President Obama insists that he is a really bad negotiator, therefore the deal he got on the 2-year extension of the Bush tax cuts and the 1-year extension of unemployment benefits was the best that he could do. This package also came with a 1-year cut in the Social Security tax.
This cut will seriously threaten the program's finances if next year, the Republican Congress is no more willing to end a temporary tax cut than this year's Democratic Congress.
The logic here is straightforward. Under the law, the Bush tax cuts were supposed to end in 2010. Tax rates returned to their pre-tax cut levels in 2011. However, the Republicans maintained a steady drumbeat about the evils of raising taxes in the middle of a downturn, even if the tax increase would just apply to the richest 2 percent of the population.
As we saw, President Obama and the Democratic Congress could not muster the votes needed to overcome the Republicans and ended up extending the tax cuts for the richest 2 percent of the population. The Democrats will be faced with a similar situation at the end of 2011 when the Social Security tax cut is scheduled to expire, except that this time the tax cut in question will apply to overwhelming majority of working people.
Also, the House will be controlled by the Republicans and the Senate will be considerably less Democratic. This raises the possibility, if not the likelihood, that the tax cut will remain in place indefinitely, more than doubling the size of Social Security's projected long-term shortfall.
Before we even get to this juncture the Republicans will have another opportunity to impose a really bad deal on President Obama. Sometime in the spring the government will run up against its debt ceiling. This will prevent the government from any further borrowing.
Since the government has a substantial deficit, with spending exceeding revenue, hitting this limit would mean that the government would not have sufficient funds to pay for all its programs. It also would mean that the government could not pay interest or principle on debt that is coming due; in effect requiring it to default on its debt.
The prospect of the U.S. government defaulting on its debt creates the sort of end of the world scenario in which Congress rushed to pass the TARP in 2008. Back then, President Bush, Fed Chairman Ben Bernanke and all sorts of other luminaries told members of Congress and the public that we would have a second Great Depression if the Wall Street banks were not immediately bailed out, no questions asked. And the money flowed.
The prospect of defaulting on the debt will create a similar outbreak of shrill warnings of disaster. This would likely to lead to scenario in which President Obama signs whatever debt ceiling package House Republicans hand him, even if it includes the privatization of Social Security and Medicare and major cuts and/or elimination of other important programs. The argument from the administration will be that they have no choice.
In order to avoid this train wreck, supporters of Social Security and Medicare have to restructure the options. They have to push President Obama to announce in advance that he will never sign a debt ceiling bill that includes cuts to Social Security and Medicare, the countries two most important social programs.
These programs are crucial to the financial security and health of tens of millions of people. If there are to be changes in these programs then they should occur after a full public debate in the light of day, not as the result of Republican trickery and parliamentary game playing.
This would be a hugely popular position since not only Democrats, but also independents and even Tea Party Republicans overwhelming support Social Security and Medicare. Furthermore, the gun, in the form of a potential debt default, is actually pointed at the Wall Street banks, not the public.
A debt default would be a very bad situation and one that we absolutely should try to avoid. But the day after the default, the country would still have the same capital stock and infrastructure, the same skilled labor force and the same technical knowledge as it did the day before the default. In other words, the ability of our economy to produce more than $15 trillion in goods and services each year will not have been affected.
One thing that would not be around the day after a default is Wall Street. The default would wipe out the value the assets of the Wall Street banks, sending Goldman Sachs, Citigroup and the rest into bankruptcy. The recovery for the economy from such a situation will be difficult, but the shareholders of the Wall Street banks would be wiped out and their top executives unemployed.
For this reason, the threat of a default is a gun pointed most directly at Wall Street. Given the power of Wall Street over Congress, is inconceivable that they would ever let the Republicans pull the trigger.
This means that if President Obama is prepared to take the right and popular position of supporting Social Security and Medicare, he will win. This is both good policy and great politics. The public just has to force President Obama to stand up and show some leadership.
I will vote for a primary challenger, a third party candidate, a write in vote, even (though not likely) a Republican, OR stay home.
But I will NOT vote for Obama. Period.
I will be more surprised if he holds his (our) ground than if he caves in.
And Obama has the winning hand. Wall Street NEEDS him, even more than the rest of us. We all go down the tubes much more slowly. Wall Street gets hit first AND hard.
I sure hope Obama doesn't fold a good hand.
Why am I NOT reassured?
We can rebuild without these crooks cooking their books and costing us huge sums of money in bailouts.
Plutocrats and their apologists consider the above scenarios "the fault of those who didn't plan for their retirement." Their verbal sleight of hand deliberately ignores the fact that Social Security is an insurance plan, financed by contributions from the paychecks of millions of workers for seventy-plus years.
