The bad ideas in Wall Street's campaign to cut benefits on Social Security, Medicare and Medicaid

Rose Ann DeMoro, Executive Director of National Nurses United last month published a defense of Social Security and a rallying call to defend it from both Republicans and Democrats, including President Obama, who might attempt to cut benefits, It’s Up to All of Us to Protect Social Security Common Dreams 11/18/2012:

Today, as the National Committee to Preserve Social Security and Medicare explains, still barely half of all workers have access to retirement plans on the job, and many of those are substandard. Without Social Security, they note, “over half of all older Americans would fall into poverty… Social Security does exactly what it was designed to do – it gives people a secure, basic income for as long as they live.”

But, sadly, no matter who wins the November 6 election, there is trouble afoot. ...

What’s really going on here is a concerted campaign by the same banksters on Wall Street who created the current economic crisis who want to get their hands on everyone’s retirement savings. They are assisted by politicians in both parties they heavily influence, and those in the media who have helped them spin what Columbia Journalism Review blogger Trudy Lieberman calls “a skewed picture of the financial health of this hugely important program which is the sole source of retirement funds for millions of Americans and will continue to be for decades to come.”

She also includes a list of basic talking points refuting some of the favorite arguments of Social Security opponents.

Jamie Galbraith in his 2008 book, The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too explained at some length why its bad, unrealistic policy to emphasize balancing the budget as long as the US dollar is the reserve currency of the world, which means that other countries will hold dollar reserves making the trade balance always a deficit for the US. After recounting the de facto Keynesian policies of St. Reagan and Shrub Bush during their Presidencies, he writes:

The great irony in this history is that the cherished ideal of a balanced budget, once a key talking point of the conservatives, was proven to be pointless precisely as it was embraced by Democrats [during the Carter Administration]. Most Republicans, as a practical matter, understand; once in office, they no longer pretend that the federal government is just like a household. It's the Democrats who do not get it. Self-styled progressives who call for balanced budgets are not merely parroting conservatives; they are parroting dead conservatives, with no living descendants and no practical application in the modern world.

He's referring to the national level of politics, the Presidency, and to what Republicans do in the Presidency. As long as there is a Democratic President, Republicans in Congress will push for austerity economics. Which, politically speaking, works well for them because it limits what Democratic Presidents can do to improve the economy and thus boosts Republican electoral prospects. This doesn't mean that some Republicans don't sincerely believe their ideology. It's just that what consistently happens in practice is that the Republican position changes during Republican Administrations. Even under Old Man Bush's Presidency, when he compromised with the Democrats and agreed to raise taxes to control deficits, Congressional Republicans opposed it. Old Man Bush's agreement to tax increases to balance the budget, writes Galbraith, "infuriated the Republican base, helping to ensure its lack of enthusiasm for Bush and his defeat in the election of 1992."

Galbraith urges Democrats to get their heads out of the deficit obsession. Barack Obama, though, seems to be a true believer. Galbraith writes:

Deficit hawks - Democrats and Republicans alike - have never understood the effects of financial globalization on the budget. The international dimension of the budget deficit enters neither their minds nor their calculations. The Washington discussion circuit, fueled by a vocal lobby of doomsayers, continues to treat deficits as it had before, as though they were the product purely of domestic policy decisions taken in the context of balanced trade and full employment. In consequence, the public discussion of fiscal policy lost contact with reality altogether; it became instead a pantomime of vice and virtue, each achieved without any relation to actual merit or wisdom in the setting of economic policy.

In sum, and to put the matter bluntly, balancing the budget is a mission impossible and a fool's errand.

Galbraith writes more recently (The coming debt battle Salon 11/08/2012):

Big Money has been gunning for Social Security, Medicare and Medicaid for decades – since the beginning of Social Security in 1935. The motives are partly financial: As one scholar once put it to me, the payroll tax is the "Mississippi [River] of cash flows." Anything that diverts part of it into private funds and insurance premiums is a meal ticket for the elite of the predator state.

And the campaign is also partly political. The fact is, Social Security, Medicare and Medicaid are the main way ordinary Americans connect to their federal government, except in wars and disasters.  They have made a vast change in family life, unburdening the young of their parents and ensuring that every working person contributes whether they have parents, dependents, survivors or disabled of their own to look after. These programs do this work seamlessly, for next to nothing; their managers earn civil service salaries and the checks arrive on time. For the private competition, this is intolerable; the model is a threat to free markets and must be destroyed. [my emphasis]

Tags: austerity economics, fiscal cliff, grand bargain, james galbraith, medicaid, medicare, social security

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