Last week I wrote about the conspiracy of corporate chieftains to impose a budget plan involving large cuts to Social Security and Medicare, regardless of who wins the elections in November. According to veteran Washington Post columnist Steven Pearlstein, who wrote approvingly of these efforts, many of the top executives of the country's biggest companies are meeting behind closed doors to design such a budget plan.
This plan is expected to follow the designs of the plan crafted two years ago by Morgan Stanley Director Erskine Bowles and former Senator Alan Simpson, the co-directors of President Obama's deficit commission. The Bowles-Simpson plan called for a reduction in the annual cost-of-living adjustment for Social Security that is equivalent to a 3 percent cut in benefits. It also called for gradually raising the normal retirement age to 69 and phasing in lower benefits for workers who earned more than $40,000 a year. The Bowles-Simpson plan would also raise the age of eligibility for Medicare to 67.
Pearlstein indicated that these corporate honchos were prepared to spend hundreds of millions of dollars to get their plan put into law. He put the necessary figure at $278 million. This target is made easier by virtue of the fact that the CEOs sit on trillions of dollars of corporate revenue and, thanks to the Supreme Court, all their contributions for this effort will be fully tax deductible.
That's the state of play, at least according to Pearlstein's assessment, or my interpretation of his assessment. The question is whether this juggernaut can be stopped?
Well, if it were a straight question of where the money lies, the answer is clearly no. The CEOs seeking to cut back or dismantle Social Security and Medicare can probably outspend the defenders of these programs 10 to 1. However, there is still the simple fact that the voters overwhelmingly support these programs.
This is a result reported by every poll every conducted on these issues. Both Social Security and Medicare enjoy extremely high approval ratings across the political spectrum. There is almost nothing that unites the public as much as support for these programs. Well over 70 percent of Republicans, Democrats and Independents indicate strong support for Social Security and Medicare.
The same holds by ideology. There is little difference between people who call themselves liberals and conservatives, both groups overwhelmingly support Social Security and Medicare and are opposed to cuts in these programs. Even self-described supporters of the Tea Party overwhelmingly support Social Security and Medicare.
The question is how to make it so that popular sentiment overrides the big bucks of the corporate chieftains. The obvious answer would be to make the protection of these programs central issues in the election. Members of Congress and candidates for seats should be pressed to indicate where they stand on the proposed cuts to these programs.
That means getting them to answer specific questions, like whether they support reducing the annual cost-of-living adjustment or raising the normal retirement age for Social Security or the age of eligibility for Medicare. These are among the most important issues in people's lives and voters should not have to go to the polls not knowing where the candidates for the House, the Senate or the presidency stand on them.
People should also be aware that politicians are true masters of evasion on these questions. A response like, "I support Social Security and Medicare," should be taken to mean that they are prepared to support cuts for these programs. All of the people running for office are smart enough to know how to say that they oppose the cuts being put on the table, and they undoubtedly would say that they oppose the cuts, if it is true.
Similarly, a statement like, "I oppose the privatization of Social Security and Medicare" should also be taken to mean that they are prepared to support cuts to these programs. Again, they are not being asked about privatization, it's not immediately on the table, why would they give an answer about privatization except to avoid admitting their support for cuts?
The news media should also be pressed into service in this effort. It is their job to tell us the candidates' positions on important issues and there are few issues more important to voters than Social Security and Medicare. People should harangue their local newspapers and television stations to ask candidates their positions on cuts to these programs. This is far more important than most of the gossip about the campaigns that dominates news coverage.
The whole effort here must be focused on smoking out politicians on where they stand on cuts to Social Security and Medicare. The CEOs want to do this behind closed doors because they know that politicians who have to answer to their constituencies will never be able to get away with these cuts. The key is to force the debate into the sunlight.
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The whole effort here is to divert your attention to the financial imbalances in the system to the man behind the curtain. Who is nameless here.
The Trustees (who aren't CEOs by the way) have said that the system has a shortfall of 20.5 trillion dollars. That means that once all of the Trust Fund is repaid, the system continues to carry 20.5 trillion in promises for which it has no cash.
