| Number 521 | December 20, 2012 |
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Greetings, I know the last Nygaard Notes came your way just a few days ago, but this "Fiscal Cliff" stuff is more urgent than even I thought – and I thought it was very urgent! Here's the main point to keep in mind: The United States is a fantastically wealthy country, so the idea that "scarcity" means we have to enter a period of "austerity" is a strange idea, indeed. The shortfalls and deficits that we see cannot be explained by saying that there is not "enough" for everyone to have their needs met. It must instead be explained by the idea that the wealth that is generated by this economy is somehow not accessible to most of us. That is, it is a matter of distribution, not scarcity, a matter of priorities and politics, not any sort of "law" or "reality." The best way to distribute wealth in a capitalist society is to provide good-paying jobs to all who want them. That should be our top priority. Not deficits. What follows is a collection of not-exactly-random thoughts to keep in mind when thinking about the "fiscal cliff," or the "grand bargain," or "out-of-control spending," or whatever we're being told to think about between now and the end of the year. It's happening quickly, so take action as soon as you can. See the last Notes for how. Urgently yours, Nygaard |
"Quotes" of the WeekThree "Quotes" this week, all related to the "Grand Sellout" underway in Washington. #1: A reminder of the fundamental problem of misplaced priorities. This is economist Dean Baker, writing in the Huffington Post blog on September 24th: "The Washington political establishment has decided that reducing the debt should be the country's number one economic priority. The tens of millions who are unemployed, underemployed or out of the workforce altogether due to the fallout from the collapse of the housing bubble will just have to wait until things get better, limiting the growth of the debt is the order of the day in Washington." #2: A Prediction. The following prediction was made by commentator Glenn Greenwald, writing in the London Guardian in a piece called "Obama and Progressives: What Will Liberals Do with Their Big Election Victory?" This was written the day after the election, as Liberals were celebrating Obama's victory: "Consider the very first controversial issue Obama is likely to manage, even before the glow of his victory dims, literally within the next couple of weeks. It is widely expected—including by liberals—that Obama intends (again) to pursue a so-called 'Grand Bargain' with the GOP: a deficit- and debt-cutting agreement whereby the GOP agrees to some very modest tax increases on the rich in exchange for substantial cuts to entitlement programs such as Social Security and Medicare, the crown legislative jewels of American liberalism." #3: Sure enough, on December 19th—six weeks after the election—the news came out that the President is, indeed, caving in on his promise to avoid cuts in Social Security. Here's the lead paragraph from the December 19th NY Times: "As part of a deal being negotiated by President Obama and Speaker John A. Boehner to avert the worst of the year-end tax increases and spending cuts, Social Security payments might be lower in the future for millions of Americans." |
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MSNBC's Lawrence O'Donnell has the best alternative metaphor to the absurd "fiscal cliff" that has been invading our minds for the past several months. Says he, "That so-called 'fiscal cliff' is more like stepping off a sidewalk... If you don't do anything, it becomes a very, very large adjustment in both tax revenue and spending over a long period of time. But over the course of the few weeks that we will have done this before Congress fixes it, it will be a minor step off a curb. And it's all fixable retroactively." Doesn't it sound a lot less "radical" to urge your elected representatives to "step off the Fiscal Curb" than to "plummet off the Fiscal Cliff"? Of course it does, and that's the point of propaganda: to shape how we emotionally react to unfolding events. |
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We often hear that one way to "save money" on "entitlement programs" is to apply "means testing" for Medicare and Social Security. I put quotation marks around all three phrases for three reasons. What we have been trained to call "saving money" is really just shifting the costs of things we want to somewhere other than government. So, for example, if we decide that some people make too much money to be on the Medicare program, what happens? Government spending goes down (there's the "saving money" part), but the newly-ineligible people have to spend money for something – either private insurance or direct payment for health care. It's not as if the people we make ineligible stop getting sick. Yet this is referred to as a way to "save money." The phrase "entitlement programs" has come to be associated with an idea that some people are "givers" and some people are "takers." Not only are the "takers" quite undesirable people, but there are a LOT OF THEM! As Mitt Romney so famously reminded us last May: ""There are 47 percent of the people … who are dependent upon government, who believe that they are victims. … These are people who pay no income tax." And it is widely, if falsely, understood that the benefits of "entitlement programs" go largely to these lazy freeloaders. The idea that there are some things to which everyone may be "entitled" is thus discredited. All of this is another way of pushing the individualistic myth that people should "take care of themselves." Social Security and Medicare are "Earned Benefit Programs" to which people are entitled. That's a good thing! Which brings us to the third phrase I placed in quotes: "means testing." "Means testing" is when a person is only eligible for a benefit if one falls below a certain level of income or wealth. Medicaid, for example, is means tested—you only qualify if you're poor. In contrast to that, a single-payer system would apply to everyone—no means test. Dr. Don McCanne of Physicians for a National Health Program summed up the argument against means testing in a recent (December 11) blog post. He's talking here about Medicare, but the argument applies to means testing wherever we find it: "Introducing means testing, which we have already begun with Part B and Part D premiums [for Medicare], reduces support of wealthier beneficiaries who are annoyed by these additional charges. Once the principle of means testing is established, the budget hawks ratchet it up, driving wealthier individuals to look for private options, currently available as the Medicare Advantage plans. It is only one small additional step to introduce premium support—vouchers—where the wealthy will take their money and run. Once you lose support of wealthier individuals who have a strong political voice, then Medicare will descend down the path toward becoming a welfare program, like Medicaid." An even more succinct summary of the problem of means testing comes from a December 10th posting on the World Socialist Website: "The introduction of increased fees based on income [i.e. a means test] will signify Medicare's transformation from a universal health care program for the elderly into a poverty program, the first step in its being starved of funds and ultimately dismantled." The political reality is that "welfare" programs are easier to destroy than universal programs, since poor people have not only less money, but less voice. Medicare and Social Security are not means tested, which is why they have lasted as long as they have. And that's why, when you hear the words "means testing," what you should also hear is alarm bells.
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If you've been following this Fiscal Cliff stuff closely enough, you've heard about something called the "Simpson Bowles" plan. Or the "Simpson Bowles" recommendations. Two guys, named Alan Simpson and Erskine Bowles, were the co-chairs of a commission that was supposed to come up with a plan to reduce the deficit. Two years ago the Commission failed to come up with a plan that Commission members would approve. Yet you'll still hear media refer to "the recommendations of President Obama's fiscal commission." The Commission voted on a plan, and they failed to pass it. So there is no such thing as a "recommendation" or a "plan" of any "Commission." What there is, is a plan that the two co-chairs, Simpson and Bowles put out on their own. Readers of the nation's newspapers will hear that the "Simpson Bowles plan" is some sort of "centrist" or "compromise" or (look out!) "bipartisan" proposal. Well, it is "bipartisan," but that just tells you that both major parties are willing to slash crucial and wildly-popular public programs in order to please the most powerful members of society. There's no space here to go into the details of why it is so bad, but the Center on Budget and Policy Priorities put out a 14-page analysis of Simpson Bowles last month that came to the conclusion that the two men have "produced a plan that—despite their intentions—would harm millions of people who are disadvantaged or have very modest incomes. In some areas, the plan also does not appear sufficiently well thought through." I don't know how these analysts would know the "intentions" of these guys, but my fear is that their proposal actually is, "well thought through," and that it's actually intended to serve the interests of the powerful. It seems unlikely that these smart guys would spend months creating a plan of such size and importance and not think it through pretty thoroughly. In any case, if it really would "harm millions of people"—and it would—then we should oppose it, whatever the "intentions" of these two powerful men. |
When we hear people talk about how the "national debt" places an "unfair burden" on "our children and grandchildren," I suggest that we keep in mind three things: Dollars, Death, and History. One at a time... Dollars. The United States debt is denominated in dollars. The U.S. government prints dollars. So, rather than raising taxes or cutting spending, the U.S. government could simply print enough money to pay down the debt. It really is that simple. The risk with this is inflation, since the more dollars there are, the less each one is "worth." But, actually, a little inflation—5 percent?