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Thursday, February 12, 2009

"Looting Social Security"

Haven't posted much on Social Security lately, but that may change:

Looting Social Security, by William Greider, The Nation: Governing elites in Washington and Wall Street have devised a fiendishly clever "grand bargain" they want President Obama to embrace in the name of "fiscal responsibility." The government, they argue, having spent billions on bailing out the banks, can recover its costs by looting the Social Security system. They are also targeting Medicare and Medicaid. The pitch sounds preposterous to millions of ordinary working people anxious about their economic security and worried about their retirement years. But an impressive armada is lined up to push the idea--Washington's leading think tanks, the prestige media, tax-exempt foundations, skillful propagandists posing as economic experts and a self-righteous billionaire spending his fortune to save the nation from the elderly. ... This swindle is portrayed as "fiscal reform." In fact, it's the political equivalent of bait-and-switch fraud.

Defending Social Security sounds like yesterday's issue... But the financial establishment has pushed it back on the table, claiming that the current crisis requires "responsible" leaders to take action. Will Obama take the bait? Surely not. ... The program's financing is basically sound, he has explained, and can be assured far into the future by making only modest adjustments.

But Obama is also playing footsie with the conservative advocates of "entitlement reform" (their euphemism for cutting benefits). The president wants the corporate establishment's support on many other important matters, and he recently promised to hold a "fiscal responsibility summit" to examine the long-term costs of entitlements. That forum could set the trap for a "bipartisan compromise" that may become difficult for Obama to resist, given the burgeoning deficit. If he resists, he will be denounced as an old-fashioned free-spending liberal. ...

To understand the mechanics of this attempted swindle, you have to roll back twenty-five years, to the time the game of bait and switch began, under Ronald Reagan.

The Gipper's ... massive tax cuts for corporations and upper-income ranks ... launched the era of swollen federal budget deficits. But their economic impact was offset by the huge tax increase ... imposed on working people in 1983: the payroll tax rate supporting Social Security... A blue-ribbon commission chaired by Alan Greenspan worked out the terms, then both parties signed on. ...

Ever since, working Americans have paid higher taxes on their labor wages--12.4 percent, split between employees and employers. As a result, the Social Security system has accumulated a vast surplus--now around $2.5 trillion and growing. This is the money pot the establishment wants to grab, claiming the government can no longer afford to keep the promise it made to workers twenty-five years ago. ...

Follow the bouncing ball: Washington first cuts taxes on the well-to-do, then offsets the revenue loss by raising taxes on the working class and tells folks it is saving their money for future retirement. But Washington spends the money on other stuff, so when workers need it for their retirement, they are told, Sorry, we can't afford it. ...

The assault sounds outrageous and bound to fail, but the conservative interests may have Obama in a neat trap. Their fog of scary propaganda makes it easier to distort the president's position and blame him for any fiscal disorders driven by the current financial collapse. He will be urged to "do the right thing" for the country and make the hard choices... Obama's fate may depend on informing the public--now, not later...

    Posted by on Thursday, February 12, 2009 at 03:06 PM in Economics, Politics, Social Security | Permalink  TrackBack (0)  Comments (96)

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