Monday, November 15, 2010

Social Security, Dead Peasants and Debating the Budget in the Age of Plutonomy – Part 2

But, the flimflam gang returned with a vengeance in our time — the monied interests and political mercenaries who connived to bring on a calamity that lost eleven million Americans their jobs, robbed people of their homes and pensions, and brought the world's economy crashing down. 

But once again, people are organizing and fighting back; as they did in that early Populist Moment that took on the monopolies and financial trusts. The stirrings of a popular insurgency could be seen late this week as thousands marched on Wall Street. These people are angry at the banks that have cost them so dearly and they want reforms to prevent similar disasters in the future. They want to break up the Wall Street oligarchy and require the banks to use their capital to build and revitalize and innovate, to create jobs and security.”
---- Bill Moyers, Bill Moyers Journal , April 2010

Enter …   The Tea Party Movement

Ah, the Tea Party, the populist movement of our era.   A movement with no clear leader but generally associated with political figures like Michelle Bachmann, Rand Paul and off course, Sarah Palin, who wants us all to return to those by-gone days of yesteryear when it was “morning again in America”.

Let’s take a stroll down memory lane and recall another time when a politician ushered in a new . . 
a clip from the film, “Capitalism: A Love Story” 
by Michael Moore

It seems that while it was morning for some, the sun was setting for others which takes us back to the subject Social Security reform.

Without a doubt, the US economy is in a mess and the budget deficit needs to be address asap.  In fact, it should have been address when former President Jimmy Carter warned us, but hindsight is 20/20.   However, I ask again, “when the topic of trimming the federal budget is under discussion, why is a self funding program the first budget item offered up?”   

The Social System make need a tweak here and there but it’s not broken, so why the big rush to fix it?   But don’t take my word that it’s not broken, here are the words of  New York Times Columnist and recipient of a Nobel Prize for Economics,  Paul Krugman:

“Social Security is a government program supported by a dedicated tax, like highway maintenance. Now you can say that assigning a particular tax to a particular program is merely a fiction, but in fact such assignments have both legal and political force. If Ronald Reagan had said, back in the 1980s, “Let’s increase a regressive tax that falls mainly on the working class, while cutting taxes that fall mainly on much richer people,” he would have faced a political firestorm. But because the increase in the regressive payroll tax was recommended by the Greenspan Commission to support Social Security, it was politically in a different box – you might even call it a lockbox – from Reagan’s tax cuts.

The purpose of that tax increase was to maintain the dedicated tax system into the future, by having Social Security’s assigned tax take in more money than the system paid out while the baby boomers were still working, then use the trust fund built up by those surpluses to pay future bills. Viewed in its own terms, that strategy was highly successful.

The date at which the trust fund will run out, according to Social Security Administration projections, has receded steadily into the future: 10 years ago it was 2029, now it’s 2042. As Kevin Drum, Brad DeLong, and others have pointed out, the SSA estimates are very conservative, and quite moderate projections of economic growth push the exhaustion date into the indefinite future.

But the privatizers won’t take yes for an answer when it comes to the sustainability of Social Security. Their answer to the pretty good numbers is to say that the trust fund is meaningless, because it’s invested in U.S. government bonds. They aren’t really saying that government bonds are worthless; their point is that the whole notion of a separate budget for Social Security is a fiction. And if that’s true, the idea that one part of the government can have a positive trust fund while the government as a whole is in debt does become strange.

But there are two problems with their position.

The lesser problem is that if you say that there is no link between the payroll tax and future Social Security benefits – which is what denying the reality of the trust fund amounts to – then Greenspan and company pulled a fast one back in the 1980s: they sold a regressive tax switch, raising taxes on workers while cutting them on the wealthy, on false pretenses. More broadly, we’re breaking a major promise if we now, after 20 years of high payroll taxes to pay for Social Security’s future, declare that it was all a little joke on the public.
But those who insist that we face a Social Security crisis want to have it both ways. Having invoked the concept of a unified budget to reject the existence of a trust fund, they refuse to accept the implications of that unified budget going forward. Instead, having changed the rules to make the trust fund meaningless, they want to change the rules back around 15 years from now: today, when the payroll tax takes in more revenue than SS benefits, they say that’s meaningless, but when – in 2018 or later – benefits start to exceed the payroll tax, why, that’s a crisis. Huh?

I don’t know why this contradiction is so hard to understand, except to echo Upton Sinclair: it’s hard to get a man to understand something when his salary (or, in the current situation, his membership in the political club) depends on his not understanding it.”

And that’s the rub isn’t it.  To paraphrase, it’s hard to get a politician to understand something when his re-election,(or, in the current situation, his party affiliation), depends on his not understanding it.    Said another way,  it’s almost impossible to find politicians who will consistently represent the interests of working Americans when it may cost them campaign financing to do so …

or when there are those behind the scenes pulling their strings.

Of course, there are only a pile of IOU's in the virtual safety deposit box that was supposed to be holding the social security trust.   And the only way to repay the trust would be to not only end the Bush tax cuts to the wealthy but possible increase the tax rate of the upper one percent.  God forbid.

To be continued……

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.