The president's scheduled to discuss Social Security, Medicare, and the deficit in a speech this Wednesday. Let's hope he isn't about to make a serious mistake.
White House advisers like David Plouffe are saying that the president thinks "we have to do more" to rein in entitlement spending, and there are reports that suggest that the "more" he has in mind is "less" -- less for middle class and lower-income Americans, that is. They say that the president's planning to propose spending cuts for Social Security and Medicare.
Nothing's been confirmed, but it doesn't help when Mr. Plouffe follows his remarks about "doing more" to cut entitlements by saying that these cuts would be made with a "scalpel" and not a "machete." If the president amputates the wrong limb, who cares what kind of blade he uses?
And that's exactly what benefit cuts would be: unnecessary amputations. Social Security doesn't add to the deficit, and the only way to fix Medicare is by reducing the profit motive's influence on health care costs. Could the president really be planning to cut these programs anyway?
Don't do it, Mr. President. For everyone's sake, please don't do it.
Bait and Switch
The right's "austerity economics" argument says that the federal deficit is our greatest problem (what about jobs?), and that it can only be fixed with deep cuts to Medicare and Social Security. If nothing else, this flawed argument makes a good smokescreen for an anti-government agenda that benefits the wealthy and hurts everyone else. The finest economists in the world are prepared to explain the flaws in this theory.
Unfortunately, let's hope the president doesn't choose to amplify these arguments, as he's done in recent weeks. It would be tragic and sad to see the president repeating the deceptive claim that cutting entitlements will help the economy because "that's where the money is."
The only effective way to reduce government debt is by addressing the three main causes of present and future deficits: tax breaks for the wealthy, excessive military spending, and exploding health care costs. Those fixes are unpopular with the right, but they're supported by strong majorities among the American people.
And the best way to help the economy in the short term is with urgently-needed government investment to stimulate the economy and put people back to work. The right has promoted what might be called Big Lie Economics, arguing that spending cuts will magically create more jobs than they destroy because... well, because of magical stuff. The president can either explain why we need to invest in the future, or he can repeat the economic Big Lie.
But he can't do both. Nobody can, because truth and falsehood can't co-exist in the same speech. They cancel each other out, and what finally gets communicated is... well, nothing.
Medicare: Don't Shift the Problem. Fix It.
Medicare cuts don't slow down or reduce our runaway health care costs. They just shift them onto individual seniors who can't solve them or negotiate them down. That ensures future financial catastrophes for all but the wealthiest Americans -- and for the nation as a whole. The only way to really solve our health care problem is by ending the corporation-friendly policies that force us to pay much more for health care than other industrialized nations and get much less in return.
Here's a good place a start: Once and for all, let the government negotiate so that it can get better deals from the drug companies. Let's tell Washington that we don't want to hear one more word about benefit cuts until the government's allowed to horsetrade with the pharmaceutical manufacturers the same way everybody else does with their vendors (including the government, when the vendor isn't a pharmaceutical company).
Then the president should make the case for deeper health reform -- reform that stops rewarding for-profit hospitals for driving up costs and utilization, or health insurers for cherry-picking their customers and denying them care.
Cuts in Medicare benefits just shift the problem from one pocket to the other, but health reform solves the problem. Perhaps the president will tell his audience on Wednesday that the solution to our health care problem lies in a simple choice: You can coddle Big Pharma and Big Insurance, or you can save Medicare.
But you can't do both.
Robbing Middle Class America's Savings Account
Social Security's $2.6 trillion trust fund is real. It's not the "myth" or the "worthless set of IOU's" that would-be welshers and piggy-bank robbers like Alan Simpson keep cackling about. The Trust Fund is middle-class America's retirement savings account. Jacob Lew, the president's director of the Office of Management and Budget, understands that.
