When asked, during his Senate confirmation, why he’d consider going after Social Security to help reduce the National Debt, Bernanke quoted bank robber Willie Sutton. He said, “That’s where the money is.”
November 23, 2010
Instead of vitally needed stimulus, Washington and European governments dictate austerity.
The pretext of deficit reduction is being used to transfer more wealth to those already with too much, plus the usual canard over the urgency to save national banking systems.
In other words, make ordinary people bear the burden of bailing out banking giants responsible for the severest economic crisis since the Great Depression. How? The usual IMF solution, involving preservation of capital at the expense of workers — a package including wage and benefit cuts, less social spending, privatization of state resources, mass layoffs, deregulation, lower "onerous" taxes, maintaining corporate debt service, and harsh crackdowns against resisters.
In the 1980s, it was called Reaganomics, trickle down, and Thatcherism. Today it's destructive "shock therapy" called austerity, the same scheme pitting capital against people — disposable workers tossed out for big money's gain.
It's how predatory capitalism works, destructively for so many to enrich an elite few — snake oil peddled as an economic elixir, corrupted politicians and central bankers forcing harmful policies that, in fact, don't work.
Three years of failure showed imposed measures have hurt, not helped, and the longer they continue, the more sickness will spread and deepen, causing imposed poverty. It's why independent experts see long-term depression, rising unemployment, human deprivation, and bigger than ever bonuses for bankers until the inevitable house of cards collapses. Welcome to the new world order, phase two.
In America, the Fed furiously monitized debt. First QE I, now II, likely III and IV coming that could have worked the first time if constructively, not destructively used. An earlier article explained, accessed through the following link:
Swapping credit for toxic assets helps banks, not the economy. However, using it for productive investment works. In her September 8th Webofdebt.com article titled, "How to Reverse A Deflation: Helicopter Ben Needs to Drop Some Money on Main Street," Ellen Brown explained that:
"Running the government's printing presses to pay its bills has not seriously been tried since the Civil War, when President Lincoln saved the North from a crippling war debt at usurious interest rates by printing greenbacks (US notes, interest free). Other countries, however, have tested and proven this model more recently. They include Germany, which pulled itself out of a massive financial collapse in the early 1930s by printing a form of currency called "MEFO bills," and Australia, New Zealand and Canada, all of which successfully funded public works in the first half of the 20th century simply by advancing the credit of the nation. China, Malaysia, Guernsey, Jersey, India, Argentina, and other countries" also tried it successfully during hard times to revive their economies. The U.S. government could do this too. It could print dollars (or type them into electronic bank accounts) and spend the money on the sorts of local public projects that would put people back to work and get the economy rolling again."Why not ailing America and European ones today. Central bank money creation (credit) for public projects and other productive investments stimulates economic growth, creates jobs, and turns depression into prosperity — inflation free by keeping credit and productive investment in balance. Whenever and wherever it's been tried, it worked when done right.
Instead, sweeping austerity measures are dictated for America and Europe. Last spring, an EU summit announced a Greece bailout package, dependent on "budgetary discipline" and imposed poverty, the same IMF prescription for Latvia, Iceland, Hungary, Romania, and Ukraine. Now eurozone shock therapy, what economist Michael Hudson calls a:
"neoliberal experiment....to drastically change the laws and structure of how European society will function for the next generation. If (successful, they'll) break up Europe, destroy the internal market, and render that continent a backwater."Calling it a "financial coup d'etat," he said "bankers are demanding (and getting governments to) rebuild their loan reserves at labor's expense." Washington's using the same ugly scheme.
Throughout the West, neoliberals are empowered.
"From Brussels to Latvia, (they) aim to shrink their economies (by) roll(ing) back wage levels by 30 percent or more — depression-style levels," making Europe and America banana republics.In late September, EU countries, led by Germany, increased pressure on member states to cut deficits by lower public spending, Chancellor Angela Merkel, in fact, demanding sanctions on offenders and suspending their voting rights for continued policy breaches. At the same time, corporate taxes have been cut, continuing a burden shift to workers. Since 2000, 12 of the 27 EU countries raised VAT rates, Hungary, Denmark and Sweden now charging 25% for commodity purchases while wages and benefits are being slashed. Some new world.
