Op-Ed

Guess Who's Coming to Dinner? Fix the Debt

by Mary Bottari — March 6, 2013 - 9:30am
  • Topics: Corporations, Economy, Real Economy Project
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    As sequester cuts start to bite a little harder, the Fix the Debt gang is pushing for a "grand bargain," deep cuts to earned benefit programs like Social Security and Medicare in exchange for some vague promises about "tax reform."

    They may have a powerful ally in the White House. Rather than barnstorming the country demanding that Congress cancel the sequester (Representative John Conyers, Jr. wrote the one sentence bill to do this) and address our jobs deficit (now topping 9 million), President Obama seems ready to make a deal on the deficit, which is already in a steep decline.

    In an unprecedented move, Obama -- who rarely even makes calls to the Hill -- is taking a group of Republican Senators out to dinner tonight. On the menu? "Entitlements."

    Read My Lips

    "He's reaching out to Democrats who understand we have to make serious progress on long-term entitlement reform and Republicans who realize that if we had that type of entitlement reform, they'd be willing to have tax reform that raises revenues to lower the deficit," White House senior economic official Gene Sperling said on Sunday on CNN.

    Jay Carney, White House press secretary, said the same thing on Monday. "The President is interested in moving forward on deficit reduction that pairs the twin objectives of entitlement reform and tax reform in the way that his proposal does, in a way that is consistent with Simpson-Bowles and Domenici-Rivlin and others who have put forward ideas and proposals in a bipartisan way." Simpson and Bowles, Domenici and Rivlin are all on the Fix the Debt board.

    But take it from the man himself. On March 1, Obama told the press: "we have a long-term problem in terms of our health care costs and programs like Medicare. And what I've said very specifically, very detailed is that I'm prepared to take on the problem where it exists -- on entitlements -- and do some things that my own party really doesn't like -- if it's part of a broader package of sensible deficit reduction."

    His sequester plan, right on the White House website, includes cuts to Social Security -- the so-called "chained CPI" or "superlative CPI" issue is explained here. The point is that it cuts Social Security benefits every year in a way that builds cumulatively. AARP has a calculator to show how big a hit your family might take.

    Now you may believe that he has some grand master plan here, but at some point we just have to take the man at his word.

    The Wimp That Gave It All Away?

    Economists like Paul Krugman and Dean Baker tell us that the real emergency is the jobs deficit not the federal deficit and cogently argue that more federal funds are needed to stimulate the economy -- not cuts.

    Baker is pretty harsh on Obama right now, charging that his lack of leadership on the issue led to the sequester. In 2009, Obama "proudly announced the need to pivot to deficit reduction after the passage of the stimulus and then appointed two deficit hawks, Erskine Bowles and Alan Simpson, to head a deficit commission. This set the ball rolling for the obsession with deficit reduction that has dominated the nation's politics for the last three years. Instead of talking about the 9 million jobs deficit the economy faces, we have the leadership of both parties in Congress arguing over the debt-to-GDP ratios that we will face in 2023."

    Krugman asks the essential question. After an overwhelming victory at the polls that sent the deficit scolds packing "will Obama go down in history as the wimp that gave it all away?"

    On Tuesday, Obama called Senator Lindsey Graham (R-SC) who told reporters that the conversation was "very encouraging" and that he would be open to increased revenues if it was accompanied by a significant overhaul of entitlement programs.

    If Obama is finding common ground with Lindsey Graham, we are in trouble.

    It Is Time to Put Wall Street on the Menu

    The Nation makes the case that embracing a Simpson-Bowles style "austerity bargain" is political suicide, but even after getting hammered for $700 billion in Medicare cuts that he didn't make in the last election cycle Obama seems to think that real cuts are worth the risk. It is Congress' job to tell him he's nuts.

    Some in Congress know there are other options -- a lot of them. First of all, there is no deficit crisis. The deficit, caused by the 2008 Wall Street economic crash, has been cut in half in the last few years. There is, however, an ongoing jobs crisis -- a terrible, needless crisis condemning older workers to a bleak future largely dependent on Social Security and damaging the lifelong earning potential of young workers. The jobs crisis demands more government spending not less, a simple fact that even Ronald Reagan understood.

    But even if you think that deficits are a problem, you have options. Last week, U.S. Senator Tom Harkin and Representative Pete DeFazio introduced a new bill that applies a tiny tax to financial speculators on Wall Street. They estimate we can generate some $350 billion over 10 years -- other proposals put that number even higher. And let's tax those hedge fund managers that pay only 15 percent on their income when the rest of us pay 35.

