Obama, Congress seek big budget cuts

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B rupting the United States with their cushy Social oth major parties agree: old people are bankSecurity and Medicare benefits! That’s the message behind the establishment of a bipartisan commission by President Barack Obama on Feb. 18, tasked with finding ways to cut the national debt and balance the budget.

Congressional Republican leaders, Senator Mitch McConnell and Rep. John Boehner, after criticizing the idea as a backdoor to tax hikes, said they would participate in the commission without preconditions.

Obama picked as co-chairs former Republican Senate leader Alan Simpson and Erskine Bowles, a centrist Democrat who as President Bill Clinton’s chief of staff brokered a 1997 balanced budget agreement with Congressional Republicans. The commission will have 10 Democrats and eight Republicans. But since Obama proposed that 14 of the 18 would have to support any recommendations, this gives Republicans a veto.

Before agreement was reached on the commission, the media was full of complaints—in news or analysis stories, not opinion pieces—similar to the one in The New York Times complaining about “a dysfunctional Congress,” and the “unwillingness of the two parties to compromise to control a national debt that is rising to dangerous heights.” “After decades of warnings that budgetary profligacy, escalating health care costs and an aging population would lead to a day of fiscal reckoning, economists and the nation’s foreign creditors say that moment is approaching faster than expected.

“Yet rarely has the political system seemed more polarized and less able to solve big problems that involve trust, tough choices and little short-term gain. The main urgency for both parties seems to be about pinning blame on the other, for deficits now averaging $1 trillion a year, the largest since World War II relative to the size of the economy.” This and similar warnings were a clear sign from the ruling class—get down to business and cut, cut, cut!

In a Feb. 7 editorial entitled “The Truth about the Deficit,” the publishers of The New York Times wrote that “to truly tame deficits will require serious health care reform [i.e., drastic cuts in Medicare],” and demanded higher taxes and cutbacks in Social Security. They didn’t bother to mention that those surviving solely on Social Security with no pensions from past jobs live in abject poverty, often surviving on dog food or handouts from food banks.

The Times insisted that politicians “gather the political will to do what must be done.” Yet the paper’s own regular economics op-ed writer, Paul Krugman, complained about such scare tactics in the Feb. 4 edition: “These days it’s hard to turn on a news program without encountering stern warnings about the budget deficit. The deficit threatens economic recovery, we’re told; it will undermine our influence in the world. These claims … [are] reported as if they were facts, plain and simple.

“Yet they aren’t facts. Many economists take a much calmer view of budget deficits than anything you’ll see on TV. Nor do investors seem unduly concerned: U.S.

6 Socialist Action march 2010 Mark Wilson / Getty Images government bonds continue to find ready buyers. The long-run budget outlook is problematic, but … much less frightening than the public is being led to believe. … The sudden outbreak of deficit hysteria brings back memories of the groupthink that took hold during the run-up to the Iraq war.

“Running big deficits in the face of the worst economic slump since the 1930s is the right thing to do. If anything, deficits should be bigger because the government should be doing more to create jobs.”

The current sense of panic, concludes Krugman, “is a key part of Republican political strategy.” Left unaddressed by Krugman is the leadership role played by Obama and Congressional Democrats in beating the drums for austerity.

Krugman was one of many observers to note that one tune banged out on these drums was the financial crisis wracking Greece, which was “feeding into the narrative of our own deficit hawks, and hold Greece up as an object lesson of what will happen if we don’t.” Obama: “Pay as you go”

The bipartisan composition of the commission doesn’t mean its proceedings will be harmonious. Republican elected officials are under intense pressure from their base to oppose any tax increases, an opposition symbolized by the right-wing terrorist who crashed his plane into an IRS building—and was hailed for doing so even by Republican members of Congress!

But anger is only going to increase, not just on the rabid right, but also among rational working people: Obama, ignoring his campaign promise not to raise taxes for households making less than $250,000, said he would not impose that condition or any other on the commission. Echoing rhetoric used in Washington’s war threats, Obama said that “all ideas are on the table.”

