February 8, 2005

• Topic: the magic eye comes into focus
  
  (if you haven’t read my last post “the heart of the debate,” i recommend reading that first, and then this NYT article… )

  
  

  Spearing the Beast

  By PAUL KRUGMAN
  
  Published: February 8, 2005
  
  
  

  resident Bush isn’t trying to reform Social Security. He isn’t even trying to “partially privatize” it. His plan is, in essence, to dismantle the program, replacing it with a system that may be social but doesn’t provide security. And the goal, as with his tax cuts, is to undermine the legacy of Franklin Roosevelt.

  
  
  
  
  
  
  
  

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  Why do I say that the Bush plan would dismantle Social Security? Because for Americans who entered the work force after the plan went into effect and who chose to open private accounts, guaranteed benefits – income you receive after retirement even if everything else goes wrong – would be nearly eliminated.

  
  

  Here’s how it would work. First, workers with private accounts would be subject to a “clawback”: in effect, they would have to mortgage their future benefits in order to put money into their accounts.

  
  

  Second, since private accounts would do nothing to improve Social Security’s finances – something the administration has finally admitted – there would be large benefit cuts in addition to the clawback.

  
  

  Jason Furman of the Center on Budget and Policy Priorities estimates that the guaranteed benefits left to an average worker born in 1990, after the clawback and the additional cuts, would be only 8 percent of that worker’s prior earnings, compared with 35 percent today. This means that under Mr. Bush’s plan, workers with private accounts that fared poorly would find themselves destitute.

  
  

  Why expose workers to that much risk? Ideology. “Social Security is the soft underbelly of the welfare state,” declares Stephen Moore of the Club for Growth and the Cato Institute. “If you can jab your spear through that, you can undermine the whole welfare state.”

  
  

  By the welfare state, Mr. Moore means Social Security, Medicare and Medicaid – social insurance programs whose purpose, above all, is to protect Americans against the extreme economic insecurity that prevailed before the New Deal. The hard right has never forgiven F.D.R. (and later L.B.J.) for his efforts to reduce that insecurity, and now that the right is running Washington, it’s trying to turn the clock back to 1932.

  
  

  Medicaid is also in the cross hairs. And if Mr. Bush can take down Social Security, Medicare will be next.

  
  

  The attempt to “jab a spear” through Social Security complements the strategy of “starve the beast,” long advocated by right-wing intellectuals: cut taxes, then use the resulting deficits as an excuse for cuts in social spending. The spearing doesn’t seem to be going too well at the moment, but the starving was on full display in the budget released yesterday.

  
  

  To put that budget into perspective, let’s look at the causes of the federal budget deficit. In spite of the expense of the Iraq war, federal spending as a share of G.D.P. isn’t high by historical standards – in fact, it’s slightly below its average over the past 20 years. But federal revenue as a share of G.D.P. has plunged to levels not seen since the 1950′s.

  
  

  Almost all of this plunge came from a sharp decline in receipts from the personal income tax and the corporate profits tax. These are the taxes that fall primarily on people with high incomes – and in 2003 and 2004, their combined take as a share of G.D.P. was at its lowest level since 1942. On the other hand, the payroll tax, which is the main federal tax paid by middle-class and working-class Americans, remains at near-record levels.

  
  

  You might think, given these facts, that a plan to reduce the deficit would include major efforts to increase revenue, starting with a rollback of recent huge tax cuts for the wealthy. In fact, the budget contains new upper-income tax breaks.

  
  

  Any deficit reduction will come from spending cuts. Many of those cuts won’t make it through Congress, but Mr. Bush may well succeed in imposing cuts in child care assistance and food stamps for low-income workers. He may also succeed in severely squeezing Medicaid – the only one of the three great social insurance programs specifically intended for the poor and near-poor, and therefore the most politically vulnerable.

  
  

  All of this explains why it’s foolish to imagine some sort of widely acceptable compromise with Mr. Bush about Social Security. Moderates and liberals want to preserve the America F.D.R. built. Mr. Bush and the ideological movement he leads, although they may use F.D.R.’s image in ads, want to destroy it (end of article).

  
  

  As my last post noted, numbers matter, but different ideologies will use numbers for their own gain.  That’s why the fight isn’t just over the numbers of Social Security, but over the legacy of FDR.   “Moderates and liberals want to preserve the America FDR built.  Mr. Bush and the ideological movement he leads…wants to destroy it.”

