America Speaks Back: The Effort to Gut Social Security and Medicare Takes a Hit
By Dean Baker for TPM –
The opponents of Social Security and Medicare are getting in high gear. After all, it makes perfect sense that after the collapse of a housing bubble has just destroyed the life savings of near retirees that we would cut their Social Security and Medicare. Okay, at least in Washington that makes perfect sense.
President Obama’s deficit commission is moving forward with Social Security and Medicare explicitly in their sights. They got a dry run for how this effort is likely to sell with the public on Saturday as the Peter Peterson funded group America Speaks sponsored a series of 19 “21st Century Town Meetings.” It seems that events didn’t quite go as planned.
The exercise was intended to show convince people that there were no options other than large cuts to Social Security and Medicare to hit their deficit targets. To ensure this result, the America Speaks crew put together a booklet that exaggerated future budget problems (the exercise was for the year 2025) by assuming a worse budget path than the country is currently facing.
America Speaks also excluded the possibility that the Fed would buy and hold more debt, in effect continuing its current course. This would substantially reduce the interest burden facing the country in 2025. While in normal times this could cause inflation, that is unlikely to be a problem in the foreseeable future. In comparable circumstances, Japan’s central bank has bought an amount of debt nearly equal to the country’s GDP (the equivalent of $14 trillion for the U.S.) and its economy is still facing deflation. There is no reason that the Fed could not follow the same path, unless the goal is to force cuts in Social Security and Medicare.
The America Speaks folks also denied participants the option of reducing public sector health care costs by reforming the U.S. health care system. As they say at America Speaks, everything is on the table, except reforms that would hurt powerful industry lobbies. The America Speaks crew also neglected to mention the Social Security trust fund and that it would have enough assets to pay all benefits through the year 2043, according to the Congressional Budget Office.
Given this stacked deck the participants rose up in revolt. They demanded the option to vote on a single-payer type health care system. The idea being to reduce costs by making health care more efficient rather than just cutting services in Medicare and other public sector programs. They also voted overwhelmingly for defense cuts and for every progressive tax option in the book, even though many had been seriously mischaracterized. For example, they listed the potential revenue from a financial speculation tax in 2025 as $30 billion a year even though there is good reason, based on the experience of other countries, to believe that we could raise close to ten times this amount.
Remarkably, even after spending more than 6 hours with the America Speakers, participants were still very poorly informed on several key budget issues. For example, more than 80 percent of the participants thought that the country had large budget deficits in the years immediately before the recession. (The budget deficits were less than 2.0 percent of GDP in the two years prior to the downturn.)
Less than a quarter of the participants realized that average wages are projected to increase substantially over the next three decades. The fact that real wages are projected to be more than 30 percent higher in 2040 would be an important consideration in an issue like increasing the payroll tax. And, less than a quarter of participants realized that the Social Security trust fund is projected to be fully solvent for more than 25 years into the future.
All in all, this was a good day for democracy. The America Speaks gang tried to shove their agenda down the public’s throat and the public pushed back. Let’s hope that the deficit commission gets the message.
This is generally a good article but the final two points are problematic. I believe they are based on a survey supplied by the Economic Policy Research Center, which I took and think I got both questions wrong.
1) Why would a generally progressive group (attendance at America Speaks events was significantly skewed self-identified “liberal”) think the deficit was bigger than 2% re GDP? Could it be because we were making a big deal about Bush’s deficits because we opposed his tax cuts for the rich & war/military spending?
2) The “average wage” thing is misleading. In most other contexts progressives including Dean Baker I believe would point out that virtually all real income growth in wages & salaries has been in the top 20% of income-earners (maybe even top 10% or smaller group), with stagnation in the next 20% and decline in the bottom 60% or 50%.
Since Medicare & Social Security rely on payroll taxes that are capped so as not to apply marginally to the highest wage/salary incomes (never mind exclusion of interest, dividend and capital gains income), that stagnation or decline represents a weakening of the potential revenue base of the programs. We need to fight to restore & expand full employment at decent wages and recognize that wage stagnation and decline for the large majority of workers plus high unemployment, discouraged workers and part-time under-employment in fact also undermine Social Security and Medicare.