—would be a good thing for most people, since inflation makes it easier (cheaper) to pay off debts, since the dollars used to pay the debts are worth less than the dollars that were borrowed. Inflation would thus reduce the debt burden for the Have-nots (the borrowers). But inflation of any sort is seen by the Haves (the lenders) as a type of tax, or at least a cost, since they get paid back in dollars that are "worth" less. And this cost is why this particular solution, while reducing the national debt and household debt, tends to go nowhere in the halls of money, er, I mean, power. This could be the subject of a whole other issue of Nygaard Notes, but we'll leave it there for now. (Probably the most articulate proponent of this idea is Warren Mosler, whose comments can be read HERE.) Death: Death is the second thing to consider when thinking about the "burden" of debt: Some people say that leaving "our children" to pay off a huge debt raises an issue referred to as "intergenerational equity"—that is, is the current generation being fair and equitable with the next? The idea that paying off the federal debt will be an unfair burden for "our children" leaves out an important point: To whom will our children be paying this debt? They'll be paying it to... our children. So it's not an issue of "intergenerational equity," after all, as economist Dean Baker spells out in a recent blog post. After noting that "Politicians . . . are fond of telling people that our children and grandchildren will pay the national debt," he continues, saying, "A moment's reflection shows why the debt is not a measure of inter-generational equity. At some point everyone alive today will be dead. At that point, the bonds that comprise the debt will be held entirely by our children or grandchildren. The debt will be an asset for the members of future generations that hold these bonds. This can raise distributional issues within a generation. For example, if Bill Gates' grandchildren own the entire U.S. debt there will be important within-generation distributional consequences. However this says nothing about inter-generational distribution." So, our children will be paying off the debt, which will be owned by our children. The distribution issue, in other words, is between borrowers and lenders—or, roughly speaking, between rich and poor—and is not between old and young. That's an important issue but, unfortunately, since the winners under the current system tend to be the lenders (i.e. the people with money), this idea, too, tends to go nowhere in the halls of money, er, I mean, power. (If you're interested in this, you can read more from a "post-Keynesian" perspective HERE.) History. Some people are concerned about the current burden posed by the interest the federal government is paying on the national debt. For instance, here is US News and World Report, in a November 19th story headlined "National Debt Interest Payments Dwarf Other Government Spending." The lead paragraph: "In 2012, the U.S. will spend around $220 billion in net interest on its debt, according to the Congressional Budget Office—a figure that is expected to spiral ever higher in coming years." Here's Dean Baker again, making a little-noted point: Due to the current super-low interest rates, the national debt-related "interest payments as a share of GDP [the overall economy] are near a post-war low." (Meaning World War II, not Iraq.) That's right; US News even acknowledges as much in its article, noting that, while $220 billion is a lot of money, the enormous size of the U.S. economy means that this amount "can seem much smaller, at around 6 percent of the total federal budget and 1.4 percent of GDP." For our purposes, it's worth noting that it serves the interests of those who want to slash public programs to make the government's interest payments "seem" as big as possible. And the way to do that is to report huge numbers, like $220 billion, with no context for understanding them. So, remember Dollars, Death, and History. Dollars: We can't go bankrupt. Death: Our children will pay back our children. History: Interest costs "near a post-war low." The crisis is jobs, not the deficit. |
Big Business and its friends have mounted one of the biggest lobbying campaigns in my memory in an attempt to manipulate the phony "Fiscal Cliff" negotiations in their favor. (The fact that nearly everyone is calling it the "Fiscal Cliff" is testimony to the power of the Public Relations aspect of their efforts.) In this regard there are two groups to be aware of—and to beware of!—in the public debate about taxes and spending. One is the "Campaign to Fix the Debt," and the other is the "Committee for a Responsible Federal Budget." They're closely related. As the Institute for Policy Studies put it in a major report on November 13, "The Fix the Debt campaign has raised $60 million and recruited more than 80 CEOs of America's most powerful corporations to lobby for a debt deal that would reduce corporate taxes and shift costs onto the poor and elderly." You can see that they mean when you look at the list of Fix the Debt's "CEO Fiscal Leadership Council," which is five pages long and reads like a Who's Who of major corporations. The group's founders are none other than Erskine Bowles and Alan Simpson, co-chairs of the Simpson Bowles Commission. Remember? The one that failed to make a recommendation on how to lower the deficit? Despite that fact, here's one of the "Core Principles" of the "Fix The Debt" group: "The recommendations of the Simpson-Bowles Commission [sic] and other recent bipartisan efforts, which saved at least $4 trillion and addressed all parts of the budget, provide effective frameworks for such a [deficit-reduction] plan." I guess it sounds better if you say that the recommendations are from "the Commission," rather than from the two elites who chaired it. But it's not true. I thought it might be a simple error, but Fix the Debt has a petition, supposedly signed by over 300,000 people, that also refers to recommendations of "the Commission." They're well-funded, loaded with powerful CEOs, and apparently willing to use falsehoods as a