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Richard (RJ) Eskow

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Four Myths About the "Deal" -- and Four Ways It Can Hurt You

Posted: 08/01/11 05:03 PM ET

Today we're watching the end of a brief manufactured crisis -- and the beginning of a long national nightmare. This deal's designed so that"centrist" (right-wing) Democrats and Republicans can finally implement the draconian measures they both want in an indirect way that gives them as little accountability as possible.

There's nothing to celebrate in this deal unless you're either an economic right-winger or very wealthy -- or both. Even the "defense cuts" some Democrats are touting could turn take the form of sharp reductions in veterans benefits or State Department diplomatic activities.

It's a plan they've tried to execute before. It creates a secret extra-democratic process designed to implement highly unpopular and harmful policies, which include "revenue increases" that could further decimate the middle class; pre-timed cost-cutting "triggers" that let politicians hide their role in the process; potentially slashing cuts to Social Security, Medicare, and Medicaid; and a refusal to address the depression-like economy that still binds million of Americans.

And all to protect the rich from additional taxes.

A Three-Stage Plan

The nation's austerity plan is to be rolled out in three stages. The first, which apparently has already been concluded, was to have economic conservatives in both parties agree that they will do nothing more to help the country's devastated economy. As the New York Times reported, "The nation's political leaders agreed on Sunday to spend and invest less money in the American economy, a step that economists said risks the reversal of a faltering recovery." That plan of inaction is an integral, if unspoken, part of this agreement, and it's likely to have as great an impact as their agreed-upon actions.

The second step will take place if and when this deal is passed, and will consist of nearly $1 trillion in mandatory cuts. We're told that half of the cuts will be from "defense spending," but that doesn't mean what you might think it means. As the Democratic Policy and Communications Center explains, "security spending includes defense, state and foreign operations, homeland security, and military construction/veterans affairs." In other words, these cuts could include layoffs for TSA workers, reduction in health care or other veteran spending. and shutdowns of US diplomatic missions around the world.

The other half of the cuts will come from a cap on non-security spending, and the specifics haven't been laid out their either. We're told that Social Security, Medicare, and Medicaid are "off the table" for this round of cuts -- but then comes Step Three.

In Step Three a Super Committee of six Democrats and six Republicans will be empowered with creating $1.5 trillion in additional cuts. Similar groups "bipartisan" groups of Republicans and conservative Democrats have been convened in the past. They've consistently come up with cuts that are widely opposed by most Americans (often including most Republicans), while refusing to raise taxes on the wealthy (widely supported by most Americans).

Four Myths

As might be expected, there's a lot of confusion around the deal -- in fact, it's designed to create confusion. Here are four myths that sprang up overnight:

Myth #1: It "preserves Social Security and Medicare."

False. It only defers the day of reckoning. Social Security and Medicare are exempted from the first and smaller round of cuts, but not from the larger $1.5 trillion in cuts that the unelected "Super Congress" must find.

The likeliest outcome? Unnecessary and drastic benefit cuts to Social Security that probably involve raising the retirement age even more than it's already scheduled to rise, the "chained-CPI" that artificially lowers cost-of-living standards to well below what seniors need for their expenses, and possibly a means-testing system that sounds reasonable but will quickly target middle-income Americans.

Myth #2: Military spending faces deeps cuts under this plan.

Even the eagle-eyed Ezra Klein falls for this myth when he writes that "a year ago, defense spending was supposed to be sacrosanct" but that "The Pentagon" will now be facing deep cuts.

Not necessarily.

As the Democratic Policy and Communications Center explains, "security spending includes defense, state and foreign operations, homeland security, and military construction/veterans affairs." In other words, these cuts could include layoffs for TSA workers, reduction in health care or other veteran spending. and shutdowns of US diplomatic missions around the world.

Myth #3: It's a "compromise."

Do we really need to rebut this again? The word's being used by the President, DNC Chair Debbie Wasserman-Schultz, and some other right-tilting Democrats. Let's review it one more time:

  • No tax increases for the wealthy.
  • Massive spending cuts.
  • A "deficit panel" that will be half Republican, even though Democrats hold both the Senate and the White House and Republicans hold only the House. This panel is likely to mirror others that have recommended deep cuts to Social Security, Medicare, and Medicaid, and have even recommended deeper tax cuts for the wealthy.

If this is a compromise, I'd hate to see what capitulation looks like.

