FacebookTwitterGoogle+RedditEmail

Obama’s Raid on Social Security and Medicare

by DEAN BAKER

President Obama’s efforts to appease Washington’s Serious People ran into serious obstacles last week. Responding to the cries of the Washington deficit hawks, President Obama proposed cutting Social Security by adopting a different measure of the rate of inflation for the annual cost-of-living adjustment (COLA).

This measure would gradually reduce the value of benefits through time. By age 75 retirees would see a benefit that is roughly 3 percent less than under current law. This is a much bigger hit to the income of the typical retiree than the tax increases at the end of last year were to the income of most of the wealthy people.

While cutting Social Security got the predictable applause from the Washington Postand other Washington establishment types, it prompted far more outrage among the president’s base than he had anticipated. As a result, Obama’s people were busy re-writing the plan at the time the budget was released, trying to ameliorate some of its worst effects.

However the basic objection remains. Why is a Democratic president trying to cut Social Security in response to a crisis created by a combination of Wall Street greed and Washington corruption and incompetence?

If we compare the most recent GDP projections from the Congressional Budget Office with the pre-crisis projections from 2007, the crisis will cost the country more than $17 trillion in lost output. This is more than $50,000 per person. And, rather than making the people responsible pay the cost, President Obama is now looking to cut the $1,250 monthly Social Security check that provides more than half of the income for the typical retiree.

The poster child for this brazen class war on the American people is Morgan Stanley director Erskine Bowles. Bowles profited big time in the bubble days, pocketed hundreds of thousands of dollars a year for his “work” as a director of Morgan Stanley. The bank played a huge role in inflating the bubble and then would have flamed into bankruptcy without a massive government bailout. The whole time the checks never stopped for Mr. Bowles.

Erskine Bowles also was pocketing hundreds of thousands of dollars from his “work” as a director of General Motors. His position there did come to an end when the company went into bankruptcy.

According to the New York Times, Bowles is now giving talks at $40,000 a piece (at three people’s annual Social Security benefits) on the need to cut Social Security and Medicare. Of course this is in addition to the hundreds of thousands of dollars that he still rakes in each year from sitting on the board of Morgan Stanley and other major corporations. You can’t make this stuff up.

The stench from President Obama’s attack on Social Security has led to a bipartisan revulsion with the ways of Washington. This is a great time to seize on the momentum.

As actually serious people have been pointing out, we should be looking to increase, not decrease Social Security. The other pillars of our retirement income system, pensions and individual savings, have collapsed. As a result, those approaching retirement are likely to be more even more dependent on Social Security than current retirees. If we want to ensure that people who have spent life working can enjoy something resembling a decent retirement, we will need to be expanding, not cutting benefits.

This does cost money, but we actually can afford it, in spite of the damage done by the Serious People to the economy. For a start we can raise the cap on wages subject to the Social Security tax, so that people earning over $113,000 pay the same tax rate as the rest of us.

If we can stop the upward redistribution of income, it would be reasonable to raise the payroll tax rate at some point in the future. The Social Security trustees project that average hourly compensation will grow by close to 50 percent over the next three decades. It hardly seems outrageous to take back one or two percentage points of this increase in higher taxes to support Social Security. The key issue will be ensuring that workers get their share of these gains rather than letting them all go to the Erskine Bowles of the world.

Toward this end we can impose a Wall Street speculation tax that will crack down the rapid flipping of stocks and other financial instruments. The Joint Tax Committee of Congress estimated that a tax of just 0.03 percent, as proposed by Senator Tom Harkin and Representative Peter DeFazio, could raise close to $400 billion over the course of a decade. This is more than three times as much as President Obama hoped to save by cutting Social Security.

Given where the country is today, proposals such as the Harkin-DeFazio bill should be occupying center stage. We should be debating how to keep the Wall Street parasites from being a continuing drain on the country’s productive economy. And we should be struggling to find ways to fill get the economy up to its potential and putting 9 million people back to work.

