saving Social Security, again

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Dean (Plunder and Blunder) Baker wants us to "Stop Baby Boomer Bashing" by protecting Social Security and Medicare. He warns us that "[w]orkers are likely to be especially fearful about the prospects of getting their Social Security benefits now, due to an all out assault on the program financed by billionaire banker Peter Peterson:"

Peterson has spent much of the last two decades trying to cut Social Security, Medicare, and other benefits for the elderly. He recently contributed a billion dollars to a foundation bearing his name that is primarily committed to this goal.

Peterson's investment has paid off both in exposure from the media and, more importantly, attention from many members of Congress and their staffers. There are now dozens of senators, members of Congress and staffers running all around Capitol Hill crafting creative new ways to cut Social Security. Baby boomers are right to fear that Peterson and his crew will take away their benefits.

Baker's caution is echoed by The Nation's William Greider, who observes in "Looting Social Security" that an "impressive armada" of "Washington's leading think tanks, the prestige media, tax-exempt foundations, skillful propagandists posing as economic experts and a self-righteous billionaire" [Peterson] are arguing that there's no money left for retiring boomers:

These players are promoting a tricky way to whack Social Security benefits, but to do it behind closed doors so the public cannot see what's happening or figure out which politicians to blame. The essential transaction would amount to misappropriating the trillions in Social Security taxes that workers have paid to finance their retirement benefits. This swindle is portrayed as "fiscal reform." In fact, it's the political equivalent of bait-and-switch fraud.

Greider writes that "[t]o 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." Here's his long version:

The Gipper's great legislative victory in 1981--enacting 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 that Congress imposed on working people in 1983: the payroll tax rate supporting Social Security--the weekly FICA deduction--was raised substantially, supposedly to create a nest egg for when the baby boom generation reached retirement age. A blue-ribbon commission chaired by Alan Greenspan worked out the terms, then both parties signed on. Since there was no partisan fight, the press portrayed the massive tax increase as a noncontroversial "good government" reform.

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.

Here's the short version:

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.

When noting the media's complicity in Peterson's "media blitz," Greider observes that "[m]ost reporters are too lazy (or dim) to check out the facts for themselves, so they simply repeat what Peterson tells them about Social Security." Gregory Clark writes in The Atlantic that the rest of us need not let their failures affect our ability to understand economic events:

The debate about the bank bailout, and the stimulus package, has all revolved around issues that are entirely at the level of Econ 1. What is the multiplier from government spending? Does government spending crowd out private spending? How quickly can you increase government spending? If you got a A in college in Econ 1 you are an expert in this debate: fully an equal of Summers and Geithner.

That's good news for the economic layperson, but rather less so for those who lean too heavily on the chattering classes for their understanding of the news.

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This page contains a single entry by cognitivedissident published on February 19, 2009 10:44 PM.

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