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“Let Them Eat Catfood”

That was the message that the Co-Chairs of President Obama’s Deficit Commission sent last Wednesday. Co-Chair’s Alan Simpson and Erskine Bowles issued a proposal to balance federal budget deficit by (get this) - 2037.  The proposal reads like an ideological, trickle-down economics rag. 

Here is the link to Co-Chair’s Proposal.

Let’s clear a few things up:

1) Budget deficit is not the problem - short term or long term.  The problem is unemployment or lack of jobs.

2) Budget deficits have been the historic norm in the U.S.  (except for several brief periods).  Any attempts to balance budget - mostly recently during Clinton Administration - were followed by recessions or worse - depressions.

3) If the economy reaches full employment the deficit will take care of itself - so the policy objective should be to reach full employment as soon as possible.

This is not to say that any and all government spending or taxation is good.  Government spending can be wasteful and taxation can be overbearing.  What matters is whether that spending and even taxation is promoting FULL EMPLOYMENT.

Federal budgets should reflect the priorities of the American people as determined by their elected representatives (but political system is broken).  But don’t be fooled - fiscal policy (spending/tax policy) re-distributes income whether upward or downward.  Right now, fiscal policy as reflected in the federal budget re-distributes income upwards to top incomes and corporations but not just because of low tax rates - there are spending policies and other tax policies that favor top incomes and corporations.

The issue is NOT the size of the budget deficit or amount of debt but WHO benefits from the deficit.  Repuglicans and conservatives understand this issue very well.  Just listen to how they defend huge tax cuts for top incomes. 

Simpson/Bowles powerpoint proposal has a lot of nice graphs but really if they were serious about reducing the deficit and federal debt why the hell are they going to CAP tax revenue.  That’s right - a deficit commission so concerned about federal deficit and debt that it proposes to cap tax revenue at 21% of GDP.  And if they were so serious about reducing the deficit and debt why the hell are they going to LOWER top tax brackets.  Then to make it look like they are being fair they propose eliminating many tax deductions including mortgage interest tax deduction.

From reading the proposal it seemed like Simpson/Bowles had an ideological axe to grind.  Besides its comical tax revenue cap and sad attempt at tax reform.  It seemed to save its punches for Social Security and Medicare.  Two programs absolutely despised by conservatives because they actually work to help people.  Let’s focus on Social Security now and Medicare next week. 

Social Security is not a problem now or nor will it be in the future.  Some people are concerned about some time in the future (2037) when it’s PROJECTED that Social Security Trust Fund will owe more in benefits than assets in the trust fund.  If we truly understood our monetary system we wouldn’t be concerned.  But that aside, minor adjustments can address this PROJECTED problem such as raising the cap on income taxed - currently income above $106,800 is not taxed for social security. 

However, Simpson/Bowles went a different route with social security.  They proposed, in part, cutting benefits for most people and raising the retirement age (age for full benefits).  This, like most of their proposals, affects Working Class Americans the most.  Consider this: we have a $6.6 trillion retirement saving deficit in the U.S. which means a significant portion of Americans have not saved enough to maintain their current standard of living in retirement.  Seriously, and we are talking about cutting social security.  But there is more:

+ 2 in 5 older American households have retirement savings accounts. If things don’t change for the better this will get worse.

+ 55% of people 65 or older rely on Social Security for half or more of their income.  And we are talking about cutting benefits!

+ 28% is the share of pre-retirement income that Social Security benefits will replace in 2030. Where is the rest going to come from? Remember there’s a $6.6 trillion retirement saving deficit.

+ 56% of Gen X households are at risk of being unable to maintain their standard of living in retirement.  It’s not just old people that will be affected by this insane proposal. 

+ Life expectancy for men with higher incomes increased much more than men with lower incomes (6 yrs vs. 1.3 yrs).  This means janitors and laborers are going to pay a heavy price if retirement age is increased as opposed to lawyers or investment bankers. 

There are a lot more facts regarding retirement and why we need to strengthen social security not weaken it here. 

How do these cuts to Social Security help our economy let alone individual retirees?  They don’t.  They are a cynical ideological (conservative) attempt to destroy a popular and good program that has help millions of Americans.  But Simpson/Bowles and the rest of Obama’s debt commission don’t care because they will be enjoying their tax cuts and filet mignon in retirement while the rest of us are eating catfood. 

It doesn’t hurt to let the White House know how we feel about Simpson/Bowles proposal:

1) Sign petition; and
2) Contact the White House and tell them Hands Off Social Security. 

Good luck.