Obama seems confused as to which party he belongs to.
Even though I caucused for him, I will have trouble voting
for him again. Regarding cuts in Medicare and especially
Social Security, he shows no understanding of economics
other than those that serve the wealthy. Cutting social
security would prolong what threatens already to be another
depression.
Nowhere was there any mention that by cutting our warmongering abroad, this country would actually be able to fund its own needs.
No mention that at least 70% of corporations in the past several years (foreign and domestic) paid NO income taxes to the federal government.
Just to compare: During Ike’s tenure as prez, corporate income taxes were at or near 50% instead of the measly 7.2% they are today.
What a snow job by the wealthy elites!
Kristen,
“at least 70% of corporations in the past several years paid No income taxes…”
C
an you give me some good references on this figure. I’d like to add it to some materials and want to have sources to quote. Thanks!
Sorry this is so tardy–just found it today (12/3/13).
Check out the AFL-CIO website for these stats on corporations failure to pay any taxes or wimpy amounts, if that. Or Google corporate tax payments and you should find numerous websites (not GOP!) that will tell you how much and which corporations are shirking their citizen obligations to America.
Corporations don’t pay taxes, people do. When will people see through the smoke and mirrors. I’d like to quote a diamond of truth written by none other than George Will:
“Corporations do not pay taxes, they collect them, passing the burden to consumers as a cost of production. And corporate taxation is a feast of rent-seeking–a cornucopia of credits, exemptions and other subsidies conferred by the political class on favored, and grateful, corporations”.
The same applies to health insurance premiums—they collect insurance premiums—you pay. There is no way any corporation can be made to pay taxes or insurance premiums when they can pass the cost on to consumers!!
You people that want to cut every thing for the working people are sick, cruel greedy and many more. Tax the Rich not me.
It’s frightening to think about the future in this country. I totally agree with Dale, Carolyn, Norman, chris and Kristen.
I am happy to hear about the reactions to the America Speaks forum. I am very disappointed that David Walker would lend himself to the kind of propositions and recommendations america Speaks appears to have made. He seemed to me to be a straight guy. Oh, well. just another jolt in the road of life.
Predicting the future is a risky business but it is likely that the “average wage” will be substantially higher than 30% in thirty years due to inflation. It doesn’t surprise me that less than a quarter of the participants were unaware that the average wage would be higher in thirty years as most people seem oblivious to insidious effect of inflation on the currency. I’m not sure if the term “real wages” reflects inflation. Thirty or forty years ago, a 3 lb bag of oranges cost 39 cents and a new Buick about $3000. At the time, if any had said that a 3lb bag of oranges would cost $3.90 and a new Buick would cost $30,000 in thirty years I would have dismissed it as nonsense. Based on inflation of the past, in thirty years a 3 lb bag of oranges will cost $39 and a new Buick wll cost $300,000. I find myself thinking as I would have 30 years ago, is this possible? Unfortunately, I know it is and the average wage, “real” or not will be substantially higher and the lot of the bottom 50 or 60% of wage earners may be even less sanguine.
When I heard about these meetings I immediately emailed all my progressive and Single Payer folks that the right wing was holding these meetings and to sign up. There was one right down the street from me, East Palo Alto, CA. which they ironically called Silicon Valley.
I decided to watch it online and my suspicions were right.
Just like the Citizen Working Group meetings held in 2006, which doubled in number to the America Speaks ones, the agenda was rigged from the start. Yet again, Single Payer wasn’t a consideration as both a cost-saving and life-saving measure. Yet again the people who attended both of these sham meetings overwhlemingly voted for Single Payer as a solution. When I saw that Andy Stern, who had to resign in disgrace from SEIU, was on thie Commission, I knew that Obama had yet again invited his Chicago Mafia buddies. His ties to corporations are sadly ruining our country. Where’s the CHANGE he promised? It’s shameful!
The myth of the Social Security system’s financial shortfall
http://www.latimes.com/business/la-fi-hiltzik-20100808,0,1359956.column
The old age and disability trust funds, which hold the system’s surplus, grew in 2009 by $122 billion, to $2.5 trillion. The program paid out $675 billion to 53 million beneficiaries — men, women and children — with administrative costs of 0.9% of expenditures. For all you privatization advocates out there, you’d be lucky to find a retirement and insurance plan of this complexity with an administrative fee less than five or 10 times that ratio.