Where in this article does it mention the fact that the Trustees have said (in a good situation) people as old as 63 today EXPECT to life long enough to have their benefits cut.
When you don't have facts, smear the enemy. When you don't even have an enemy, you must create one.
Thanks for your reply, and providing the link.
According to the excerpt, the trust fund runs out of money in 2033.
This strongly suggests that there are no financial ramifications until the trust fund is exhausted.
The truth, however, is that the same financial dynamics would happen when the trust fund runs out, as when it is tapped, if benefits are not to be reduced.
That is, general revenues are needed to redeem trust interest and principal, just like general revenues will be needed to make up the deficit at exhaustion.
Of course,if general revenues are not available, then debt held by the public must increase.
I can provide a reputable government excerpt and link to support these statements, if you would like for me to do so.
Don Levit
I work with Fix Social Security Now so I am interested in the links. I do not doubt your statements, but it is helpful to see where else this issue is discussed. You can have trouble posting them.
I am all for people paying their fair share of taxes.
If we eliminate the cap, with no other adjustments, it means that for every dollar paid in, the person receives 15 cents in benefits. That is an effective taxation rate of 85%.
Regarding deficits, note that on a cash basis, Social Security has been running a deficit since 2010.
What that means is that interest on the "special-issue" bonds must be redeemed (from general revenues if a budget surplus or increased debt held by the public if a budget deficit).
The entire trust fund is empty, from a cash flow basis.
2 reasons verify this fact:
1. It takes cash to redeem principal and interest, rather than simply liquidating the interest and principal, if it was pre-funded.
2. The balance in the trust fund is part of our total debt.
Unless debt= cash, there is no store of wealth in the trust fund.
Don Levit
Of course they do.
"When the people find that they can vote themselves money, that will herald the end of the republic."
- Ben Franklin
“The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.”
- Thomas Jefferson
"A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.
The average age of the world's greatest civilizations has been 200 years. Great nations rise and fall. The people go from bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage. "
- Alexis de Tocqueville.
The theives on Wall Street push this country over the edge to fatten their already bloated wallets and it's the "people" who are to blame.
The corporations destroy our manufacturing base and blame the "people's" lack of skills and industry.
And individuals claims that a social safety network that takes care of the poor and sick is "voting themselves money".
We can't have a social security system or a healthcare system that actually cares about the poor and sick but we can always increase the budget for the grossly obese Pentagon and fund ever increasing wars to kill dark skinned people.
It's not that we can't fund social programs that benefit society as a whole, it's just that greed is spreading at epidemic rates amongst the wealthy and wealthy wanna-bes.
But I wouldn't blame Wall Street and corporations and greed for what is happening. I would blame a monetary system that embraces excessive credit expansion that has no relationship to real goods and services. The funny money that the government creates out of thin air, via the private banking cartel known as the Fed, is what has helped cause the rapid and extreme globalization, financialization and de-industrialization of our economy.
It is no coincidence that things started heading south around 1970, when the dollar de-linked from gold. The seeds for that eventuality were planted in 1922 (also the seeds for the Great Depression) and the few economists that saw the potential for grave trouble (Rueff, Triffin, etc.) are hardly household names even among economics writers.
Here's a good take on the whole thing:
http://www.cobdencentre.org/author/lehrman/
What is the source for your wage statement? The last 12 years have had stale real-wage growth in the private sector, but that stems mainly from peak wages driven higher to accommodate the Y2K work.
"We can't have a social security system or a healthcare system that actually cares about the poor and sick "
We have taken so much wealth from the workers that when they arrive at retirement they are poor. Dean Baker notes in another article that retiree wealth is around 170K including home equity. The Urban Institute puts the cost of Social Security on a retiree last year at more than 3 times that amount. Social Security is what is creating the poor.
Hey, if I am not going to get it, I want the deductions from my pay stopped immediately.
President Obama should be asked at every opportunity what cuts to Social Security and Medicare he advocates. President Obama should also be asked if he supports an increase in the FICA cap up to total income.