prism, even otherwise intelligent people like Andrew Sullivan can get drawn into just offering their readers two opposing opinions on global warming and saying that they should decide, as if this is representative of the current state of thought on this issue (among those who know what they are talking about).

The media in the U.S. reinforces this trend. It avoids taking positions on anything the least bit potentially controversial and when opinions are needed it goes to a talking head format in which an equal number of partisan representatives do their best to frame/spin the issue in their favour.

The end result is that on any issue, regardless of the weight of the actual evidence, the testimony of those involved, the informed judgment of serious, knoweldgeable analysts, the rational arguments or the impact of similar policies enacted elsewhere, either side in the U.S. (Republican/Democrat) can take any position they like and it will be treated as a valid option to be weighted with equal consideration with whatever position the other party takes.

Supporters of both parties will look to their own partisan media outlets to reinforce their viewpoint and tell them why the other guys are wrong. The 'non-partisan' media will treat both options equally and will allow roughly equal time for both sides to make their case (and if they don't they will be accused of bias).

Obviously there are limits to this kind of thing. A party which supported a draft for example would have a hard time framing it well enough not to take a hit. More generally, the more close to home a policy hits, the more people will see through the spin to figure out how a policy affects them and vote accordingly. But to the extent that this paradigm does hold, a party in the U.S. can both propose and do pretty much whatever it wants - the only thing that will matter in the end is which party frames it's message better, and of course who seems more trustworthy (symmetrical).

OK, this was a long rambling post (silly me thinking that blogging would teach me to be more concise), but even if you didn't like it, I feel like writing it has brought me closer to understanding how Bush could be re-elected, so I still think it was worthwhile.

In a later post, I'll look at Canada and talk about why we are in a somewhat better position than the U.S. on this issue.

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Update Jan 24, 2005: Some time after I wrote this post, I noticed that Paul Krugman has said the same thing much more concisely:

"The media are desperately afraid of being accused of bias. And that's partly because there's a whole machine out there, an organized attempt to accuse them of bias whenever they say anything that the Right doesn't like. So rather than really try to report things objectively, they settle for being even-handed, which is not the same thing. One of my lines in a column -- in which a number of people thought I was insulting them personally -- was that if Bush said the Earth was flat, the mainstream media would have stories with the headline: 'Shape of Earth--Views Differ.' Then they'd quote some Democrats saying that it was round."