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. This article originally appeared in Al Jazeera America.  

Like What You’ve Read? Support CounterPunch
July 27, 2015
Susan Babbitt
Thawing Relations: Cuba’s Deeper (More Challenging) Significance
Howard Lisnoff
Bernie Sanders: Savior or Seducer of the Anti-War Left?
Martha Rosenberg
Big Pharma’s Profiteers: You Want Us to Pay What for These Meds?
John Halle
On Berniebots and Hillary Hacks, Dean Screams, Swiftboating and Smears
Stephen Lendman
Cleveland Police Attack Black Activists
Patrick Cockburn
Only Iraq’s Clerics Can Defeat ISIS
Ralph Nader
Sending a ‘Citizens Summons’ to Members of Congress
Clancy Sigal
Scratch That Itch: Hillary and The Donald
Colin Todhunter
Working Class War Fodder
Gareth Porter
Obama’s Version of Iran Nuke Deal: a Second False Narrative
Joshua Sperber
What is a President? The CEO of Capitalism
Zoe Konstantopoulou
The Politics of Coercion in Greece
Vacy Vlanza
Without BDS, Palestine is Alone
Laura Finley
Adjunct Professors and Worker’s Rights
Jon Langford
Mekons Tour Diary, Episode Three, Where We Thrill Everyone by Playing Like “Utter Bloody Garbage”
Weekend Edition
July 24-26, 2015
Mike Whitney
Picked Out a Coffin Yet? Take Ibuprofen and Die
Henry Giroux
America’s New Brutalism: the Death of Sandra Bland
Rob Urie
Capitalism, Engineered Dependencies and the Eurozone
Michael Lanigan
Lynn’s Story: an Irish Woman in Search of an Abortion
Paul Street
Deleting Crimes at the New York Times: Airbrushing History at the Paper of Record
ISMAEL HOSSEIN-ZADEH
Making Sense of the Iran Nuclear Deal: Geopolitical Implications
Andrew Levine
After the Iran Deal: Israel is Down But Far From Out
Uri Avnery
Sheldon’s Stooges: Netanyahu and the King of Vegas
David Swanson
George Clooney Paid by War Profiteers
ANDRE VLTCHEK
They Say Paraguay is in Africa: Mosaic of Horror
Horace G. Campbell
Obama in Kenya: Will He Cater to the Barons or the People?
Michael Welton
Surviving Together: Canadian Public Tradition Under Threat
Rev. William Alberts
American Imperialism’s Military Chaplains
Yorgos Mitralias
Black Days: August 4th,1914 Germany and July 13th, 2015 Greece
Jeffrey R. Wilson
“It Started Like a Guilty Thing”: the Beginning of Hamlet and the Beginning of Modern Politics
Jeffrey St. Clair
Star Whores: John McCain, the Apache and the Battle to Save Mt. Graham
Pepe Escobar
The Eurasian Big Bang: How China and Russia Are Running Rings Around Washington
Charles Larson
The USA as a Failed State: Ta-Nehisi Coates’s “Between the World and Me”
Robert Fantina
Israel and “Self-Defense”
John W. Whitehead
The American Nightmare: the Tyranny of the Criminal Justice System
Leonidas Vatikiotis
Rupture With the EU: a Return to the Cave Age or a New Golden Age for Greece?
Murray Dobbin
Harper is Finally Right: the Canadian Election is About Security Versus Risk
Brian Cloughley
Meet General Joseph Dunford: a Real Threat to World Peace
Manuel García, Jr.
The Trump Surge and the American Psyche
Pete Dolack
We May Have Already Committed Ourselves to 6-Meter Sea-Level Rise
Michael Barker
The Challenge to Labour and Tory Extremism
Eric Draitser
US Targets Venezuela Using Border Dispute as Pretext
Robert Hunziker
America’s Purple Politics
Ishmael Bishop
Decentering Whiteness in the Wake of a North Carolina Tragedy
Chad Nelson
Something About Carly: Fiorina and the Professional Political Class