Wednesday, June 30, 2010

The jihad against Social Security

I'm no fan at all of the fiscal scolds or of their main goals: abolishing Social Security and Medicare. Digby calls them the let-granda-eat-catfood advocates, and that's an appropriate designation for them.

Brad DeLong, an economist at UC-Berkeley, is more sympathetic to the budget hawks that I am. But he has some worthwhile comments about Alan Simpson, former Republican Senator from Wyoming and currently head of Obama's bipartisan Fiscal Commission, in Listening to arsonists Berkeley Blog 06/29/10. DeLong in that post quotes from John Berry, Simpson’s Comments Undermine Commission Efforts The Fiscal Times 06/20/2010.

Obama has been talking during his entire Presidency about the need to get control of the deficit and to look at entitlement reform, a phrase which for the Republicans and the bipartisan fiscal scolds means phasing out Social Security and Medicare. Whether or not, Obama himself is so deeply committed to the ideology of economic neoliberalism that he actually want to phase out Social Security and Medicare, he has chosen to pursue the illusion of "bipartisanship" with a Republican Party that has no intention of being bipartisan about anything but keeping the war in Afghanistan going forever. This Fiscal Commission, headed by rightwing Republican Alan Simpson, is one of Obama's exercises in bipartisanship.

DeLong writes:

... Berry reports that Simpson now believes that it would be unfair to use general revenues to pay for any portion of Social Security benefits. In other words, the large surplus in the Social Security trust fund, which is made up of government bonds that general revenues are earmarked to pay for, does not really exist and cannot be drawn upon. "Simpson maintained," according to Berry, that "Social Security is already insolvent because it is paying out more than it is getting in tax revenue." Never mind that the plan since 1983 has been for Social Security to tax more than it spends for a full generation and then use the built-up surpluses to spend more than it taxes.

"There is no surplus in there. It's a bunch of IOUs," Berry reports Simpson as having said. "Listen. It's two-and-a-half trillion bucks in IOUs which have been used to build the interstate highway system and all of the things people have enjoyed since it has been set up."

Simpson is not making sense. All investments are IOUs. A General Electric bond is just that – a promise by the General Electric Company to pay its creditors. A dollar bill is an IOU from the government, just like a Social Security Trust Fund bond is.

Perhaps the most bizarre of Simpson’s claims that are quoted by Berry is that the Social Security Commission of 1983 "never knew there was a baby boom…." The baby boom, of course, started immediately after World War II and peaked in 1960. As Berry writes: "Alan Greenspan, who headed…[that] commission ... would tell Simpson something different. The big demographic shift that began right after World War II was precisely why…taxes were raised and benefits were cut [in 1983] – to build up a trust fund surplus so benefits could be paid."
This kind of crackpot nonsense is part of the barrage of slogans and scare tactics that the let-grandma-eat-catfood lobby are using.

It's bad enough that the United States and the other G-20 countries are embracing Herbert Hoover economics, which prescribes that cutting federal outlays and thereby lowering aggregate demand is the proper response to a recession. The fact that governments that should know better are going down that road is the main reason Paul Krugman is starting to call this current period the Third Depression.

But cutting Social Security again - it was cut in 1983 as part of that bipartisan deal which was otherwise sound - is just nuts. Why do we even have a Democratic Party if they can't fight for something as basic and successful and necessary as Social Security?

There is good news in Barry's report, though: "what Simpson did was to undermine the already slim chances of politicians agreeing on a way to put the government on a sustainable long-term budget policy path." Since in the context what "sustainable long-term budget policy" means is phasing out Social Security and Medicare, it will be good news if Barry is correct on that point.

The Social Security Works advocacy group for saving Social Security has a website with lots of information on the topic.


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