FacebookTwitterGoogle+RedditEmail

Shifting from Defense to Offense

by DAVE LINDORFF

A tectonic shift is occurring in the US body politic. Ignore the media-driven sideshow about the 2014 contest for control of the House or about the screwed-up Obamacare insurance-market website. The real political battle is over Social Security and Medicare, and there the story is a historic turn from fighting against Washington efforts to cut those programs to demanding that both be expanded.

A coalition of progressive groups organizations, including of groups like the National Committee to Preserve Social Security and Medicare, NOW, Paralyzed Veterans of America, Generations United, NARFE and SocialSecurity Works, last week protested outside the White House against a proposal, still included in the proposed Obama 2014 budget, to cut back on the inflation adjustment to Social Security, effectively assuring a gradual, but significant reduction in benefits in future years for elderly retirees and the disabled.

Meanwhile, a small but growing group of US senators and representatives, including Sen. Bernie Sanders, an independent socialist from Vermont, Sen. Elizabeth Warren (D-MA), Sen. Tom Harkin (D-IA), Sen. Sherrod Brown (D-OH), Sen. Mark Begich (D-AK) and Sen. Bryan Shatz (D-HI), is calling for eliminating the cap on income subject to Social Security taxation, so that all Americans, including millionaires and billionaires, pay the full FICA tax on their income, a move which would effectively end any talk of the Social Security program “running out of money.”

It’s about time.

As Sen. Warren put it in a recent statement on the Senate floor, “We should be talking about expanding Social Security benefits – not cutting them…. Social Security is incredibly effective, it is incredibly popular, and the calls for strengthening it are growing louder every day.”

While Democratic party leaders, like House Minority Leader Nancy Pelosi (D-CA) and President Obama, in thrall to Wall Street lobbyists, have offered to cut Social Security benefits by, for example, adopting a new stingier means of calculating inflation called the “Chained CPI), polls show that Americans consistently and resoundingly support not just protecting Social Security but expanding its currently meager benefits.

recent poll, for instance, by Public Policy Polling, released on Nov. 20, found that voters, by an “overwhelming margin,” support expanded Social Security benefits, not cuts in the 77-year-old New Deal program. Fully 65% of those polled supported expanding benefits, while on nine out of 10 questions about cutting Social Security benefits, the “no cuts” position won by over 70%, with only one question showing the “no-cuts” position winning by “just” 66%.

Clearly, the public and the political parties, including the Democratic Party, are sharply at odds.

Social Security’s critics — primarily corporate America and the politicians and “think” tanks it bankrolls — argue that the US “can’t afford” even the current Social Security program. As Peter Peterson, the dour Wall Street billionaire and founder of the Blackstone Group, likes to put it, the program, along with Medicare, is “bankrupting” the country, and unless “entitlements” are cut America will go bust. Some like to point to the 12.4% FICA payroll tax that workers and employers have to pay on a 50/50 basis to fund Social Security, and argue that it imposes an intolerable burden on American business and cannot be raised without further damaging the US economy.

Nonsense. It’s not that high at all.

It’s time to inject so reality here. If a 12.4% FICA tax to fund Social Security is so punishingly high, how to explain countries like France, Germany, Sweden, and Finland, where the social security system taxation levels are far higher, yet the standard of living, and even the competitiveness of the countries’ economies, are better than in the US?

Take Finland, a country I visited just recently. Finland’s workers and employers pay in a total of 23% of payroll towards funding the country’s retirement system. Workers pay 6%, and employers pay 17%. That money funds a retirement pension that is designed to give all workers a benefit level equal to at least 60% of what they were earning at the time they retired (for the poor, it’s a lot higher than 60%). This is called “consumption smoothing,” meaning that people should not have to lower their living standard upon retiring.

As Mikko Kautto, the head of research for the Centre for Pensions, explained it to me during in an interview in his office outside the capital of Helsinki, “In the early 1990s, Finland began preparing in earnest for the large aging population we saw coming.” He explained that studies by the Centre showed that most retirees would need about 60% of their final pre-retirement income to maintain their standard of living in retirement, and that “consumption smoothing” became the stated goal of the program. (Sixty percent replacement is ample in Finland because certain costs are low. Health care, including long-term care, is essentially free, and children who go to college pay no tuition and in fact receive a €450 ($600) monthly stipend for living costs.)