Across the continent, painful worker hammering continues, Ireland the latest troubled country making headlines. On November 13, Wall Street Journal writers Neil Shah and Marcus Walker wrote: "Ireland Stirs Specter of EU Default," saying:
"Europe's debt crisis is still smoldering (months) after relative calm," showing it deceptively hid big trouble, awaiting its moment to surface. The challenges facing Ireland "show few signs of abating soon," a worrisome contagion affecting Europe's largest economies, leading analysts to wonder what shoe will drop next.Workers, of course, are most affected, spending cuts and high unemployment taking a punishing toll. More are coming, assuring greater deprivation and added impetus for increased emigration. Monthly, 1,250 students leave Ireland as well as thousands of young workers, seeing no future at home. Those remaining face growing burdens, including homeowners to avoid forclosure. One in eight mortgages is underwater. The worst is yet to come, and similar trouble affects Greece, Italy, Spain, Portugal, Britain, and elsewhere across the continent, yet policy fixes assure worse ahead, not better.
Also in America, planned austerity is the wrong solution for a sick economy, yet bipartisan support and two deficit cutting commissions back it. An earlier article explained, accessed through the following link:
It covered Obama's proposed social spending cuts, while leaving defense, banker bailouts, and other corporate subsidies intact, a prescription from hell promising harder than ever hard times for millions. On November 10, Obama's deficit cutting commission outlined its plan. The above link discussed it, a thinly veiled scheme to serve capital, not people when they most need it.
The Bipartisan Policy Center (BPC) was also mentioned, a lesser known group for the same purpose, its proposal imminent at the time. Now it's out with draconian measures as destructive as Obama's commission — proposing Social Security, Medicare, Medicaid, and other social benefit cuts, harming working households most, the way elitists always cheat ordinary people for themselves.
Co-chaired by former Senator Pete Domenici and Alice Rivlin, former director of the Office of Management and Budget and the Congressional Budget Office, it's called "Restoring America's Future," saying:
America "fac(es) two huge challenges that can only be surmounted" by bipartisan support "to curb the mounting debt (to) reinforce recovery, not impede it."Typical elitist boilerplate, then proposing punishing measures on working households for greater enrichment for themselves. They include:
- Indexing Social Security benefits to life expectancy to reduce benefits as longevity increases; in other words, "incentiviz(ing) people to work longer to compensate for lower benefits;
- Eliminating annual cost of living adjustments (COLAs), justified by claiming inflation is overstated when, in fact, it's higher, especially for retirees facing costly medical expenses;
- Over the next 38 years, "rais(ing) the amount of wages subject to payroll taxes (now capped at $106,800) to cover 90% of all wages" — suggesting bonuses, capital gains, dividends, and other executive compensation be exempt, for many, the lion's share of their earnings;
- Instituting a one-year payroll tax holiday for workers and employers, Social Security to get no funding for 12 months to save an estimated $650 billion; supposedly, future general revenue will replenish the shortfall;
- Cutting Medicare benefits, including by higher Part B premiums (from 25 to 35% of total program costs), co-pays, and fees for outpatients services; also establishing privately owned, lower-cost, health insurance exchanges to be given competitive cost advantages over Medicare — a de facto Trojan horse to replace it eventually, leaving recipients at the mercy of predatory insurers that profit by denying expensive care;
- By 2018, cutting Medicaid by the amount it grows faster than GDP, providing less care to the indigent, perhaps eventually none;
- Shielding insurers and drug giants from malpractice lawsuits by making it harder to file them; then capping non-economic and punitive damage awards, suits to be adjudicated in "specialized malpractice courts," that may, in fact, be civilian equivalents of military commissions, used to deny so-called "terrorists" due process and judicial fairness;
- Instituting a 6.5% national sales tax (called a Debt Reduction Sales Tax — DRST); like European VATs (value added taxes), they'll hit ordinary people hardest and can be incrementally raised anytime to hit harder;
- Simplifying the tax code to two brackets (15 and 27%), favoring the rich; regressively cutting the top personal and corporate tax rate from 35% to 27%, claiming it "will make the tax system more progressive;"
- Eliminating home mortgage and most other deductions and credits;
- Taxing employer provided health insurance to encourage less comprehensive coverage and make healthcare cost more;
- Freezing non-defense discretionary spending for four years, then capping it according to GDP growth — a prescription to slash social benefits, perhaps eliminating them later;
- Freezing "discretionary" defense spending for five years, then capping it with GDP growth; doing it, among other ways, by "reforming military health care;" in other words, cutting veterans' (and perhaps active duty forces') health benefits; and
- Various other schemes hitting working households hardest.