This year and next, the program’s costs will exceed its take from the payroll tax and income tax on benefits. That’s an artifact of the recession, and it’s expected to reverse from 2012 through 2014. The difference is covered by the program’s other income source — interest on the Treasury bonds in the Social Security trust fund.
That brings us back to this supposed $41-billion “shortfall,” which exists only if you decide not to count interest due of about $118 billion.
And that, in turn, leads us to the convoluted subject of the trust fund, which for some two decades has been the prime target of the crowd trying to bamboozle Americans into thinking Social Security is insolvent, bankrupt, broke — pick any term you wish, because they’re all wrong. The trust fund is the mechanism by which baby boomers have pre-funded their own (OK, our own) retirements. When tax receipts fall short, its bonds are redeemed by the government to cover the gap.
Despite what Social Security’s enemies love to claim, the trust fund is not a myth, it’s not mere paper. It’s real money, and it represents the savings of every worker paying into the system today. So I’m going to train a microscope on it.
What trips up many people about the trust fund is the notion that redeeming the bonds in the fund to produce cash for Social Security is the equivalent of “the government” paying money to “the government.” Superficially, this resembles transferring a dollar from your brown pants to your gray pants — you’re no more or less flush than you were before changing pants.
But that assumes every one of us contributes equally to “the government,” and by equal methods — you, me and the chairman of Goldman Sachs.
The truth is that there are two separate tax programs at work here — the payroll tax and the income tax — and they affect Americans in different ways. The first pays for Social Security and the second for the rest of the federal budget.
More to the story:
http://www.latimes.com/business/la-fi-hiltzik-20100808,0,1359956.column
(Politicians seem to be among the uninformed)
I am 62 years of age and disabled. What appalls me is the blatant attack by our elected officials that Seniors and People with Disabilities are to blame for the deficit to Social Security, Medicare, and Medicaid and that we are continuously being singled out. That our population is putting a strain on health care and too much waste is being used for our care. Our so-called government has been dipping into these programs for years, and has never paid back a cent! I am tired of being treated as less than a third-class citizen who has no rights! We deserve to be treated with dignity and respect! I cannot afford any more cuts to my programs. I consider the acts of our elected officials a violation of my Civil and Human Rights and discrimination of age and discrimination in regards to People with Disabilities. I’ve called, sent letters, and am now ready to protest/march so that I can be seen, heard, and counted as opposing anymore cuts, reforms, or the abolishment of Social Security, Medicare, and Medicaid. Enough is enough! The only thing left in genocide of Seniors and People with Disabilities. They have NOT listened to a word WE said…and they certainly ARE NOT acting in my best interest. They are putting us in a life and death situation…I have yet to see them reduce their salary and reduce spending on their own health care. (It was very convenient and selfish of them to give themselves salary increases before the BS hit the fan!). I am a registered voter and a legalized citizen of the United States. I vote we, reduce their salaries by 50% and take away their health care, take away their expensive cars, business luncheons, dinners, banquets, galas, and first-class flying…let them take public transportation or walk! I have two questions: 1) Can we sue/fight them in court? 2) Are there any protests, demonstrations, or marches being planned? I am very interested in both. Their proposals are unacceptable…we should also demand being treated with respect and dignity!
Hi, I couldn’t agree with you more. In fact, I keep harassing that damn Obama and his website (info@barackobama.com) with all my complaints. He’s no more a Dem than Boehner or any Senate GOPer. He was bought from the get-go by Wall Street and its big bucks. And we voters were such suckers to think he was the real deal. What a laugh on us. Keep sending your complaints and dissents–he deserves a kick in the rear and a legacy to match. He’s so disgusting, I could throw up. Never again trust a politician–except a few like Bernie Sanders, Eliz. Warren, Tammy Baldwin, Sherrod Brown, and my favorite the Congressman with Guts, Alan Grayson of FL–he gets stuff done and is nobody’s fool.