Home Capitalism A Presidential Commission–To Cut Your Benefits

A Presidential Commission–To Cut Your Benefits


“Houston, we have a problem….”

“We’re out of money.”

Our fiscal problems have at last reached emergency status. The Republicans, yes, the Republicans–in a purely partisan way–over the last 30 years finally put us so deeply in debt that we must now address the situation before it it too late. The President, no FDR or LBJ, has set up a commission to address the problem. And what is the problem specifically?

Here’s the problem in a nutshell. Common sense tells us that when you have a business that loses too much money, it will eventually fold. Let’s say that it does $17 dollars a year and that your annual take-home pay is $1.50 but your expenses are $2.20. You’re losing $.70 a year. But you’ve been doing it so long that you now owe $13. You need to make more money and start paying off that debt before it reaches the total amount of your entire business. For dollars, substitute trillions of dollars and you have our problem.

Some pretty good studies, including one by two economists, Reinhardt and Rogoff, tell us that when a country gets into this kind of mess, it is time to handle it or huge problems…lots of people in trouble, homeless, starving, dangerous disruptions of society…those kinds of problems could occur.

Now we have a commission. And that commission is going to recommend that we “tighten our belts,” go through an “austerity” program. That’s a nice word…”austerity.” What it actually means is that we’ve all been to dinner, some have fattened themselves, others have eaten moderately, but now we all get to share the bill equally.

In this case–and why you should be concerned–is that the bill is going to land on the middle and lower classes. Our government, in its infinite wisdom, now that George W. Bush and Dick Cheney and Donald Rumsfeld got us into a horrible mess, wants the middle and lower classes to pay for the dinner and add the tip.

Let’s take a quick trip down deficit memory lane to insure that we really know who got us into this mess. At the end of the Carter Administration in 1980, the national debt was $900 billion. By the end of the Reagan Administration in 1979, our national debt was $2.6 billion (almost 3 times what it was under Carter.) By the end of the first Bush Administration in 1992, it was $4 trillion, still climbing like crazy. By the end of the Clinton Administration in 2000, it had reached $5.6 trillion.

It should be noted that under Bush I, the deficit was growing at about $400 billion a year. There was great resistance by a Republican Congress to raising taxes. They preferred to let the deficit grow. When Bush sensibly did raise taxes very slightly, the Republicans abandoned him. When Clinton came in, he fought for tax increases immediately and did pass a tax increase without one, single Republican Senate vote. That, plus cost cutting by Al Gore, and paygo rules continually reduced the deficits until they were down to about $100 billion per year.

When Bush II and Cheney came into office, rather than continuing the Clinton policies that had taken the deficits from $400 billion down to $100 billion and on a track to surpluses…in other words, structural surpluses…Bush and Cheney decided to cut taxes and start two wars. By the end of the first term, they had raised the deficit by over $2 trillion. By the end of 2008, they had added $4.5 trillion. And after the Bush Recession of 2008, they left the new President with 15 million unemployed and an $11.9 trillion debt.

Just from 1980 to 2010, the Republicans had added $11 trillion to the national debt. Where did it go?

Bush II and Cheney introduced tax cuts, over the objection of their respected and admired, (and a renowned Conservative) Treasury Secretary, Paul O’Neill, at a $3 trillion cost to the budget. While the country was fighting a war in Afghanistan, and ignoring for the moment whether or not it was ethical or moral, they started another war in Iraq, an unnecessary war, that thus far has cost between $1.9 trillion and $3 trillion. It should be noted that the $3 trillion figure was an estimate by a group headed by Dr. Joseph Stiglitz, not only a Nobel Prize winner in economics but ranked in every poll by economists as the number one economist in the country.

With all the regulators looking the other way, Wall Street went on a spree and crashed. The result, in 2008, was an economy bordering on Depression, with 15 million out of work, with a $1.3 trillion deficit handed to the new administration. So the final blow to Americans was their handing over a deficit double at least of any prior deficit to the Obama Administration. The Great Recession resulted in another trillion-dollar deficit in the first year of the Obama Administration from the huge costs of the stimulus, from dramatically increased unemployment costs, welfare costs and from enormous support needed by many states simply to stay afloat.