    Corporate America can afford to do more. With the Dow Jones industrial hitting all-time highs this week (a rally led by many of the Fix the Debt firms, like Boeing, that are failing to pay their taxes or fund their own pension plans) the split between companies making record profits and their workers who are being left behind has never been more stark. Firms are not hiring, Wall Street is not investing and frankly they just don't give a damn about the rest of us. The sequester will cost some 700,000 jobs and a Simpson-Bowles type plan could cost 4 million jobs, but "the market wants more austerity," one analyst told the New York Times.

    It's time to call your member of Congress and tell them no deal on Social Security or Medicare. You can also take action here at the Campaign for America's Future.

    Or you may just want to call the White House and ask for a dinner invitation yourself. It is time to put Wall Street on the menu.

    Comments

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    President Obama and the USA Citizens

    Submitted by Anonymous (not verified) on March 6, 2013 - 9:01pm.

    I am not convinced despite all his talk, President Obama, really knows what is going on with the citizens who are unemployed and have in many cases these are the same people who have lost their homes. How do we get him to see the light and do what is necessary to put people back to work? I for one do not know or maybe he does not give a rats ass.

    A rebuttal from a 2nd year Economics student

    Submitted by Derek, the Economics Major. (not verified) on March 6, 2013 - 8:03pm.

    There are a lot of problems in this article. I don't mean I feel a different way. For the past little time I've viewed myself as a democratic socialist.

    First this article assumes that the deficit is not an issue. True, that the deficit and our gigantic level of debt is not as bad as would appear to an uneducated layman, our debt is still valued well and we appear to be having no issues in getting financiers of it. Our credit rating, although dropped from AAA to AA+ is still among the best in the world. And people seem to love our treasury securities simply because of the fact that we are so stable and because of the safe return they provide. But that doesn't mean it's not an issue. Reducing our national debt is a sound thing to do. It's much better to be a creditor nation than a debtor nation.

    Second of all, while government spending DOES increase economic activity and help get us out of a recession or sluggish growth cycle, this article acts as if the economy is completely devoid of any ability to heal naturally. Fiscal stimulus by the government is just one portion of the consumption function. And anyone who had any kind of economic sense would know that. Therefore either the author of this article is not familiar with fundamental economic theory in the slightest or someone is being blatantly dishonest in the way this article is worded. C+G+I-E=Y (Y being GDP) Government is just one part, and not even the largest of that function.

    I just felt like I had to write this rebuttal as a comment. It's shameful to see such slant coming from what I have found in the past to be a very reliable source of information.

    Your argument has very, very thin rationale.

    Submitted by bpdexter85 (not verified) on July 5, 2013 - 10:41am.

    For such harsh critism over the content of this article, your rebuttal doesn't add up.

    First, you state that "reducing our national debt is a sound thing to do". This is incorrect right now. It is advantageous to borrow at this time as treasury rates are lower than the rate of GDP growth for the predictable future. Basically that means it is a good investment to borrow money at such low rates because our rate of return on any money we invest off of the borrowed money is almost certainly to be greater than the rate of return on treasury bonds. So no, reducing the debt right now is actually a bad decision.

    Second, while yes the economy will heal naturally and is currently doing so, the rate at which this is happening in respect to jobs is horribly slow. Yes, government spending is only one part of GDP, but what you fail to understand is the government spending portion of GDP also has a higher rate of job expansion compared to the other parts of GDP, which has been shown again and again in data.

    Education in economics

    Submitted by Frang (not verified) on March 9, 2013 - 5:07am.

    Unfortunately for economic majors and the nation, universities seem to only teach the Milton Friedman theory of economics. Although the failure of this school of economic thought is all around us, apparently students at most universities (University of Missouri-Kansas City being one exception)seem to remain impervious to its disastrous results (disastrous for the 98%, wildly successful for the top 1-2%).

    Friedmanism/Reaganism

    Submitted by Anonymous (not verified) on July 5, 2013 - 1:00pm.

    33 years of trickle down/privitization/deregulation and you still can't tell that it doesn't work?

    The self-healing market....

    Submitted by Lisa Graves on March 7, 2013 - 11:38pm.

    Dear Derek:
    Thank you for sharing your critique. It is the editorial position of PRwatch that the major drivers of the deficit are not being addressed by the Fix the Debt/Wall Street gang and that the deficit is much less important than stimulating the economy, which cutting Social Security benefits plainly will not do. It is true that government spending is one part of GDP and not the only factor in the nation's gross domestic product, but the notion that the economy will heal itself naturally if earned benefits are cut does not add up. We stand with Dean Baker and Paul Krugman, two very thoughtful economists, on these points.

    Cut the damn oil subsidies,

    Submitted by Barbara Leonard (not verified) on March 6, 2013 - 4:14pm.

    Cut the damn oil subsidies, for one. There are tons of places to cut that NEED to be cut to stop the giveaways to big money and to foreign countries. Keep our money at home....and leave social security and medicare alone! I'm a big NASCAR fan, but PLEASE....do Nascar racetracks really need millions in subsidies from the federal government??