And the usual apologists for Obama have seats at that table: Andy Stern, head of the crumbling Change to Win union federation, proved once again that he never met a joint labor-management committee he didn’t like by agreeing to sit on Obama’s commission.

Meanwhile, in preparation for more drastic steps to be recommended by the commission, Obama has already taken steps to put the screws to workers, (Left) A girl cries out after seeing the feet of her dead brother underneath the rubble of his school.

such as a proposed budget that would freeze spending on some categories of domestic spending for three years. His latest jobs “stimulus,” composed entirely of tax breaks for small businesses, will have even less impact than his first stimulus package on the unemployment rate.

Obama also restored a rule—commonly called “pay as you go”—requiring that new spending be offset by spending cuts or new revenue. His action went largely unremarked upon. But the very same principle was invoked by Republican Senator Jim Bunning when he used a filibuster to hold up spending for extension of unemployment benefits for 1.2 million workers—as well as salaries for some federal workers, health coverage for the jobless, etc.—unless Congress voted to find the money by cutting somewhere else. Once the vote was held Bunning relented, even though he lost the vote, as he mostly wanted to make a political point. But the incident is symbolic of how far Washingtonians of both parties are willing to go in holding workers’ very lives hostage.

More proof of this came from Washington Post columnist E.J. Dionne, who noted that Republican Senator Jon Kyl and Democrat Blanche Lincoln were simultaneously engaged in their own effort to hold up the benefits extension unless estate taxes for the wealthy were cut by $138 billion.

In a domestic parallel to the Nixon-going-to-China routine (i.e. using a conservative to make piece with “Communists”), the ruling class often prefers to use a Democrat to strip away spending and services. Thus Bill Clinton was assigned to gut welfare, whereas Bush was allowed to abandon plans to “reform” Social Security when the rulers sensed that resistance would be too great. Now they are demanding that both parties cooperate, with a Democratic president at the helm, in a broader assault on a whole range of plans needed for workers’ survival. That’s why the ruling class so eagerly embraced Obama’s presidential campaign with its focus on “bipartisan cooperation.”

One of the key voices arguing for austerity is billionaire Peter Peterson, whose Peter G. Peterson Foundation was one of several think tanks issuing reports in recent months demanding tax increases and spending cuts, especially in “popular entitlement programs.”

Peterson himself is no marginal right-wing crank. He is a longstanding figure at the core of the U.S. ruling class, and his ideas are similarly finding a comfortable berth in today’s ruling class consensus. Peterson served as Richard Nixon’s Secretary of Commerce. He co-founded the private equity firm, the Blackstone Group.

In 1994, Clinton named Peterson as a member of the Bi-Partisan Commission on Entitlement and Tax Reform. He was also chair of the Federal Reserve Bank of New York between 2000 and 2004 and succeeded David Rockefeller as chairman of the Council on Foreign Relations, serving from 1985 to 2007. He has carried out his campaigns for “fiscal sustainability” through cutting deficits and “entitlement programs,” and raising taxes, through such groups as the Concord Coalition, which he helped found, as well as his own Foundation.

So its worth paying close attention to the arguments made by Simon Johnson, a senior fellow at the Peterson Institute (formerly the International Institute of Economics and renamed by the billionaire) in a coauthored article in The Wall Street Journal that also made the Greek connection.

Johnson, an MIT professor and former chief economist of the International Monetary Fund, wrote: “Greece’s dysfunctional economy is now at the heart of a rescue effort that could be disastrous for the entire continent—and the rest of the world.” They applauded efforts by various potential rescuers—from Germany and France to the European Central Bank to the IMF—to demand severe cuts in wages, jobs, services and benefits as the price for rescue (although preferring the more fine-tuned, longer-term approach of the IMF to the threatened hammer blows of Germany and France).

They used events in Greece to argue for similar austerity at home: “Unless the U.S. puts in place a process to take its own government debt off an explosive (continued on page 7)

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path—for example, through an independent but Congress-backed fiscal commission, with everything on the table—we are vulnerable to the same kind of debt dynamics that now plague parts of Europe.”