  
  

  Remember the quote from the Cato institute, a libertarian think tank that is one of the leading influences on the Republican agenda:

  
  

  “Social Security is the soft underbelly of the welfare state,” declares Stephen Moore of the Club for Growth and the Cato Institute. “If you can jab your spear through that, you can undermine the whole welfare state.”

  
  

  We are a welfare state, and there are problems with our welfare state.  Some programs are inefficient, some are underfunded, some are overfunded and wasteful.  But, the reason we have a welfare state, as does Canada, England, Brazil, Sweden…is to do the best we can to give everyone, especially the poor, an opportunity for a good education, for a healthy life, for a decent standard of living.  Now…when we find problems with our social programs, and there are, we should aim to improve those programs. 

  
  

  The Republicans, supported by libertarian think tanks, think differently.  They want to do away with all social programs.  The state should not provide, things should be privatized, taken care of by the individual, an “ownership society.”  On a philosophical level, there may be some justification for their thinking.  But…on a practical level, knowing what we know about human nature, we are forced to have these social programs.  And…on a practical level, knowing what we know about who tends to support which ideology (seniors, workers unions, oppose privatizing Social Security…Wall Street and big business supports it), we see again why we are forced to have these social programs.  A government that operates for the people is better at taking care of its people than businesses whose only concern is with profits (which, often goes against the interests of people). 

  
  

  “The attempt to “jab a spear” through Social Security complements the strategy of “starve the beast,” long advocated by right-wing intellectuals: cut taxes, then use the resulting deficits as an excuse for cuts in social spending. The spearing doesn’t seem to be going too well at the moment, but the starving was on full display in the budget released yesterday.”

  
  

  Here we see how liberals and conservatives can come up with two different formulas for growing the country, the economy, and taking care of its people.  Intellectuals will debate till they’re blue about whether cutting taxes and social programs is better, or whether a progressive tax and social programs is better.  But…you don’t have to be an economist to understand what the differences are.  It all comes down to whether or not you believe in a social safety net, whether or not you believe that to help the poor, we must create certain social programs for them, to be paid for through taxation.  

  
  

  That’s why you hear a lot from Bush and co. about lowering taxes as a way to raise the economy.  People hear that, think it’s good, and support it.  However, you never hear Bush and co. arguing the second part of their argument, “cutting social programs is also going to improve the economy.”  Many libertarians might support that argument, but your average Republican only voted for tax cuts, not cutting social programs.  A strong economy is worthless if the poorest in society do not benefit from it.

  
  

  At the end of the day, Republican economics is simply not honest economics.  Libertarians are more honest, but that’s probably why most people haven’t heard of them.  “Vote for me…I’ll cut your taxes, and cut social programs, that’s what’s best for society.”  Instead, you get Republicans covering for them, “We’ll cut taxes, and save those starving social programs by privatizing them, or, we’ll starve them some more since they’re doing very poorly and don’t deserve any more funds (see No Child Left Behind).”  It’s a cruel logic, but, it’s a logic that must be revealed for what it is.   

  
  

  In another article, Mr. Bush promised to hold “federal programs to a firm test of accountability” and take “the steps necessary to achieve our deficit reduction goals.”  

  
  

  Now…synthesizing what we’ve discovered, what can we extract from Mr. Bush’s promise.  Does Mr. Bush want to see federal programs flourish, but also make sure they’re being held accountable?  Or…is it more likely that Mr. Bush wants to hold them accountable for their very existance? 

  
  

  Is the deficit (federal spending is more than federal revenue) that Mr. Bush is trying to reduce, a product of a slow economy where high taxes actually caused federal revenue to decrease?  Or, is the deficit a product of federal spending, period.  End of sentance! 

  
  

  Is Mr. Bush interested in lowering taxes in order to stimulate the economy, so that there are more federal revenues available for programs?  Or…is Mr. Bush interested in lowering taxes in order to stimulate the economy, but rather than using a strong economy to increase federal revenue and spending, to instead keep those things small too?

  
  

  In future posts…I hope to examine some federal programs, to see whether these programs should be starved to death or not. 

  
  

   

  • 10:54 am
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