Myth #4: The president and others backing this bill will now "pivot and address the jobs issue."

That Times report only makes explicit what has been understood all along: The Republicans won't agree to tax increases for the wealthy, and they won't spend any money for jobs or rebuilding the economy. Everybody's agreed to stop pretending they intend to do anything more to fix this blighted economy.

More Myths

These aren't the only myths. The deal offers Congress several ways to create another debt ceiling crisis in the future, for example, despite the White House claim that it "removes the cloud of uncertainty over our economy at this critical time." There's still a very real possibility the US government could lose its AAA credit rating even if it's enacted.

Welcome to Your Nightmare

How is this deal likely to affect your household? If you're in the top 1% of earners, there's no need to read any further because it probably won't affect you personally. Here are five ways it's likely to affect the rest of us:

1. You'll be less likely to find a job. If you've got one, you're less likely to earn more money -- and more likely to lose it.

If both parties have agreed not to push for jobs programs or other economic recovery efforts, it's bad news if you or anyone close to you is currently unemployed -- especially if you live an a hard-hit area, have been unemployed for a long time, are African American, or are older. It's equally bad news if you've just graduated from college. This "grand bargain" won't even extend your Federal unemployment insurance.

If you're not working enough hours or haven't seen your salary go up very much, this will hurt you too. And wages are stagnating, even for fully-employed people, too. In other words, of you're one of the 22 to 24 million people in the country who are un- or under-employed, this deal is bad news. And if you're one of the tens of millions of people with stagnant income, it will hurt you too.

Hang in there, and don't give up. Join us in pressuring Washington to address unemployment. That will give you added purpose -- and we sure could use the help.

2. Your housing value is likely to suffer.

The bipartisan coalition that bailed out Wall Street has agreed to exclude any help for suffering homeowners in their "grand bargain." That means that a wave of foreclosures will continue unabated, driving down housing value, ruining millions of households, and depressing the local economy in tens of thousands of cities, towns, and neighborhoods.

The tax provisions we'll describe in a minute are likely to make that problem even worse.

3. Your old age just got scarier.

Benefit cuts are likely to be recommended by the "Super Congress" and implemented by that other body. (What should it be called from now on -- the "Lesser Congress," perhaps?)

A "chained-CPI" benefit cut will reduce Social Security by nearly ten percent by the time you're 80 -- and that's if you retire right away. If you're young the cuts will be even greater. Raising the retirement age is a huge benefit cut, too.

That's likely to mean an old age with more financial insecurity -- unless this deal can be stopped, or the "Super Congress" is staffed with Democrats who believe in the higher good and not a deal for expediency's sake.

4. Your tax bill is likely to go way up.

The phrase "tax increase" is understood to mean raising tax rates, which would discommode the wealthy. That's why they'd rather say "revenue enhancement" instead, because that phrase also covers eliminating tax deductions that benefit the middle class but mean very little to the wealthy. Two of the biggest are the home mortgage interest deduction and the tax deduction for employer-sponsored health care.

If the mortgage deduction goes, even more homes will go into foreclosure, leading to even more severe drops in home prices. Those families who can keep their homes will face a steep increase.

If you get your health benefits through your employer, you'll pay a lot more for coverage if they eliminate or reduce the health benefit deduction . You'll also get a lot less coverage in return -- as your employer shifts even more of the health bill back to you. Many small employers may drop coverage altogether -- which means that more households will be required to purchase it on the individual market. That could cost a middle class family ten thousand dollars or more per year under the current health bill.

But wait. There's less ...

That's not all, folks. Education will be cut under this plan, which means your children will get less of an education and will have less money for college, closing one more avenue to a better life. And things will get much worse for lower-income Americans, who'll be stripped of health care and educational opportunities. Overall, economic growth is likely to be reduced from its current crawl to a complete standstill, causing spikes in unemployment and other economic hardships.

Is this a done deal?

Pretty close, but there are still things that can be done. First and foremost, people can call today and demand that your Senators and representatives reject this deal. And if the deal does pass, demand that only people who represent you are appointed to the extra-legislative Super Congress that's been empowered with deciding your fate.

And don't forget how your elected officials behave as this deal makes its way through the process. Write it down if you need to, but be sure you remember everything when you vote next November.

Here are more detailed descriptions of the myths and the ways the deal could affect you:

Four Myths About the Deficit Deal
Four Ways the "Deal" Will Affect You Personally

 

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