FacebookTwitterGoogle+RedditEmail

Is Obama Opting to the Lose the Election?

by DEAN BAKER

There are few issues that matter more to the public than Social Security. It is a hugely popular and hugely successful program.

Social Security was set up to provide retirees and disabled workers with a core income either in retirement or in the event a disability made them unable to work. This is exactly what the program does. In its seven decades of existence it has lifted tens of millions of retirees out of poverty and allowed millions of disabled workers to maintain a modest standard of living.

It accomplishes these goals with a minimal amount of fraud and in a highly efficient manner. Its administrative costs are less one-tenth as a high as those of private sector insurers.

This is the reason that the program enjoys enormous popularity across the political and ideological spectrum. Not only Democrats, but the overwhelming majority of independent and Republicans consistently tell pollsters that they support Social Security and do not want to see benefits cut. Conservatives and even self-identified supporters of the Tea Party also oppose cuts to the program.

This is why it is striking that Governor Romney has explicitly called for large cuts to the program. It is perhaps even more striking that President Obama indicated in his first debate that he agrees with these cuts.

Romney has outlined a proposal on his website that calls for further increases in the retirement age to 69 or 70. It also calls for cuts in benefits for middle-income retirees. Under the Romney proposal, middle-income workers just entering the labor force can expect to see benefits that will be reduced by more than 40 percent compared with currently scheduled levels.

This might be reasonable policy if we had some cause to believe that workers in the future will be better prepared for retirement than current retirees; however there is no evidence to support this view. The median wealth for those near retirement (ages 55-64), is just $170,000.

This calculation includes everything they own, the equity in their home, their retirement accounts, even the value of their car. To give a basis of comparison, the median house price is $180,000. This means that if the typical person in this age group used all their wealth, they would have almost enough money to pay off their mortgage. They would then be entirely dependent on Social Security in their retirement.

If we look at the group 10 years younger, ages 45-54, median wealth is just over $70,000. And remember, half of households will have less.

The basic story is that our systems of retirement savings outside of Social Security have collapsed. Traditional defined benefit pensions are quickly disappearing outside of the public sector. The 401(k)s that have replaced them have been a bonanza for the financial industry, but have done little to help most workers accumulate enough for a secure retirement.

The amount put into these accounts is generally far too small to provide for a decent retirement. Furthermore, the fees charged by the financial industry can easily eat up one-third of the earnings on these accounts, sharply reducing accumulations over time.

The result is the situation we now see. For most middle-income workers their home equity is by far their greatest source of wealth. Money held in a retirement account is a distant second.

Given this reality, it would be sound policy for President Obama to insist, in contrast to Governor Romney, that Social Security cuts are off the table until we have fixed the larger retirement savings system. If anything, it would be reasonable to suggest increasing Social Security benefits, especially for low and moderate income workers.

While this would be good policy, the polls indicate it would be great politics. In a close election it could easily make up the margin of victory, especially in a state like Florida with a large elderly population. Yet President Obama told the country that there is not much difference between his position on Social Security and Romney’s position.

There is a simple explanation for Obama’s refusal to defend Social Security. In elite Washington circles the willingness to cut Social Security is taken as evidence of courage. These people do not depend on Social Security. In fact, as Governor Romney demonstrated at his famous fundraiser speech, they actually have contempt for the people who do depend on Social Security.

If Obama were to take a strong stand defending Social Security he could expect to be attacked harshly by these elites. In news stories and editorial columns, outlets like the Washington Post and National Public Radio would denounce President Obama in harsh terms. Needless to say, his wealthy funders might also have second thoughts.

This fear is likely the reason that President Obama will not defend Social Security. If he loses the election, this fear of the wrath of the elite will clearly be the villain.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy.

This essay originally appeared in Yahoo Finance.

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

Weekend Edition
April 28, 2017
Friday - Sunday
Paul Street
Slandering Populism: a Chilling Media Habit
Andrew Levine
Why I Fear and Loathe Trump Even More Now Than On Election Day
Jeffrey St. Clair
Mountain of Tears: the Vanishing Glaciers of the Pacific Northwest
Philippe Marlière
The Neoliberal or the Fascist? What Should French Progressives Do?
Conn Hallinan
America’s New Nuclear Missile Endangers the World
Peter Linebaugh
Omnia Sunt Communia: May Day 2017
Vijay Prashad
Reckless in the White House
Brian Cloughley
Who Benefits From Prolonged Warfare?
Kathy Kelly
The Shame of Killing Innocent People
Ron Jacobs
Hate Speech as Free Speech: How Does That Work, Exactly?
Andre Vltchek
Middle Eastern Surgeon Speaks About “Ecology of War”
Matt Rubenstein
Which Witch Hunt? Liberal Disanalogies
Sami Awad - Yoav Litvin - Rabbi Lynn Gottlieb
Never Give Up: Nonviolent Civilian Resistance, Healing and Active Hope in the Holyland
Pete Dolack
Tribunal Finds Monsanto an Abuser of Human Rights and Environment
Christopher Ketcham
The Coyote Hunt
Mike Whitney
Putin’s New World Order
Ramzy Baroud
Palestinian, Jewish Voices Must Jointly Challenge Israel’s Past
Ralph Nader
Trump’s 100 Days of Rage and Rapacity
Harvey Wasserman
Marine Le Pen Is a Fascist—Not a ‘Right-Wing Populist,’ Which Is a Contradiction in Terms
William Hawes
World War Whatever
John Stanton
War With North Korea: No Joke
Jim Goodman
NAFTA Needs to be Replaced, Not Renegotiated
Murray Dobbin
What is the Antidote to Trumpism?
Louis Proyect
Left Power in an Age of Capitalist Decay
Medea Benjamin
Women Beware: Saudi Arabia Charged with Shaping Global Standards for Women’s Equality
Rev. William Alberts
Selling Spiritual Care
Peter Lee
Invasion of the Pretty People, Kamala Harris Edition
Cal Winslow
A Special Obscenity: “Guernica” Today
Binoy Kampmark
Turkey’s Kurdish Agenda
Guillermo R. Gil
The Senator Visits Río Piedras
Jeff Mackler
Mumia Abu-Jamal Fights for a New Trial and Freedom 
Cesar Chelala
The Responsibility of Rich Countries in Yemen’s Crisis
Leslie Watson Malachi
Women’s Health is on the Chopping Block, Again
Basav Sen
The Coal Industry is a Job Killer
Judith Bello
Rojava, a Popular Imperial Project
Robert Koehler
A Public Plan for Peace
Sam Pizzigati
The Insider Who Blew the Whistle on Corporate Greed
Jesse Jackson
Jeff Sessions is Rolling Back Basic Rights
Nyla Ali Khan
There Has to be a Way Out of the Labyrinth
Rivera Sun
Blind Slogans and Shallow Greatness
Michael J. Sainato
Trump Scales Back Antiquities Act, Which Helped to Create National Parks
Stu Harrison
Under Duterte, Filipino Youth Struggle for Real Change
Martin Billheimer
Balm for Goat’s Milk
Stephen Martin
Spooky Cookies and Algorithmic Steps Dystopian
Michael Doliner
Thank You Note
FacebookTwitterGoogle+RedditEmail