Finland has not suffered overmuch for this decision to have the state be responsible for essentially 100% of retirement costs (Finns have no need to assume the individual risk of putting money into 401(k)-type funds and then playing the stock market in hopes of possibly having enough assets to fund their retirement — or possibly going bust — as Americans must do). Its citizens, who get six weeks paid vacation, paid maternity/paternity leave, free health care and free college and who arguably have the best public education system in the world, live better than we Americans do, and their industries — telecom, automotive, machinery, forest products and paper — manage to compete quite well on the world markets, giving the country a trade balance the US can only dream of.

Clearly high taxes for supporting retirees and the poor and disabled is not crippling Finland.

While I cannot claim to be an expert on the retirement systems of other nations, it is worth mentioning that the payroll tax rates of other major developed economies like France, Germany and Sweden, are all significantly higher than the US, and yet their economies are all outperforming ours, including in the area of global competitiveness. Sweden’s retirement system taxes, paid by the employer, total over 31% of payroll. In France workers contribute 13.4% of each paycheck to fund the national retirement scheme, with employers paying another 18.2% of payroll, for a total of 31.6%. Even in Germany, workers and employers each pay 9.95% of payroll in to the retirement fund — and yet Germany still manages to be the second largest net exporter in the world after China, outstripping the US this year, and, unlike the US, Germany boasts a consistently positive trade balance. Clearly, using a payroll tax to fund a decent retirement program does not mean destroying competitiveness or crippling business.

What does separate the US from these other developed nations is the staggering amount — 53% of the discretionary federal budget — that the US spends on war and the military. Finland, in comparison, spends just 3.4% of its federal budget on its military, the same as Germany. France, one of the larger military spenders, devotes 5.4% of its budget to its military.

The answer then is clear: If the US, where Social Security on average only provides a meager 30% of pre-retirement income to retirees, is to expand benefits, the money will have to come from a combination of higher taxes on the wealthy, higher taxes on employers, and from dramatic cuts in US military spending.

Despite all the pro-war propaganda, and the scare stories about terrorism put out by the government and the corporate media, Americans get this. A poll conducted earlier this year by The Hill, found that 49% of Americans supported cutting military spending to reduce the nation’s budget deficit, while only 23% favored cutting Social Security and Medicare. Meanwhile 69% said they opposed cuts in those two programs.

And cutting military spending is, in fact, what Sen. Sanders is calling for in his proposal to defend and expand Social Security: full FICA taxation on all income, not just the first 113,400 of income, and several hundred billion dollars a year in cuts in the military budget. Others are demanding even bigger military budget cuts, of as much as 25-50% of the current $1 trillion a year level of spending on war and preparations for war. (Even a 50% cut in the US military budget would still leave this country spending more than several of the next-largest spenders, like Russia and China, combined.)

Needless to say, the experience of those same European countries — Finland, France, Finland and Germany, as well as many other developed countries like the UK, Italy, Holland, Denmark, Norway, Spain, etc., as well as Canada and Australia — shows that it is also possible to have a better, less costly universal health care system by adopting some socialized approach, whether the fully nationalized one used in Britain, a single-payer one where the government is the insurer, as in Canada, or some combination, and the countries that do this manage just fine without “going bust” as Peterson et all and the free-market sycophants in Congress and the White House would have us believe. (A new international study by the Commonwealth Fund found the US to have the highest health costs and to rank last in quality of care and outcomes in almost every category among 10 industrialized nations — with the exception of waiting times to get care, where America edged out Canada for second-to-last position.)

As the politics of Social Security and Medicare move away from rear-guard defensive action to prevent cuts, to a positive struggle to expand both programs, it is important that Americans become aware of how things work in the rest of the developed world. That way, the scare-mongers like Peterson and his ilk cannot get away with fake claims that a decent retirement and health care for all will “bankrupt” the US, or “destroy” the American economy.