We keep hearing scary-sounding talk about worker-to-retiree ratios and all those retiring baby boomers who are about to overrun the system. But this large group of aging Americans has been contributing to the Trust Fund all along, in proportion to its numbers. Where do you think that $2.6 trillion comes from? The fact that we might need to cut benefits by 25% in 2037 isn't their fault. And it's certainly not the fault of the future generations who would be hit much harder by Social Security cuts than the boomers will.
Here's the real story: The Greenspan Commission that reformed Social Security in 1983 had no way of knowing that the top 1% of wealthy Americans would grab a much greater portion of our national income under Clinton, Bush II, and Obama than it did under Ronald Reagan. That money grab is the only reason that the payroll tax cap is now too low to cover 100% of the program's projected costs.
Any benefit cut -- anything, in fact, other than the elimination of the payroll tax cap -- would mean that middle class people who contributed to the Trust Fund all their working lives are being asked to take a financial hit, just so that America's wealthiest don't have to pay the same payroll tax rate as everyone else.
Try selling that deal to voters.
Franklin D. Roosevelt designed the Social Security Trust Fund so that it would be funded by contributions from working people, not by general tax revenues. He did that, he said, so that "no damn politician" could come along later and raid that money for other purposes. Let's hope the president tells the American people on Wednesday night that the middle class has contributed its fair share and it's time for the wealthy to step up to the plate.
After all, no American leader wants to be remembered as the "damn politician" FDR warned us about.
A good hand
The president would be making a tragic political mistake by cutting benefits, too. Democrats are going into the budget debate with an enormous advantage. Public opinion strongly opposes the Republican agenda of benefit cuts for middle-class and lower-income Americans to finance even bigger tax breaks for the wealthy and corporations.
Polls show that the American public supports raising taxes on the wealthy and cutting the military budget, two things that the Republicans steadfastly refuse to do. What's more, Americans of all political persuasions (including 75% of Republicans and 76% of Tea Party members) are against cutting Social Security to balance the budget. And everybody hates runaway health care costs.
On the other hand, only six percent of those polled after the last election thought that the deficit should be Congress' number one priority, while 56% thought the highest priority should be jobs. By threatening to shut down the government, Republicans have rammed spending cuts through the Congress that will increase unemployment and hurt the economy.
Sure, polls show that people were pleased that the government didn't shut down this weekend. That seems like a good thing -- in the abstract. But the administration shouldn't draw false comfort from those numbers. People won't be happy if the results of that agreement make their lives worse.
Ezra Klein put it quite well: "When unemployment is stuck at eight percent, nobody is a great communicator."
There are encouraging signs from the White House, too. We're told that the president will call for tax increases on well-to-do Americans. That means a return to his 2010 proposal: a more rational (higher) rate for top earners and the elimination of tax breaks for hedge fund billionaires. And more is needed. We also need to remove the payroll tax cap, and we should institute a financial transactions tax that provides needed revenue while slowing down reckless Wall Street gambling. These tax increases would be fair and reasonable, especially after decades in which more and more of the nation's income went to the wealthiest among us.
Cutting benefits for American seniors, on the other hand, would be just one more way of transferring our national wealth upward. The wealthiest Americans have "won" the last several decades, getting even richer off reckless tax cuts and the fruits of destructive deregulation. Entitlement cuts will let them "win the future," too -- while everybody else loses.
Entitlement cuts would hurt the public, and they'd hurt the president and his party, too. It doesn't matter if you call it a "scalpel" or a "machete," a sling blade or a Kaiser blade. Any blade that cuts benefits is a blade that cuts both ways.
The future is that time when each of us grows old, that time when most of us will live on limited incomes. Most people need a future that includes a secure income and decent medical care. Without those things, "winning the future" would be just another empty and meaningless political slogan that tested well in focus groups but rang hollow in the cold light of day.
There's still time for wisdom and common sense to prevail. Let's hope that the president makes a clear, strong case for sensible deficit reduction based on jobs, growth, and fairness. Anything else in his speech should be, well, cut.