Obama’s Raid on Social Security and Medicare


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.

Weekend Edition
October 2-4, 2015
Henry Giroux
Murder, USA: Why Politicians Have Blood on Their Hands
Jennifer Loewenstein
Heading Toward a Collision: Syria, Saudi Arabia and Regional Proxy Wars
John Pilger
Wikileaks vs. the Empire: the Revolutionary Act of Telling the Truth
Mike Whitney
Putin’s Lightning War in Syria
Gary Leupp
A Useful Prep-Sheet on Syria for Media Propagandists
Jeffrey St. Clair
Pesticides, Neoliberalism and the Politics of Acceptable Death
Joshua Frank
The Need to Oppose All Foreign Intervention in Syria
Lawrence Ware – Paul Buhle
Insurrectional Black Power: CLR James on Race and Class
Oliver Tickell
Jeremy Corbyn’s Heroic Refusal to be a Nuclear Mass Murderer
Helen Yaffe
Che’s Economist: Remembering Jorge Risquet
Mark Hand
‘Rape Rooms’: How West Virginia Women Paid Off Coal Company Debts
Yves Engler
War Crimes in the Dark: Inside Canada’s Special Forces
Arno J. Mayer
Israel: the Wages of Hubris and Violence
W. T. Whitney
Cuban Government Describes Devastating Effects of U. S. Economic Blockade
Brian Cloughley
The US-NATO Alliance Destroyed Libya, Where Next?
Barry Lando
Syria: Obama’s Bay of Pigs?
Karl Grossman
The Politics of Lyme Disease
Andre Vltchek
Southeast Asia “Forgets” About Western Terror
Jose Martinez
American Violence: Umpqua is “Routine”?
Vijay Prashad
Russian Gambit, Syrian Dilemma
Sam Smith
Why the Democrats are in Such a Mess
Uri Avnery
Nasser and Me
Andrew Levine
The Saints March In: The Donald and the Pope
Arun Gupta
The Refugee Crisis in America
Michael Welton
Junior Partner of Empire: Why Canada’s Foreign Policy Isn’t What You Think
Lara Santoro
Terror as Method: a Journalist’s Search for Truth in Rwanda
Robert Fantina
The U.S. Elections and Verbal Vomit
Dan Glazebrook
Refugees Don’t Cause Fascism, Mr. Timmermann – You Do
Victor Grossman
Blood Moon Over Germany
Patrick Bond
Can World’s Worst Case of Inequality be Fixed by Pikettian Posturing?
Pete Dolack
Earning a Profit from Global Warming
B. R. Gowani
Was Gandhi Averse to Climax? A Psycho-Sexual Assessment of the Mahatma
Tom H. Hastings
Another Mass Murder
Anne Petermann
Activists Arrested at ArborGen GE Trees World Headquarters
Ben Debney
Zombies on a Runaway Train
Franklin Lamb
Confronting ‘Looting to Order’ and ‘Cultural Racketeering’ in Syria
Carl Finamore
Coming to San Francisco? Cra$h at My Pad
Ron Jacobs
Standing Naked: Bob Dylan and Jesus
Missy Comley Beattie
What Might Does To Right
Robert J. Burrowes
Gandhi Jayanti, Gandhi’s Dream
Raouf Halaby
A Week of Juxtapositions
Louis Proyect
Scenes from the Class Struggle in Iran
Christopher Washburn
Skeptik’s Lexicon
Charles R. Larson
Indonesia: Robbed, Raped, Abused
David Yearsley
Death Songs