Online at: http://politicalaffairs.net/article/articleview/8165/

"Beating Up on Old People" to Balance the Budget?

By Joel Wendland
Archives - Dates and Topics 2009 online February 1 – 28, 2009 click here for related stories: economy

2-22-09, 8:59 am




Additional resources:
Political Affairs #93 - "Buy America" and the economic stimulus package







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In the middle of one of the worst economic crises in American history and with massive spending projected to create new jobs and loosen the credit markets, the Obama administration has called a "fiscal responsibility" summit for this Monday, Feb. 23.

In what has become a signature Obama move, the president has invited to this summit experts, elected officials, business personalities and labor leaders from a variety of fields and a diversity of political backgrounds. Various officials in the Obama administration who work with the White House Task Force on Working Families will lead different discussion at the summit from taxes to health care to budget priorities.

One person who is expected to attend and who was initially believed to have been given a keynote speaking role is former Republican Commerce Secretary Pete G. Peterson. Peterson is the co-founder of the far right, $1 billion endowed Peter G. Peterson Foundation, whose sole aim is to gut social safety net programs like Social Security and Medicare to pay for massive new tax cuts for corporations and the wealthy. His group has spent hundreds of millions of dollars on a PR campaign pushing the notion that those two programs are in financial crisis.

Progressive version of "fiscal responsibility"

While Peterson will by no means dominate the conversation, his presence, as well as that of other right-wing personalities and politicians, has progressives nervous about the direction of the conversation at the summit and the framing of some basic questions, such as how to handle Social Security improvements and Medicare spending.

In a teleconference with reporters last week, Campaign for America's Future director Roger Hickey expressed the concern that in its "effort to get bipartisan consensus [on budget issues] the White House could get locked into a path of austerity as the way to achieve long-term budget balance." While it makes sense that political leaders begin a discussion about the "long-term balance" of the budget, Hickey argued, the economic crisis requires important injections of government spending and short-term deficits for recovery.

Hickey pointed out that contrary to media claims and the alarmism of right-wing think tanks like the Peterson Foundation, Social Security is not in crisis and that the best way to reform Medicare spending is through reforming the whole health care system. These positions, Hickey added, were ones on which candidate Obama had campaigned.

Hickey argued for a "progressive path to long-term fiscal responsibility," which includes three main ideas: a strong Social Security system combined with universal health care reform that controls costs, high levels of public investment to promote continued economic growth, and a plan to match federal spending with "a responsible level of progressive taxation."

"The worst, most irresponsible burden we could pass on to our children is a gutted social safety net and an anemic economy," Hickey warned.

Hickey added that his organization is withholding judgment about the White House summit until it takes place, and he said he looks forward to adding progressive voices to the discussion.

Social Security and Medicare are not the problem

At least three well-known economists shared Hickey's concerns about the White House summit and the push from the right to gut Social Security and Medicare. University of Texas at Austin economics professor James K. Galbraith called on President Obama to assure people that Medicare and Social Security will be defended in the process of pursuing long-term balanced budgets.

Galbraith described the framing of the White House summit as focusing on "fiscal responsibility" as "unfortunate." Efforts to tackle the economic crisis have just begun and giving the impression that the US is in a position to take a stab at balancing the budget already is misleading, he asserted.

The economic and financial crisis need to be the "paramount public policy concerns. We're not returning to the normal world any time soon," Galbraith added.

Social Security is stable, and if any reform to Medicare are needed, Galbraith emphasized, it should aim to expand the program by reducing the eligibility age to 55.

Experts estimate that such a reform could dramatically reduce the number of uninsured Americans and eliminate tens of billions in unnecessary health insurance costs.

Nancy Altman, a former advisor to former Federal Reserve Chair Alan Greenspan, noted that of all federal programs, Social Security is the most fiscally sound. "Last year alone, Social Security's income exceeded its expenditures by $186 billion," she added. By 2027, the program will have accumulated a $5.5 trillion surplus.

The federal government's practice of projecting Social Security's financial situation out 75 years down the road is not used for any other federal program or agency. This unique method of accounting is unsound and unrealistic, Galbraith suggested.

If we accept the accounting practices currently used to scrutinize Social Security, Altman further noted, the "manageable" shortfalls Social Security is expected to accrue many decades from now will be less than the cost of the Bush tax cuts for the top one percent of wealthiest Americans over the same period.

Altman appealed to the Obama administration to resist calls for raising the retirement age or cutting benefits. The best way to improve the program's fiscal situation would be for Congress to bump up the income cap on the payroll withholdings that pay for the program. This latter reform will not cost 94 percent of American workers anything.

"Social Security's benefits are modest by any standard you want to use, but they are vital for just about all of its beneficiaries," Altman said. These benefits should not be reduced further in a time when millions of seniors and workers near retirement have lost trillions in retirement income asa result of the housing crisis and the collapse of the financial markets.

"We don't have an entitlements crisis," economist Dean Baker, author of Plunder and Blunder, added, "we have a health care crisis." The word "crisis" should not be used to described Social Security's financial situation either. Social Security is not "in anything that any reasonable person can call crisis."

According to the Congressional Budget Office, Social Security will able to pay every penny of benefits it is scheduled to pay without deficit until 2049. Even if no changes were made to the system, after 2049, retirees would still get a higher percentage of benefits adjusted for inflation then they get today, Baker pointed out. While we may want to tackle that at some point, "I don't think that looks like anything that people ordinarily consider a crisis."

On the issue of Medicare, Baker argued that broader health care reform should aim to control the costs that plague that program and all of the health insurance and medical care industries generally. "Even if we could zero out Medicare and Medicaid," Baker stated, "our economy would still be devastated because we haven't fixed health care."

Baker described gutting Social Security and Medicare as "beating up on old people" in the name of "fiscal responsibility."

Right-wing attack on democracy

Baker added that right-wing think tanks like the Peterson Foundation have added a new dimension to their attack on important safety net programs like Social Security and Medicare. Instead of pursuing reforms through the usual legislative process, the Peterson Foundation has proposed sidestepping normal Constitutional practices and debate by forcing its agenda through Congress within the framework of an extra-judicial "entitlements commission."

Baker pointed out that the Peterson Foundation has proposed this radical divergence from traditional public debate and congressional action because the public generally opposes the radical gutting of Social Security and Medicare and regularly pressures Congress to oppose such measures.

Groups like the Peterson Foundation think the system has to be changed or gamed to force through the outcomes they want. "This system is not broken, however," Baker argued. "The democratic system just hasn't given them what they want," Baker said. "Mr. Peterson's money has not been able, up to this point, give him what he wants to see in terms of policy outcomes."

Where will Obama stand?

On the campaign trail, candidate Obama vociferously argued that Social Security's financial situation should be strengthened through raising the income gap, and he rejected proposals to raise the retirement age or cut benefits. While he advocated streamlining costs by cutting overpayments in the Medicare system, Obama also emphasized the need to control health care costs through universal health care reform.

Early media analysis of President Obama's first budget proposal, which is expected to be made public later this week, suggest that he intends to keep some of these campaign promises by aiming fiscal responsibility measures at ending the Bush tax cuts for the wealthiest and scaling back war spending.

According to expert advice, candidate Obama's positions on Social Security and health care should also win the day if some reasonable balance between protecting the social safety net, and fiscal responsibility is to be be preserved.


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