"19 Americans (elitist ones) from across the country, with diverse backgrounds and views, examined a broad range of spending and revenue options for the federal government [see story below]...We believe (their plan) provides a comprehensive, viable path to restore our economy and build a strong America for future generations and for those around the world who look to the United States for leadership and hope."More boilerplate, disguising a scheme to enrich the few while denying equal opportunity to growing millions, especially the poor, disadvantaged, needy dependents, disabled and retirees, leaving them more than ever on their own and out of luck, the "future America" none of them want or deserve.
Stephen Lendman lives in Chicago and can be reached at firstname.lastname@example.org. Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.
June 30, 2010
Less than a year after cries of “death panels” dominated headlines about town hall meetings on health care reform, a new round of town hall events was held in 19 cities, and 40 smaller get-togethers around the United States, all joined together via a sophisticated online system.
This time the target was the National Debt.
Organized by the respected AmericaSpeaks group, Saturday’s event was blandly titled, “Our Budget, Our Economy.” It attracted 3,500 people in such cities as Portsmouth, N.H, Chicago, Ill., Dallas, Texas and San Jose, Calif.
Although AmericaSpeaks director Carolyn Lukensmeyer called the event “the largest and most diverse town meeting ever held in this country,” critics of the town halls are challenging the group for “stacking the deck” toward reducing the National Debt in part by cutting Social Security and Medicare benefits.
Social Security: Elders Repond to the "Debt Panel" from New America Media on Vimeo.
From Town Halls to Halls of Power
Far from being a mere civic exercise, AmericaSpeaks will bring its town hall report to Washington’s halls of power. The group was invited to present the meetings’ nationally tabulated polling results at today’s meeting of the new National Commission on Fiscal Responsibility and Reform.
Also, Lukensmeyer will present the summary to key congressional committees, such as the Senate Budget Committee and House Ways and Means Committee.
Created by President Obama, with members appointed by the White House and Congress, the bipartisan debt commission includes 18 members of Congress plus a few prominent citizens. If 14 members agree to present a set of recommendations to Congress by their Dec. 1 deadline, chances are strong that the package will become the law of the land.
Editor's Note: One of the "prominent" citizens appointed to the debt commission is Andy Stern, president of the Service Employees International Union, represents 2.2 million healthcare workers, janitors, security officers, public employees, and other hardworking women and men in the United States, Canada, and Puerto Rico. According to the White House press leader: "As both a labor leader and an activist, he is a leading voice and aggressive advocate for practical solutions to achieve economic opportunity and justice for workers. Stern began working as a social service worker and member of SEIU Local 668 in 1973 and rose through the ranks before his election as SEIU president in 1996. He is a graduate of the University of Pennsylvania."Critics worry that the debt panel includes too many deficit hawks — both Republicans and Democrats — and that even if they concur on some tax hikes desired by the President, the potential entitlement reductions, such as by raising the age for full Social Security benefits, would inflict disproportionate harm on lower- and middle-income Americans most in need.
Another presidential appointee is Alice Rivlin, former Vice-Chair of the Federal Reserve, senior fellow in the Economic Studies Program at the establishment think tank, the Brookings Institution, and visiting professor at Georgetown University. According to the White House: "Before returning to Brookings, she served in a variety of senior public policy roles including vice chair of the Federal Reserve Board, director of the White House Office of Management and Budget, chair of the District of Columbia Financial Management Assistance Authority, and founding director of the Congressional Budget Office. She is a graduate of Bryn Mawr College and received her Ph.D. in economics from Harvard University."