    Fix The Debt?

    Submitted by Anonymous (not verified) on March 6, 2013 - 11:40am.

    How about we "fix the debt" by cutting the Pentagon budget, closing right-wing "think tanks" (which are far more "tank" than "think"), and repealing Citizens United?

    Citizens United

    Submitted by anonymous (not verified) on March 6, 2013 - 8:53pm.

    IF Citizens United is repealed then no more unlimited amounts of money will be permitted to be given anonymously to campaigns, and with that, government jobs given to people who gave substantial amounts of money to a campaign will be made public. ALEC and the fact that they write laws known as "model laws" that are made into actual law will be public knowledge and the backers and legislators who are putting into law these ALEC laws will be held accountable for their lack of working for "we the people." Republican's backers are the ones who want privatization because their contributors to their campaigns want to own government contracts so they can put the profits in their own pockets instead of workers making a living wage. As a civil service employee who is restrained by the Hatch act and not able to help candidates I support, I am offended that certain governors, have privatization panels and teams and also hire people who are currently holding an elected office, and gave money to the governors campaign. When these people are given by the governor a high level position such as (for instance) a veterans home they then can put into action union avoidance tactics. All of this is designed to make sure the wealthy can put contract money into their own pockets and less to the workers. Privatization does not save money, it redistributes the money so the wealthy become even wealthier and the middle class work harder and make less money, and lose retirement and health care. Citizens United must be overturned, two Supreme Court justices are personal friends of the Koch brothers, one of the Justice's wives received 160,000 dollars from the Koch brothers. The Justices who are friends of the Koch's and who should have recused themselves are Scalia and Thomas. The main goal of the Koch's and most Republicans is in essence taking over our country and putting the running of our country in the hands of those whose main interest is making money, not the betterment of mankind. They want unions obliterated because they want to shift the balance of power and they want total control of our country, our laws and the running of government services. These same legislators are quick to point out the wages of public employees and inflate it if necessary to their goal but are not willing to put themselves in that same class, they are also public employees but make much more money than ordinary workers and with retirement they can claim 2 years for every one year worked, at least in some states, I am not sure how this is with all states. Legislators who want to break unions on the path to privatization never talk about their own wages, health care and retirement funds, perhaps they feel they deserve the pay and perks they receive. These legislators put into law "model laws" written by ALEC that support special interests such as making fracking fluid a secret claiming it's a trade secret, they deny their are health hazards and they deny the water is polluted during fracking. Big oil and Pharma are only two of the many favorite "causes" they support with "model" laws. It is not a coincidence these same businesses and organizations support these legislators campaigns. There are over 900 "model" laws written by ALEC, ALEC is one of the organizations that the Koch brothers developed and hide behind, the Tea Party would be another organization they support, many other organizations sound to the public like a good idea until the research is done and the real reason they exist exposed. The Koch brothers father belonged to the Birch society and what they wanted then they still want, the takeover of our country by any means. Some of the model laws want anything affiliated with the public's right to know obliterated at the most and at the least make it nearly impossible for the public to search out and find the truth of government functions. ALEC and other organizations are claiming non-profit status and yet they are making a profit. I cannot understand why the IRS is not pursuing legal action against ALEC because they are making a profit. I cannot understand why the Citizens United decision has not been overturned. The balance of power of our government is gone because a few wealthy people are now deciding who and how our government functions are run. In Wisconsin when the recall occurred the majority of money supporting the governor came from out of state. Before Governor Walker initially ran for governor there was no negative statements regarding unions or of his agenda to destroy unions during his campaign. With privatization of government services there is a very real possibility that foreign entities could be in charge of government functions and those same aforementioned foreign entities may not have the USA's best interests at heart. When private companies run government services it is a recipe for disaster. Laws have been changed to keep privatized prisons full and that is just the tip of the iceberg. Anyone running or working for the government should have it's citizens as their primary concern and the fact that privatization does not save money but simply puts the majority of the contract money in the pockets of the owners of the private company and then takes away income, retirement and health care to the workers. These "right to work" laws Republican lawmakers push for is to destroy unions and make the balance of power shift so that workers cannot complain about unfair treatment and bargain for a living wage with health care and retirement. Our government is compromised and if things continue without intervention from people in power we are heading for a country we no longer recognize with no hope for our children and grandchildren to live the American dream. This brings me to this, Charter schools, they have the same or worse level of dysfunction as private schools and with charter schools, the teachers do not have to be certified. To keep the public uneducated makes the job of fooling the public easier. Propaganda is also used liberally in their pursuit of destroying what I hold dear, the balance of power, the Constitution and the Bill of Rights. May God help us all and may be remind our legislators WHO they work for, which is of course the public.