Democrats, Social Security and the Fiscal Cliff
With democrats ecstatic that political dysfunction has postponed their cutting the social insurance programs that Americans have paid for and count on for a few weeks, discussion of the intricacies of ‘chained CPI’ (Consumer Price Index) versus other measures of inflation used to adjust Social Security can now apparently wait for the New Year. Still, this probably isn’t a bad time to ask: why? Why cut Social Security? The program is currently solvent, is expected to remain solvent for decades to come, and projected shortfalls in the future could be better addressed by raising the incomes of the people who pay into the program, not by cutting payments to those who depend on them. What is to be gained by ‘solving’ a problem that isn’t?
If cutting Social Security isn’t necessary, why then is it being proposed? Barack Obama provided copious evidence in prior proposals, television interviews and speeches that doing so is his intent. Congressional democrats and labor leaders quickly acceded to his proposal to do so, with House Speaker Nancy Pelosi going so far as to actively lie that proposed cuts will ‘strengthen’ the program. And given the cuts will eventually put tens of millions of Americans into dire poverty from a program they paid into for all of their working lives, what rationale could possibly justify doing so?
The reason I ask is a coalition of democrats, labor, liberals and progressives just re-elected Mr. Obama and democrats in Congress to what—cut Social Security? Mr. Obama created the ‘fiscal cliff’ to first push his stacked (in favor of cutting social insurance programs) ‘deficit commission’ to develop a plan to cut government spending and second, to force the issue to be revisited immediately after the election if no plan was agreed to. And Republican threats to refuse to raise the debt ceiling for leverage to ‘force’ spending cuts are idiotic—George W. Bush and congressional Republicans just led the largest increase in government spending in modern history. And that is not a difficult point to make. (And had it been on beneficial programs, it would have been laudable).
Ultimately the entire ‘debate’ is nonsense—the U.S. doesn’t fund spending directly from taxes. As the Federal Reserve is in the process of demonstrating with its QE (Quantitative Easing) programs, it can buy an unlimited quantity of government debt with money it ‘creates’ –the ‘debt limit’ is an arbitrary misdirection. This isn’t to argue that there is no relationship between economic production and money creation, but it is to point out that the ‘Federal budget’ is a convenient fiction. So, given his repeated analogy of the Federal budget to a family budget, is Mr. Obama ignorant of government finances or does he understand them and is purposely using the misleading analogy to further unstated goals?
The ‘Fix the Debt’ committee of politicians, corporate executives and connected financiers claiming to be concerned about the Federal deficit isn’t discussing eliminating the ‘carried interest’ deduction that benefits billionaire hedge fund managers, raising effective corporate tax rates that are currently the lowest in modern history, materially cutting end-of-empire levels of military spending and raising personal income tax rates on the titans of finance who would be begging for change in the street were it not for Federal government largesse in the (ongoing) bank bailouts. But they are deeply concerned about the Federal deficit, as are Mr. Obama and congressional democrats.
But again, why? The web of convenient fictions currently in play amongst both democrats and republicans in Washington—corporate tax cuts promote economic growth and job creation, government spending ‘crowds out’ more productive private sector spending, ‘excessive’ government debt will cause a financial market rebellion (bond vigilantes) and handing social insurance programs to private market profiteers is beneficial to the insured, are all demonstrably nonsense with only a cursory look at ‘the evidence.’
Effective corporate tax rates are the lowest in modern history and job creation, even before the economic calamity began in 2008, is the weakest since the 1930s. As global warming caused by largely private production and the predatory, dysfunctional private sector demonstrate on a daily basis, the ‘efficiencies’ of private production come from cost shifting, not by levels of human motivation intrinsic to capitalism. As QE is demonstrating, the Federal Reserve can control both short and long term interests rates—the ‘bond vigilantes’ are only in control when they provide cover for private interests. And Barack Obama didn’t choose the ‘least bad’ option with his healthcare ‘reform,’ he chose the private option to which he is ideologically committed.
Without apparent irony, these convenient fictions are straight from the IMF (International Monetary Fund) and World Bank playbooks circa 1980. While couched in the language of ‘economic development,’ IMF policies were / are extractive, designed to exert control over political economies and were / are tools of economic imperialism. The ‘austerity’ of IMF policies, cutting social spending to divert funds to service external debt, was rarely accompanied by even the pretense it benefited those whose social insurance programs were being looted. Cut to Mr. Obama and Democratic Speaker Nancy Pelosi mirroring the Vietnam Warism that to strengthen Social Security we must weaken it. Welcome to neo-Colonial America.
Also without apparent irony, the neo-Keynesian wing of the Democratic Party claims to have correctly analyzed current economic travails and prescribed the necessary and sufficient solutions if only Mr. Obama and the DC democrats would listen. In the first, this leaves the great mystery of why they haven’t listened and have actively articulated the policies of the radical right instead? In the second, Keynesian solutions imply that ‘we are all in this together,’ economically speaking, decades after official Washington and America’s plutocracy made it abundantly clear they believe they are responsible for their lot and we for ours, except when they need a few trillion dollars for a bailout. Finally, the ‘we’re all in this together’ monetary policies of the neo-Keynesians have benefited America’s richest 10% who own financial assets alone. (For explanations see Minsky’s essays on inflation and Marx’s Capital, Volume II).
With no respect whatsoever, this leads to the observation that Mr. Obama and his co-conspirators in the Democratic Party haven’t ‘caved,’ ‘capitulated,’ ‘relented,’ ‘given in,’ ‘submitted’ or ‘yielded’ by agreeing to cut social insurance programs. Mr. Obama’s far-right-of-center policies of his first term were just affirmed by the coalition that re-elected him. He will propose cutting Social Security again in just a few weeks. And democrats, labor, liberals and progressives will again be sincerely debating the merits of chained CPI versus other measures of inflation by which to cut Social Security. But while the effects of cuts will be real, the ‘debate’ won’t be. Put another way, the goal is to cut Social Security, not to ‘strengthen’ it.
In his speech at the Hamilton Project launch (link above) in 2006 Mr. Obama articulated the ‘slippery slope’ argument he believed was the ‘left’ position against ‘modernizing’ America’s social insurance programs. He argued supporters of these programs feared minor ‘adjustments’ were a pretext for the wholesale cuts desired by the radical right. But what this explanation leaves out is context. Were the ‘discussion’ taking place as the economic prospects of the poor and working classes were dramatically rising– rapid income gains, increasing income security, rising food security and income and wealth distribution resembling economic democracy, interpreted intent might be benign. But with Mr. Obama and congressional democrats several decades into giving voice to the desires and policies of the radical right, it would require a fool to believe benign intent today.
Hopefully I am underestimating the political pushback proposed cuts will engender. But given the propensity of democrats, labor, liberals and progressives to sincerely debate irrelevancies while giving unwavering support to the increasingly debased policies of their leaders, I doubt it. The bourgeois of these constituencies will likely break with the poor and working class and accede to the bogus rationale that the programs must be weakened so they may be strengthened, calculating that they’ll be all right in any case. And the pundit class will do the narrow calculus of cutting this program to save that without noticing the unwavering trajectory toward neo-liberal hell of the last forty years. To the folks who support the Democratic Party without apparently knowing what their policies are, good luck with that Social Security thing and all. To everyone else, we didn’t ask for this, but it’s coming our way anyhow.
Rob Urie is an artist and political economist in New York.