Appointees, National Commission on Fiscal Responsibility and Reform:
Presidential Appointments: The President appointed former White House Chief of Staff Erskine Bowles and former Senator Alan Simpson as co-chairs of the Commission. He also appointed to the panel: Andy Stern, President of the Service Employees International Union; Dave Cote, CEO of Honeywell; Alice Rivlin, former Vice-Chair of the Federal Reserve and former Director of the Congressional Budget Office; and Ann Fudge, former CEO of Young and Rubican Brands.
Senate Majority Leader Harry Reid's Appointments: Richard J. Durbin of Illinois; Max Baucus of Montana; and Kent Conrad of North Dakota.
Senate Majority Leader Mitch McConnell's Appointments: Tom Coburn of Oklahoma; Judd Gregg of New Hampshire; and Michael Crapo of Idaho.
Speaker of the House Nancy Pelosi's Appointments: John Spratt, Jr. of South Carolina; Xavier Becerra of California; and Jan Schakowsky of Illinois.
House Minority Leader John Boehner's Appointments: Paul Ryan of Wisconsin; Dave Camp of Michigan; and Jeb Hensarling of Texas.
Ethnic communities are especially vulnerable to potential reductions. According to the Social Security Administration, for example, in 2008, 62 percent of older Latinos and 54 percent of African American seniors living on their own “relied on Social Security for 90 percent or more of their income.”
Simpson’s “Lesser People” Gaffe
Not helping much to promote civil discourse has been the debt commission’s inflammatory co-chair, former Sen. Alan Simpson, R-Wyo. Two weeks ago he said in a video that the commission is considering benefit reductions and other measures to help “the lesser people.”
Simpson’s “lesser people” gaffe — only a week after the chairman of BP remarked that the oil giant cares for the “small people” — was only his latest incendiary remark. The former senator, age 78, recently derided seniors as “greedy geezers,” who disagree with proposed cuts in social supports.
In the “lesser people” interview, Simpson repeated the false statement that the Social Security’s trust fund is nothing but a pile of worthless “IOUs,” even though he agreed in the interview that the program’s trust fund is backed by “the full faith and credit of the United States government.”
What’s more, the commission’s Democratic co-chair, Erskine Bowles, who was President Clinton’s chief of staff and is a current board member of Morgan Stanley, recently told the North Carolina Bankers' Association that if the debt panel doesn't “mess with Medicare, Medicaid and Social Security ... America is going to be a second-rate power.”
The debt panel’s heavy emphasis on spending cuts in the federal budget has prompted numerous progressive economists and experts to call on it to balance any recommended program reductions by showing the human impact — how many people cuts would affect and in what ways.
Alan Simpson: Cutting Social Security Benefits to “Take Care of the Lesser People in Society” (Transcript of the Video)
Perfect Storm for Cuts
Saturday’s AmericaSpeaks program received major funding from the controversial Peter G. Peterson Foundation. Although the foundation claims to have no say in the town hall sessions, it drew accusations from liberal critics that it influenced the content of program background materials to guide participants too strongly toward reductions in social programs.
Peterson, a Wall Street power, who was Commerce Secretary under President Richard Nixon, has aggressively militated against social-insurance programs for over three decades.
Compounding the worries of Social Security advocates that a perfect storm is brewing that could tear at America’s safety net program are international pressures on the United States from this week’s G-20 summit in Toronto.
Progressives are concerned that G-20 pressure to cut U.S. deficit spending will give the “Administration and Congress the cover they need to embrace the Commission's austerity measures,” said Maya Rockeymoore, president of Global Policy solutions and former research director of the Congressional Black Caucus Foundation.
While global finance seems remote and eye-glazing to most people who would be affected by cuts in Social Security and Medicare, conservative leaders in Germany, England and other nations are calling on the United States to slash its projected debt and secure its long-term position in global markets.
Rockeymoore notes that Social Security is not only the nation’s most successful anti-poverty program for elders, widows, children and people too disabled to work, but it is a completely separate program from the U.S. budget, and now boasts a very healthy $2.6 trillion surplus that guarantees paying its retirement and family benefits for decades to come.