So now we have a commission. And who is heading the Commission. The President of the University of North Carolina…a state that thinks it is still in the Confederacy. And the former arch-conservative Senator from Wyoming. Now there’s a duo that you can really put your trust in. One comes from a state full of Right Wing bigots who call the President a “liar” in the State of the Union speech and the other comes from a state that has more cattle and horses than people.

And here are some other members of the Commission.

The Co-Chairs of the Commission

Bill Frenzel, a former Republican Congressman from Minnesota. Can you trust him? He headed another commission. The President’s Commission to Strengthen Social Security in 2002. We know what those recommendations were. In 2004, Bush tried to privatize Social Security. Thanks but no thanks, Mr. Frenzel.

Tim Penny. A former Democratic member of the House. He supported McCain in 2008. Any questions?

Charlie Stenholm. A non-stop Conservative Blue-Dog Democrat who was always and is now and probably will be fiscally conservative. His vote will be to cut something. Probably Medicare and Social Security. He is not and will not be for raising any taxes.

So what does that tell you? You’ve got the guy who advised Bush, Jr. on how to sell out the People on Social Security teamed up with a McCain supporter and the most fiscally conservative Democrat in Congress while he was there. That’s how you start off this “analysis” of the situation…with the leadership of the committee stacked against you from the start.

But who else might be on board? Well, here are just a few selections among the “commissioners.”

Dr. Douglas Holtz-Eakin, economist to Bush I and head of economic advisors to Bush II and eventually as head of the Congressional Budget Office. He was appointed to this commission by Sen. Mitch McConnell. So he was one of the key people responsible for getting us into this mess and now he is on the panel telling us how to get out of it? He was also against health care reform. Very simply, if you are against reforming health care, you are against lowering Medicare costs, because that is what it will do. Medicare costs are a key factor in the long term deficit. Why is this guy even on this commission?

Jim Nussle. Nussle was the head of the Budget Committee, determining how much would be spent from 2001 to 2006, after which time the Democrats took over the House and Nussle exited to lose in a race for Governor of Iowa. When he lost the governor’s race Bush II made him the head of the Office of Management and Budget. Another chance for him to spend more money than we remotely had in the Budget. He alone would be enough reason to boycott this committee. Every bit of spending that created an additional $7 trillion budget debt came under his time managing financial decisions in Congress.

There are many more people on this commission who are are not only suspect but are tried and convicted of terrible breaches of ethics and judgement and compassion for their fellow citizens. There are too many to list. The commission is a joke.

Let’s take a look at where we are before the leaders of the effort behind the Peterson-Pew Commission, get their hands on our money. Pete Peterson is a former Nixon-era Republican, a billionaire Wall Streeter. David Walker was basically the government’s CFO for his career. Walker has been complaining about the danger of the growing debt for years, to his credit, but he doesn’t want to make recommendations on the tough–but sensible–changes. And despite what he says, the easy decisions are the snip-snips away at the social services for the middle and lower classes. Easy for him, tough for them.

Peterson will smile at you while cutting your Social Security but wants you to keep your hands off his hard-earned money. And that’s not sarcasm, exactly. Some guys literally work 7 days a week, 24 hours a day to get rich. They make it at about a dollar an hour.

Let’s not panic yet and suddenly give our lifestyles away so Grover Norquist can be feted by those who want to turn the government…and came close in 2001-2008…into an oligarchy. There are reasons for middle class Americans to push back against hard against potential cuts in services.

1. Social Security was in the black every year after 1984 until a year ago. It was our money. We paid in. In 1984 the benefits were changed. Reagan and Tip O’Neill reduced them, to make the rich feel better and supposedly keep the funds solvent. (Read their lips…no new taxes.) Last year or the year before was the first time SSI paid out more than it took in. So, ah, where did all the money go? Cannons, and tanks and planes!

So don’t let them reduce your Social Security. It’s insurance. You paid for it. It’s a tax over and above and separate from the income tax.

