As a result of incredible economic mismanagement and the greed and incompetence of the financial industry, the country is in the worst downturn since the Great Depression. In this collapse we have seen the most massive intergenerational transfer in the history of the world.
Americans have lost more than $15 trillion in housing and stock wealth, with the great bulk of the losses being incurred by people age 45 and older. This is effectively a transfer to younger workers and those yet to enter the labor force, because they will be able to buy into the stock market and buy homes at close to half the price they would have paid just two years ago.
What do our elites, ranging from editorial boards to former Commerce secretary Pete Peterson, plan in response to this situation? At the same time that they are handing trillions of dollars to the bankers who wrecked the economy, they are proposing to cut Social Security in the name of fiscal responsibility.
This plan is even more outrageous because workers have already paid for their Social Security benefits. The Congressional Budget Office projects that Social Security, by drawing down its trust fund, will be able to pay benefits until the year 2049 with no changes whatsoever.
In effect, the cutters are proposing that the government default on the bonds held by the Social Security trust fund: U.S. government bonds that were purchased with money raised through the designated Social Security tax.
It is truly incredible, and unbelievably galling, that anyone in a position of responsibility would suggest defaulting on the government bonds held by the Social Security trust fund at the precise moment that the government is honoring trillions of dollars of bonds issued by private banks.
While the government has no legal or moral obligations to pay off the banks’ debts to wealthy investors (who presumably understood the risks they were taking), the Social Security bonds carry the full faith and credit of the U.S. government.
It is understandable that people are angry. We have a government and an elite that never stop looking for ways to take money from ordinary workers and redistribute it upward to the richest people in the country.
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.