Also, even conservative economists agree that cutting Medicare alone will not solve its long-range budget woes. Huge federal deficit costs stem from largely uncontrolled health care inflation that is unique to the United States among advanced economies. Health care reform passed this year does little to reign in escalating health care spending.
AmericaSpeaks Offered Limited Options
In a YouTube posting, one of Saturday’s AmericaSpeaks participants, a woman who identified herself only as Robin of Bucks Country, Penn., echoed others in saying that AmericaSpeaks provided participants with a limited set of federal budget areas and instructed them to cut $1.2 trillion in spending by the year 2025. “Our table refused,” she said.
Roger Hickey of Campaign for America's Future reported that during Saturday’s town hall meeting, AmericaSpeaks head Carolyn Lukensmeyer “had to acknowledge a rebellion in the ranks. People were demanding to have the option of voting for ‘single-payer’ [health care] reform, instead of cutting Medicare and Medicaid.” She eventually relented and announced “a complicated process of including the single-payer alternative as a write-in vote, he said.
After the final vote, though, Hickey joined other progressives in cautious optimism.
“Despite a very biased and manipulated set of options presented to participants,” he said, some winning policy choices preferred by the participants turned out to be “pretty progressive.”For example, AmericaSpeaks town hall groups voted to increase the amount of earnings that can be subject to Social Security tax among more affluent Americans. They also want to raise tax rates on corporate income and for those earning more than $1 million. And Saturday’s voters called for reducing defense spending by 10 to 15 percent, as well as for creating a carbon and securities-transaction tax.
However, they also favored cutting Medicare, reducing non-defense spending (transportation, education and so on), and raising Social Security’s full retirement age to 69.
Barbara Burt, executive director of the Frances Perkins Center, named for the original architect of Social Security, was among multiple observers who worried that raising Social Security’s full retirement age would unfairly burden vulnerable Americans, while doing nothing to increase the national debt.
“There's no reason why Social Security should even be considered in this discussion, as it is a pay-as-you-go program by law, and thus has no impact on the deficit,” she said.Still, as the debt panel’s Republicans and blue-dog Democrats close in on social entitlement programs, the stale joke uttered by Federal Reserve Chairman Ben Bernanke may resound with little laughter.
When asked, during his Senate confirmation a few months ago, why he’d consider going after Social Security to help reduce the National Debt, Bernanke quoted bank robber Willie Sutton. He said,
“That’s where the money is.”See: The Final Red Herring - The Threatened Bankruptcy of Social Security
November 17, 2010
The nation and its workers remain in grave economic distress, but it's a bull market for alarmist Washington insiders coming up with draconian solutions to projected fiscal problems that might or might not arise years from now.
A second group came out with a deficit reduction plan Wednesday, exactly a week after the two chairmen of President Obama's fiscal commission floated their controversial draft recommendation. (A third group also has some advice as well.)
This latest group hails from the Bipartisan Policy Center, and its signature proposal may end up being a whopping 6.5 percent national "Deficit Reduction Sales Tax" -- just the sort of thing that is devastating to people who live on a budget while not really mattering so much to the rich.
In its quest to control health care costs, the group also recommends significant increases in Medicare premiums in the short term. And after 2018, Medicare beneficiaries would either be forced to pay out of pocket for any and all cost increases more than one percent greater than the growth rate of the economy -- or they would be invited to leave the government program entirely and find private insurance instead. That would no longer be Medicare as we know it -- or as future retirees expect it.
The group's next most major recommendation for cutting healthcare spending is the imposition of an excise tax on the manufacture and importation of beverages sweetened with sugar or high-fructose corn syrup.
Like the plan from presidential commission chairmen Erskine Bowles and Alan Simpson, this one also would significantly reduce Social Security benefits for most retirees. It doesn't technically call for an increase in the retirement age, like Bowles-Simpson does, but it accomplishes essentially the same thing under another name.
This plan would "index the benefit formula for increases in life expectancy" starting in 2023. In both cases, the net result would be lower monthly benefits. It would also dramatically reduce benefits by changing the calculation of cost-of-living adjustments, and by chopping checks for top quarter of beneficiaries.