Those trying to derail this essential effort and to take away people’s Social Security deserve exactly the sort of derision they have been receiving. These Serious People should never again be taken seriously.

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 article originally appeared on Al Jazeera.

 

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.

May 05, 2016
Andrew Stewart
Green Bernie or Green Party Machine?
Binoy Kampmark
Yuri Gagarin in Space: the Politics of Cosmic Discovery
Hayes Rowan
This Naming of Things
May 04, 2016
Kshama Sawant
It’s Not About Bernie: Why We Can’t Let Our Revolution Die in Philadelphia
Conn Hallinan
Baiting the Bear: Russia and NATO
Joshua Frank
Hanford’s Leaky Nuke Tanks and Sick Workers, A Never-Ending Saga
Paul Craig Roberts
TIPP: Advancing American Imperialism
Ted Rall
Hillary to Bernie Supporters: Don’t Vote for Me!
Eric Draitser
Hillary Clinton and Wall Street’s Neoliberal War on Latin America
Leslie Scott
The Story of Jill Stein: Putting People, Peace and the Planet Before Profits
Ann Garrison
Building the Greens Into a Mass Party: Interview with Bruce Dixon
Tom Clifford
Crying Rape: Trump’s China-Bashing
Lawrence Davidson
Getting Rid of Bad Examples: Andrew Jackson & Woodrow Wilson
Ellen Brown
Bank of North Dakota Soars Despite Oil Bust: A Blueprint for California?
Nelson Valdes
Is Fidel Castro Outside or Part of Mainstream Thinking? A Selection of Quotes
Jesse Jackson
Don’t Send Flint Down the Drain: Fix It!
Nathan Riley
Help Bernie Keep His Halo
Rivera Sun
Remembering Nonviolent History: Freedom Rides
Clancy Sigal
Rachel and the Isolationists: How Maddow Blew It
Laura Finley
Changing the Conversation About “The Woman Card”
CJ Hopkins
Coming this Summer … Revenge of the Bride of Sophie’s Choice
May 03, 2016
Gary Leupp
Hillary Clinton’s Foreign Policy Resumé: What the Record Shows
Michèle Brand – Arun Gupta
What is the “Nuit Debout”?
Chuck Churchill
The Failures of Capitalism, Donald Trump and Right Wing Terror
Dave Marsh
Bernie and the Greens
John Wight
Zionism Should be on Trial, Not Ken Livingstone
Rev. John Dear
A Dweller in Peace: the Life and Times of Daniel Berrigan
Patrick Cockburn
Saudi Arabia’s Great Leap Forward: What Would Mao Think?
Doug Johnson Hatlem
Electoral Votes Matter: Hillary Clinton or Bernie Sanders vs Donald Trump
Chris Gilbert
Venezuela Today: This Must Be Progress
Pepe Escobar
The Calm Before the Coming Global Storm
Ruth Fowler
Intersecting with the Identity Police (Or Why I Stopped Writing Op-Eds)
Victor Lasa
The Battle Rages on in Spain: the Country Prepares for Repeat Elections in June
Jack Rasmus
Is the US Economy Heading for Recession?
Dean Baker
Time for an Accountable Federal Reserve
Ted Rall
Working for US Gov Means Never Saying Sorry
Dave Welsh
Hunger Strikers at Mission Police Station: “Stop the execution of our people”
John Eskow
The Death of Prince and the Death of Lonnie Mack
May 02, 2016
Michael Hudson – Gordon Long
Wall Street Has Taken Over the Economy and is Draining It
Paul Street
The Bernie Fade Begins
Ron Jacobs
On the Frontlines of Peace: the Life of Daniel Berrigan
Louis Yako
Dubai Transit
Bill Quigley
Teacher, Union Leader, Labor Lawyer: Profile of Chris Williams Social Justice Advocate
Patrick Cockburn
Into the Green Zone: Iraq’s Disintegrating Political System
Lawrence Ware
Trump is the Presidential Candidate the Republicans Deserve
FacebookTwitterGoogle+RedditEmail