The plutocrats, President Obama, and their allies in Congress plan to cripple Social Security, then declare it insolvent, so that they may plunder its Trust Fund. Meanwhile, "our" illegal, mega-billion dollar wars in the Mid-East rage unabated, creating death, destruction and undying hatred for the United States.
Only there is NO trust fund. It was raided years ago. Only IOU's exist. Worthless in the real world.
The politicians want to get rid of SS so they don't have to keep paying for it out of the general tax money. THAT money is for their wars and rich sponsors, not the little people.
It's all a lie. The government takes in plenty of tax dollars to ensure these programs last for many generations. The problem is that Washington has it's priorities all messed up. Washington is more concerned for it's own welfare and the needs of the people are now a secondary concern.
The tragedy is that our nation continues its downward spiral simultaneously with the politicalization of this most basic program in its capitulation to "pure" capitalism on Wall Street. Sure, we could privatize SS accounts and this seems fair but how does it really work? Would the elderly have had the ability to have averted catastrophic consequences recently with the meltdown if they were day trading from their assisted living centers? I agree with your assertions about the inability of Congress to effectively govern but it is clear the "private sector", so sanctimonious and smug from its lair on Wall Street, is quite inept at its own game, especially for any benefit of people in the real working world. I have little confidence in turning SS and Medicare loose to be savaged by the "free market".
Grow the economy at about 4% a year (place your bets)
Make Cuts in every sacred cow that exists in Washington
Pay more taxes
Americas great economic ride is coming to a conclusion very quickly and the politics are going to get ugly really quickly.
just when the hard choices need to be made, they continue on with buisness as usual.
Unbelievable.
Obama has rarely taken a "right and popular position" with respect to the people's programs. Why then would he do it to save Social Security and Medicare?
In defiance of the vast majority of the American people, Obama approved Tarp funds for bailing out the big banks and other corporations.
In defiance of the majority of the American people and to please the insurance companies, Obama refused to fight for a strong public option that would have brought high health insurance costs under control.
Obama keeps the wars going even though most Americans have no idea why the government continues to wage battle in arenas thousands of miles from its shores.
As gas prices continue to steadily climb at great expense to the American people, Obama and Congress sit on their hands while their buddies in the oil industry and on Wall Street amass huge profits. And of course some of those profits, in one way or another, are ultimately kicked back to politicians who refuse to introduce legislation reasonably capping the cost of fuel.
As such, with all due respect to Mr. Baker, I believe it is inappropriate to use the conditional clause ("if Obama does such and such"), knowing full well what this president has already done.
It is much more appropriate to say "Given what this president has already done," ...
I had high hopes for Obama, but everything you stated hit the nail on the head, sadly.
As far as politics goes, there are no good choices. If Obama does not come around, we are doomed.
Back room deals were not required in letting a bad tax bill die or giving the republicans everything they needed. The deal came at a big price and I am confident it was part of the Payroll Tax Holiday and SSA
The net result will be the Worker earns less and pays more tax.
Stock Traders will get more Profit, Dividend, Appreciation and no tax and a Free Ride
Sad.
Not going to happen.
The 2% payroll reduction is tantamount to hundreds of billions of dollars that has been extracted from the Fund so that there can be a continuation of the Bush tax cuts for the wealthy.
http://www.gpo.gov/fdsys/pkg/BILLS-111hr4853enr/pdf/BILLS-111hr4853enr.pdf
See SEC. 601. TEMPORARY EMPLOYEE PAYROLL TAX CUT.
"There are hereby appropriated to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund established under section 201
of the Social Security Act (42 U.S.C. 401) amounts equal to the reduction in revenues to the Treasury by reason of the application of subsection (a)"”
WE ARE AT WAR!
People are being killed and people are dying in the name of the United States of America!
We think nothing of dropping a bomb and blowing up a bridge in Iraq - then spending $1 billion to rebuild that bridge while watching our own bridges crumble around us for lack of investment required to maintain them.
The public is not involved because they have been asked to sacrifice nothing! They are detached - the public is busy complaining about how they've been "Taxed Enough Already". Give me a break!
Want to have a war? PAY FOR IT! Raise EVERYONE'S taxes. Have all Americans shoulder the burden! Pass a law that ALL wars must be financed by increased taxes, specifically called a WAR TAX! Include full benefits for returning veterans in all financing! Then, see how quickly we give up fighting unnecessary wars of choice!
By the way - F& F'd
You Democrats could use some people like that. Lol.