Dave Lindorff is a founding member of ThisCantBeHappening!, an online newspaper collective, and is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press).

Dave Lindorff is a founding member of ThisCantBeHappening!, an online newspaper collective, and is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press).

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

Weekend Edition
February 24, 2017
Friday - Sunday
Jeffrey St. Clair
Roaming Charges: Exxon’s End Game Theory
Pierre M. Sprey - Franklin “Chuck” Spinney
Sleepwalking Into a Nuclear Arms Race with Russia
Paul Street
Liberal Hypocrisy, “Late-Shaming,” and Russia-Blaming in the Age of Trump
Ajamu Baraka
Malcolm X and Human Rights in the Time of Trumpism: Transcending the Master’s Tools
John Laforge
Did Obama Pave the Way for More Torture?
Mike Whitney
McMaster Takes Charge: Trump Relinquishes Control of Foreign Policy 
Patrick Cockburn
The Coming Decline of US and UK Power
Louisa Willcox
The Endangered Species Act: a Critical Safety Net Now Threatened by Congress and Trump
Vijay Prashad
A Foreign Policy of Cruel Populism
John Chuckman
Israel’s Terrible Problem: Two States or One?
Matthew Stevenson
The Parallax View of Donald Trump
Norman Pollack
Drumbeat of Fascism: Find, Arrest, Deport
Stan Cox
Can the Climate Survive Electoral Democracy? Maybe. Can It Survive Capitalism? No.
Ramzy Baroud
The Trump-Netanyahu Circus: Now, No One Can Save Israel from Itself
Edward Hunt
The United States of Permanent War
David Morgan
Trump and the Left: a Case of Mass Hysteria?
Pete Dolack
The Bait and Switch of Public-Private Partnerships
Mike Miller
What Kind of Movement Moment Are We In? 
Elliot Sperber
Why Resistance is Insufficient
Brian Cloughley
What are You Going to Do About Afghanistan, President Trump?
Binoy Kampmark
Warring in the Oncology Ward
Yves Engler
Remembering the Coup in Ghana
Jeremy Brecher
“Climate Kids” v. Trump: Trial of the Century Pits Trump Climate Denialism Against Right to a Climate System Capable of Sustaining Human Life”
Jonathan Taylor
Hate Trump? You Should Have Voted for Ron Paul
Franklin Lamb
Another Small Step for Syrian Refugee Children in Beirut’s “Aleppo Park”
Ron Jacobs
The Realist: Irreverence Was Their Only Sacred Cow
Andre Vltchek
Lock up England in Jail or an Insane Asylum!
Rev. William Alberts
Grandiose Marketing of Spirituality
Paul DeRienzo
Three Years Since the Kitty Litter Disaster at Waste Isolation Pilot Plant
Eric Sommer
Organize Workers Immigrant Defense Committees!
Steve Cooper
A Progressive Agenda
David Swanson
100 Years of Using War to Try to End All War
Andrew Stewart
The 4CHAN Presidency: A Media Critique of the Alt-Right
Edward Leer
Tripping USA: The Chair
Randy Shields
Tom Regan: The Life of the Animal Rights Party
Nyla Ali Khan
One Certain Effect of Instability in Kashmir is the Erosion of Freedom of Expression and Regional Integration
Rob Hager
The Only Fake News That Probably Threw the Election to Trump was not Russian 
Mike Garrity
Why Should We Pay Billionaires to Destroy Our Public Lands? 
Mark Dickman
The Prophet: Deutscher’s Trotsky
Christopher Brauchli
The Politics of the Toilet Police
Ezra Kronfeld
Joe Manchin: a Senate Republicrat to Dispute and Challenge
Clancy Sigal
The Nazis Called It a “Rafle”
Louis Proyect
Socialism Betrayed? Inside the Ukrainian Holodomor
Charles R. Larson
Review: Timothy B. Tyson’s “The Blood of Emmett Till”
David Yearsley
Founding Father of American Song
FacebookTwitterGoogle+RedditEmail