2. We have the lowest federal, state and local revenues since 1950. Here’s a dumb idea. Let’s raise frickin taxes. On everyone. Go back to collecting about a net 40% from the really wealthy. The guy with the 5-car garage with murals and a marble floor can sell one of his Ferraris so that people aren’t on the street when they turn 65.

3. Fifteen million people are out of work. How about we work on that problem. If you put 5 million people to work, with the greater economy that will produce, the tax revenues will go back in about a year to what they were in 2007. Then you can strike at the deficit in reasonable ways. Putting people to work who will pay taxes is the quickest way to reduce the deficit.

4. The rich pay a net 21 to 25% of their income…and they pay 80% of the taxes because they (we) get 80% of the income. But the tax breaks on millionaire-and-up households during Bush were $120,000 per million, per tax return every year for ten years. Pete Peterson’s a billionaire. Guess how much he made on the Bush tax cuts?

If we increased the marginal rate to 50%, from its current 35% scaled it up all across the tax tables and made every level pay some taxes if only starting at 5%, we would create enough to put the country in the black…maybe without anything else.

5. We have no manufacturing. If we changed all the incentives for that…and we could do it in a week if we really wanted to (where’s FDR when we need him?)…it would put the country into the black in two years while accelerating paying down the debt. And it would end the structural deficits. Corporations make $40 billion and pay no taxes? Anything wrong with this picture?

This stuff isn’t complicated. It is only complicated by the fact that it is political. No one wants to pay taxes. And no one wants their program cut. So here’s how it works..the arithmetic.

Pew studies show that we would need about a 35% increase in taxes or a 26% cut in spending to balance the budget through something like 2085 and get our deficits down a little bit. The national debt needs to stop growing and be reduced by about 15%…that is, we need to pay down the national debt by that amount. It is about 75% of GDP now and needs to go down to at least 60%. It is a big turnaround because it is still going up while we are working on this.

So, here is how you do it. You do half in taxes and half in tax cuts. Half of 35% is 17% roughly. Half of 26% is about 13%. That’s 30%. So you split it evenly. You increase by about 15% and a decrease spending by about the same amount and it turns things around. Now you could cut about 5% out of non-entitlement spending and it would penalize a lot of good programs…but if it were necessary it could be done. You could cut 5% from the military and they wouldn’t even know it. And, while it isn’t fair to cut programs from people who have already paid in and will now be paying more in taxes because the rich got richer, you could cut 5% out of entitlement programs in ways that would not affect the poorest and most vulnerable.

As far as tax increases, the wealthy can afford to go from paying 22.5% of taxes to 35%. It is still lower than at any time prior to Reagan. Everyone else can chip in and pay the balance to get them up to the 15% increase.

Two more things. If we come up short, we could add a VAT, a value added tax, of perhaps 5% on products. VAT is a primary source of revenue in Europe and theirs is much higher. Next, we need to have our biggest corporations, like Exxon and BP paying some taxes. They make literally tens of billions and pay no taxes at all. Current revenues from business are about 7%, the lowest in our history. Businesses should not pay huge taxes but they should pay some minimum taxes, certainly at least 10%.

Finally, we need to have a quantum change in our attitude towards global trade. First we need to build up our manufacturing economy again here at home. We need good jobs, unions, small manufacturers aided with growth, a reduction in the number of huge corporations, and incentives for both manufacturers and investors to grow jobs here. If we raised the top marginal rate to something like 70%, and tax breaks were only available for investment in U.S. domestic manufacturing firms with 75% minimum U.S. workforces…you would see manufacturing grow over night.

If we go back to a full-manufacturing economy, we will have a much larger tax base and once again be the economic engine of the world. At this point, we will be able to make and sell products of a much higher quality and technical sophistication than we did in our earlier historical periods of manufacturing expansion.

We can do this. Don’t let the Peterson-Pew, Neocon-slanted commission steal your Social Security or Medicare…the insurance that you paid for over and above your income tax… or be reduced by a bunch of Right Wing corporatists.

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