means to get their way. Watch out. The parent of the Fix the Debt Campaign is our second group, the "Committee for a Responsible Federal Budget." Both Simpson and Bowles are on the board of directors of the Committee, along with a large number of "deficit hawks" from both parties. Their funding comes from, among other places, the deficit-obsessed Peter G. Peterson Foundation, which pays for a hefty staff of 14, and a board of 39 (including Peterson himself). One look at their position paper "Options for Controlling Health Care Costs" from last June tells us all we need to know. It's like a Little Shop of Horrors for working people. Among the "Fundamental Reforms" they call for are: Destroying Medicare by turning it into a market-based voucher system; slashing Medicaid by turning it into a block grant-type program that responds not to human need but to cost-control imperatives, and; changing all federal entitlement programs to some sort of "budgeted" programs that are capped in ways similar to the block grant idea. Oddly, they also call for a Single-Payer system for health insurance. (Probably because everyone knows that a Single-payer system would reduce health care costs dramatically.) Less "fundamental" reforms suggested by the Committee include the raising of Medicare premiums, the raising of the eligibility age for Medicare, the cutting of Medicaid payments to the states, the weakening ("reforming") of medical malpractice laws, and more. Again, the mention of either of these groups, or of Peter G. Peterson, should set off some alarms. |
Before succumbing to the temptation to hold Republicans solely responsible for any regressive "bargain" that might emerge from the current Fiscal Hysteria negotiations, remember that a "bargain" has to have at least two sides to it. As the New York Times reported on November 15th, "In a rare show of bipartisanship, or mutual protection, both parties ducked the debate [on the Fiscal Cliff and the cuts that both parties plan to make] until after the election." And here we are, after the election, with "both parties" busy drafting a "Grand Bargain" that will slash the public programs upon which huge majorities in this country depend. There's bipartisanship for you! Again I quote from the World Socialist Web Site, this time in a November 29th posting, which said, "As the deadline for the so-called 'fiscal cliff' grows nearer, the indications mount that, behind the smokescreen of deficit talks and media hype, the artificial fiscal emergency is the starting point of a process for making deep structural cuts in basic social programs that previously would have been considered politically impossible." It all points to, as WSWS sees it, a "bipartisan drive to give entitlement cuts, long regarded as the 'third rail' of American politics, an aura of inevitability." |
The great failure of the Democrats (the somewhat less-reactionary of the two major parties), is that the best they can ever do in the face of right-wing attacks is to be "not quite as bad." Since the only voices in these policy debates that are ever heard in the mass media are elected officials from these two parties, it's no wonder that so many people see only two options: The Republican Option of "Cut to the Bone," and the Democratic Option of "Maybe Cut a Little Less." While it's good to say "No" to the most extreme cuts—and we should support the few Democrats who do—the real starting point should be to say "Yes" to the creation of much-needed new programs and to the strengthening of existing programs. For example... When Republicans say we should "Raise the Medicare eligibility age," Democrats say (sometimes), "No, we shouldn't." What we should say is: Medicare for All. That is, expand the program from "seniors only" to everyone. Even such a Single Payer plan is a compromise; we could be demanding a complete socialization (democratization) of the health system. Why should "the market" have anything to do with health? When Republicans say "Cut the Cost of Living Adjustment (COLA) for Social Security," and Democrats say, "No cuts," we should say "Let's increase benefits so that no seniors, people with disabilities, or survivors have to live in poverty." When Republicans say, "No Tax Increases on the Rich, and Democrats say, "How About a Tiny Increase, Please?," we should say, "Progressive Taxation to Fund Human Needs." It's not enough to "Just Say No" to the worst ideas on the agenda. We need to set the agenda by demanding serious responses to serious needs, instead of always playing defense. Find an organized group that speaks for you, and join it or support it. |
I left out a lot in this issue. Here are a couple more things to look at on the subject of the Fiscal Bluff. The Big Picture, or the context, within which is occurring all of this talk about "austerity" and "deficits" and "jobless recoveries" and inequality is summed up beautifully in an article in Monthly Review from June of 2011. Called "The Great Recession and Its Aftermath: Causes vs. Symptoms," this article by scholar Fred Magdoff spells things out in remarkably plain language. A June 27th paper by Benjamin Page and Lawrence Jacobs is chock-full of surprises about how the Average Joe and Jill feel about this idea of "saving" money by cutting Social Security. Their conclusion: "To cut Social Security benefits in the name of deficit reduction would go against the public's wishes and be politically hazardous." The paper is called "Understanding Public Opinion on Deficits and Social Security." It's really fun to read. |