Meanwhile, much like Bowles-Simpson, it would actually lower income tax rates for the rich (albeit while removing hugely lucrative deductions). There would be two individual income tax rates, 15 percent and 27 percent, instead of the current six rates that range up to 35 percent. The corporate rate would drop to 27 percent from 35 percent. Capital gains would be taxed at a higher rate, as ordinary income.
Almost all deductions would be wiped away, including the deduction for employee-paid health insurance. The mortgage interest, charitable donation and retirement savings deductions would be replaced with a capped 15 percent credit.
And unlike the most dramatic of the tax options put forth by Bowles-Simpson, this one would not eliminate the earned income tax credit or the child care tax credit, two crucial boons to low earning families.
But the latest proposal is in some ways even more regressive and cowardly than the earlier one, most notably in its imposition of the sales tax and its cloaking of what would be staggering cuts in government programs under the guise of freezes and caps to be enforced by automatic triggers. Discretionary government spending would be frozen at 2011 levels, ostensibly saving $2.1 trillion by 2020.
In the plan's one acknowledgment of the current jobless recovery, the group endorses a one-year payroll tax holiday. Allowing both employees and employers to keep the 6.2 percent Social Security tax they would otherwise pay on salaries would put more money in employees' pockets and, by removing what is essentially a tax on employment, would create 2.5 to 7 million new jobs over two years, according to the group's report.
Former Republican Senator Pete Domenici -- who co-chaired the panel along with former Federal Reserve Vice Chairman Alice Rivlin -- introduced the report on Wednesday using cataclysmic rhetoric.
"We confront a quiet killer that is eating away at the foundation of America," Domenici said -- twice, in fact, just to make sure reporters got it all down. "Every part of government must share in this sacrifice so this quiet killer will not eat us alive before we have a chance to fix what is our doing," he said.
In a Washington Post op-ed this morning, the duo described theirs as "a bold, comprehensive plan." Rivlin insisted that the end result of all the tax changes would result in a system that is "slightly more progressive," as well as "definitely simpler and pro growth." But Dean Baker, the co-director of the progressive Center for Economic and Policy Research, told HuffPost Wednesday that for the super-rich, what matters most is the tax rate.
"My best guess is that the vast majority of these people come out way ahead," he said.And Baker took issue with the whole thrust of the report.
"It's silly and misleading because the deficit problem, contrary to what they say, is a healthcare problem."His group's healthcare budget deficit calculator allows you to see that if U.S. healthcare costs were comparable to those in other countries, there would not be a deficit problem.
But the new report offers no solutions there.
"They don't propose reducing healthcare costs, they propose reducing what the government pays for healthcare. And it's really a fundamental dishonesty," Baker said.
The plan also doesn't consider any sort of Wall Street financial speculation tax, or financial transaction tax.
Baker said he also doesn't get either report's focus on cutting tax rates for the rich.
"I'm just amazed that here we have this 'huge deficit problem' and all they seem to be able to think about is how to reduce tax rates," he said.
All three of these deficit-reduction plans are the product of a particular class of Washington policymakers who consider it a sign of their seriousness that they worry about imaginary problems rather than real ones.
Perhaps, with federal borrowing costs at their lowest levels ever, what we need are not more deficit commissions, but a growth commission or a jobs commission.
UPDATE at 2:19 PM ET:
"Neither plan recognizes that America needs recovery and prosperity, not austerity," Tamara Draut, a vice president at Demos, a progressive policy group, said in a statement about the Domenici-Rivlin and Bowles-Simpson plans. "Growing the economy again through public investment is the fastest, fairest way to address our fiscal challenges.
"Of the many fiscal policy proposals offered thus far, only one -- Rep. Schakowsky's Nov. 16 plan -- has asked the core question that will determine the extent of American greatness in the 21st century: what will it take to grow and secure the middle class?"
UPDATE at 5:42 PM ET
Deficit hawks everywhere are celebrating!
A (not very bipartisan) press release just issued by the Bipartisan Policy Center summarizes the praise its plan has received from the Chamber of Commerce, the Concord Coalition, the Committee for a Responsible Budget and the Peter G. Peterson Foundation.
President Obama at the White House with the chairman of his fiscal commission, Alan K. Simpson, left.