So far this week, we’ve talked about the upcoming Presidential Fiscal Commission meeting, debt, deficits, and Social Security. At this point, it’s fair to ask, why would Social Security become the primary target for this commission? While Fed Chairman Ben Bernanke says, “That’s where the money is” we also looked to history for the answer.
The promise of secure benefits is a “hoax”, the taxes paid into the trust fund are “wasted” by the government rather than prudently invested and “the so-called reserve fund…is no reserve at all”.
Sound familiar? That’s because it is. You’ve heard the same core argument made most recently by President George Bush, now multi-billionaire and fiscal hawk Peter Peterson, David Walker, and countless other conservatives on Fox News and Capitol Hill. However, this particular statement was made by Republican presidential hopeful, Alf Landon, in 1936 before the first Social Security check had even been delivered.
It would have been reasonable to include some discussion of the economic impact of Senator Kent Conrad's plans to cut the budget deficit below the levels targeted by President Obama. The Post reports on the political implications of the budget committee's vote on a package that reduces the defiicit below the levels in President Obama's budget with additional cuts beginning in October, at point at which the unemployment rate is still likely to be close to 10.0 percent. more »
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The following was originally posted in March 2009, after I confronted the CEO of the Peterson Foundation during its "Fiscal Wake-Up Tour." (See video above.)
Now, with the Peterson Foundation's "2010 Fiscal Summit" on tap for next week, I thought it would be a good time to revisit how these deficit hysterics get away with acting like unassailable paragons of truth, when in fact they are blind ideologues.
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Social Security and Medicare opponent Pete Peterson funds through his foundation a "Fiscal Wake-Up Tour," which characterizes itself as a non-ideological truth-telling presentation bravely warning the nation that Social Security and Medicare need drastic changes to save our children from crushing debt.
But the "Fiscal Wake-Up Tour" actually is the worst kind of ideological exercise, one that blindly follows a political position regardless of the facts.
I attended the Boston stop of the tour last night, and confronted the panel on its misinformation. Their responses only further proved my point. more »
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The Washington Post ran a news article complaining that value added taxes are not being taken more seriously in debates over the budget. (A value added tax is effectively a national sales tax that would impose taxes in proportion to consumption.) The first sentence complained that the lack of interest in this tax stemmed from the "hyperpartisan political atmosphere" in Washington.
"Hyperpartisan" is a peculiar term to use in the context of the deficit debate since it actually does not divide people closely along partisan lines.
The Washington Post reported on the restart of the Hamilton Project, a policy-oriented research project that is financed in large part by Robert Rubin. Mr. Rubin made $110 million in his decade as a top Citigroup executive. During his tenure Citigroup went from one of the largest and most profitable financial companies in the world to the edge of bankruptcy. It was only saved from bankruptcy in the fall of 2008 by tens of billions of taxpayer dollars and hundreds of billions of dollars of government guarantees. It would have been worth noting the questionable source of the project's funding in this piece. If a similar project had been launched by a coalition of labor unions, there is no doubt that the source of the funding would have been clearly noted in the piece. more »
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The NYT reports on the Fed handing $47.4 billion in profits to the Treasury. This event should have gotten more attention. The $47.4 billion in profits from the Fed affects the budget in the same way that raising $47.4 billion from taxes or saving $47.4 billion with spending cuts would affect the budget. However, the Fed neither raised taxes nor cut spending. It printed money.
The reason why this is important is that the Fed is now printing large amounts of money and can print more to support the government's deficit during this downturn. The government does not need to raise taxes or cut spending to pay for programs like unemployment benefits or aid to state to and local education. It can simply print money.
While in principle there is a limit to its ability to print money, that would only come after the economy was back near full employment and further increases in demand threatened to cause inflation. However, the economy is nowhere near this point today.
Kim Wright is the assistant director of communications for the National Committee to Preserve Social Security and Medicare.
Central to persuading Americans that Social Security is broken is the meme offered by President Bush during his privatization campaign 5 years ago, that there is no trust fund or on alternate days that the trust fund is full of worthless IOU’s.
This failed pitch is still the cornerstone of the fiscal hawks’ campaign to erode public support for Social Security. The Cato Institute described their long-term strategy (implemented after the last major Social Security reform in 1983) this way:
So here we are. As promised, the American people have been bombarded with a steady stream of pronouncements that Social Security is bankrupt, broken, or just too expensive. In truth, what these folks really mean is that they don’t Washington to honor its obligations to the Social Security trust fund.
That would have been an appropriate title for an article describing North Dakota Senator Kent Conrad's plan for sharp cuts in the budget deficit over the next four years. Conrad's plan would reduce the projected 2015 deficit by approximately 1.6 percentage points of GDP more than President Obama's budget. Since most projections still show the economy to be well below full employment levels of output by this year, the cuts in spending and higher taxes in Senator Conrad's plan will reduce the level of output. If we assume an average mulitplier of 1, then output will be 1.6 percent lower in 2015 than would otherwise be the case. If employment falls by the same amount, then Senator Conrad's plan would throw roughly 2.3 million people out of work. more »
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Kim Wright is the assistant director of communications for the National Committee to Preserve Social Security and Medicare.
Contrary to popular myth promoted by Wall Street billionaires, the main stream media, and Washington’s so-called deficit hawks, Social Security is not to blame for the nation’s fiscal problems or our bleak debt and deficit picture. To the contrary, Social Security’s trust fund surplus has been used for years to help balance the federal books. Without it, things would look much bleaker. Yet, the economic recession and the deficits it has caused have given Social Security’s foes a political opportunity to “go where the money is” to trim rising deficits. more »
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