The unease of foreigners about whether to buy and hold our debt, they wrote, “is a major economic and national security risk.” “Greedy Geezers”

In trying to scare us into accepting the coming cuts, politicians have not shied away from demonizing the elderly. Said Alan Simpson: “How did we get to a point where you get to a certain age in life, regardless of net worth or income, and you’re ‘entitled’? The word itself is killing us.”

In the Feb. 1 New York Times, columnist David Brooks wrote in concert with those politicians when he charged that “Greedy Geezers,” if they continue to accept their pensions and “costly” federal benefits, are robbing the younger generation of money, opportunity, and control.

Carl Bloice, an editor at Black Commentator, after also making the Greek Connection, noted that those demanding that “Greedy Geezers” stop feeling so entitled were the very ones who had initiated and profited from the last decade’s financial bubbles and swindles. “In each and every country in the European Union there is talk of ‘austerity.’ And in every one of them it means attacks on easy access to healthcare and social security for those in their golden years. They call such programs, secured after decades of struggle, ‘entitlements.’ They are efforts to renew the project that Lady Thatcher and Ronald Reagan launched but couldn’t quite finish. In the U.S. that means eviscerating, and eventually doing away with, Medicare and Social Security.”

And he noted the favored mechanism for getting away with that: “When these people are divided amongst themselves as to how far to go, and not wanting to take personal responsibility for advocating a specific course of action, they propose a ‘commission.’”

He quotes George Will on how paying to keep “geezers” alive threatens national security: “By living longer, Americans will become susceptible to more health problems. By becoming richer they will be able to purchase more biotechnologies. This demographic destiny might entail starving every other sector of society—including national defense, at great cost to America’s international standing. … While China increasingly invests in its future, America increasingly invests in its past.”

These attacks on Social Security come as sky-high unemployment rates make increasing numbers of workers dependent on the program much earlier than they had expected. In January, 6.3 million workers had been jobless for six months or longer—twice as many as in any previous month in the last 35 years. Justin Sullivan / Getty Images (Left) Seniors protest closing of San Francisco geriatric clinic due to city and state budget cuts.

Jobless rates for men and women age 55 and older were higher in 2009 than at any time since the government started collecting the data in 1948.

So it wasn’t surprising that record numbers of eligible Americans started receiving Social Security benefits in 2009. More than 2.7 million new beneficiaries were added in 2009, up 20% from 2008. Many did so at lower rates beginning at age 62, unable to wait until 66 to receive the full benefit rate.

Another reason, as explained by one early retiree: “To tell the truth, I wasn’t really sure if Social Security would be around when I’m 82.” Yet some older employees stay on the job longer than they would wish for, trying to recoup losses from wiped-out 401k accounts.

Despite the fear mongering, current projections show Social Security has sufficient funds to remain solvent until 2037. While it’s true that the baby boom generation will swell the Social Security rolls and require unprecedented funds to support them at current benefit levels, the problem is not inherent to the program itself. Rather, it suffers from the same problem as Medicare.

In both cases, the “market” is fragmented between private pensions and health-care plans and their public counterparts. Each component of the market is further made irrational and wasteful by disparities in funding and service levels, competition, duplication, administrative waste, and profiteering.

And when the economy as a whole hits the trough of a decades-long crisis of profitability, all of those the effects of market fragmentation are grossly magnified as each segment spurs on the others in a joint race to the bottom.

Just as single-payer advocates pointed out the efficiencies and equity of one, unified insurance pool, so too pension provision can only be both rational and just under one unified pool for all workers paid for by public funds and under workers’ control (with the best private pension plans grandfathered in to such a public fund, and the benefits of all gradually raised to those higher rates).

As workers in the United States discuss how to respond to the propaganda behind these coming attacks on our “entitlements,” we can take inspiration from the example set by workers in Greece (see related article below). n

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The Democratic and Republican politicians were quite generous in bailing out the banks. Now they call for ‘austerity,’ as working people pay more for diminishing services.

Greedy Geezers? In trying to scare us into accepting the coming cuts, politicians have not shied away from demonizing the elderly.