Why We Have A Deficit

Deficit theater is coming to DC tomorrow, with a well-funded “fiscal summit.” The plot summary is that we have Deficit Trouble – Right Here In River City! so to fix it we need to cut Social Security and Medicare and the things democracy does for We, the People — while cutting taxes on the rich and their corporations to make us more “business-friendly.” (This musical is sometimes billed as “Simpson-Bowles” but it’s the same old song.)
All of this deficit hysteria today – when just over ten years ago we had such a large a budget surplus that we were projected to pay off our entire debt in … ten years! That’s right, Ten Years Ago We Were Paying Off The Nation’s Debt. But Then We Elected Obama.,

Just ten years ago this country was running huge surpluses and paying off its debt. But then we elected Obama and all hell broke loose. Oh, wait…
Between the time ten years ago when we had big surpluses and were paying off the debt and now when we are told the “Obama spending and deficit” mean we have to cut back on the things We, the People do for each other, something happened. Something changed. The things that happened, the things that changed, are being ignored in the current DC discussion about what we need to do to fix things.

Something happened. We had a surplus, and it was replaced by massive deficits. The last Bush budget year had a deficit of $1.4 trillion!

Why We Have A Deficit

What happened under Bush? We cut taxes on the rich and doubled military spending. (And started wars.) And don’t forget collapsing the economy, forcing people onto unemployment and food stamps. That is why we have a deficit. We have a deficit because of tax cuts for the rich, huge military budget increases and the consequences of deregulating corporations.
Here are some questions for tomorrow’s deficit theater:

  • How large was the country’s yearly budget deficit and total debt in the “Eisenhower/Truman” decades when the top tax rate was 90%?
  • Today we have an “infrastructure deficit” – the amount needed to repair our country’s roads, bridges, sewers, etc. – of somewhere upwards of $1.6 trillion. Was our infrastructure kept in good repair before the top tax rates were cut?
  • Concentration of wealth is long recognized as a threat to democracy, and now we are seeing a low-wage, everything-to-the-top economy with the greatest ever concentration of wealth going to a few at the top. Was the problem of wealth concentration increasing or decreasing before the top tax rates were cut?
  • When top rates were high people couldn’t take home vast fortunes in a single year. When it took several years to make a fortune did corporations depend on long-term or short-term thinking? Did the executives of corporations care if the infrastructure and communities their companies depended on were in good shape? Did large corporations fleece customers and exploit employees for quarterly returns as they do now?

How We Fix The Deficit

How do we fix this? Doesn’t it make sense to look at what caused the deficits and fix that? There actually are budget plans that get rid of the deficit without cutting back on the things democracy does for We, the People. Here is a post about one of those budget plans: The People’s Budget Balances The Budget — Why Isn’t It Part Of These “Deficit” Talks? Here is a post about another budget plan that fixes the deficit without cutting the thing democracy does for us Every Progressive Should Know About The “Budget For All”
So we know why we have a deficit, and we have realistic budget plans that undo the damage, maintain the things that democracy does for We, the People and invest in growing our economy. So why aren’t these plans part of the big DC deficit discussion? Maybe progressive plans that cut the deficit are not part of the DC deficit discussion because cutting the deficit isn’t really the point. This Deficit Story Can’t Be Repeated Often Enough!,

So we went from big surplus to huge, huge deficits. Bush said it was “incredibly positive news” when we went back into deficit spending. He said it was good news because it continued the plan to use debt to force the government to cut back. He said that. It was the plan. (Don’t take my word for it, click the links.)
The Reagan people said it too, back when they started the massive deficit spending. It was the plan: force the country into massive debt, “starve the beast,” and use that to force the government out of business, or at least to be “small enough to drown in a bathtub.” They forced the tax cuts and Reagan said this was “cutting the government’s allowance.” The point was to use revenue cutbacks to force government to shrink, to get out of the way of the 1%.

A Golden Oldie

From Dear Deficit Commission, It’s Not Hard: (Click through to see bigger charts)

Dear Deficit Commission,
It’s not hard to figure out why we have a huge deficit. It’s so easy I don’t have to use words. Here are some pictures:
Clinton_Bush_Deficit
Bill Clinton raised taxes on the rich. Bush cut them.
Now, about that huge national debt…
TopRates_vs_Debt_Chart
The second chart kind of explains itself. The third chart can help you find a place to get some money:
Defense-Budget
(Note: There is no more Soviet Union.)
In case that isn’t clear enough, try this:
Defense Spending and Debt chart
Let me know if you still have any questions.

We had a budget surplus. We were paying off the debt. Then something changed. If you want to fix the deficits, change it back.
Don’t fall for it. Deficits were the plan. Run up the borrowing, then come back with a scare campaign that stampedes people into accepting cuts in the things democracy does for We, the People. It was the plan.
If You Happen To Be In DC Tomorrow: May 15: Stand Against Austerity:
May 15, 2012 at 1 p.m. (Program starts 1:30 p.m.)
In Front Of the Peter G. Peterson Foundation Fiscal Summit
1301 Constitution Avenue NW, Washington, D.C.
Here’s one of those charts again, larger:

TopRates_vs_Debt_Chart

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Simpson-Bowles Zombie Returns

President Obama and many Democrats spent much of 2011 talking about deficits instead of doing something about jobs. Now, a too-close election is on the horizon (too-close because of spending 2011 talking about deficits instead of doing something about jobs) and we’re being forced back to talking about deficits instead of jobs — by a Democrat!
Senate Budget Committee Chairman Kent Conrad says he is going to introduce the “Simpson-Bowles” deficit plan as his fiscal year 2013 budget resolution. This is a plan put forward by Alan Simpson, a retired Republican Senator who hates Social Security, and Erskine Bowles, a member of the Board of Wall Street’s Morgan Stanley. So here we are once again with the same old same old plan from the same old same old elites. Namely: cuts in Social Security and other things We, the People do for each other, combined with even more tax cuts for the rich. This austeridiocy plan to grow the economy by taking money out of the economy is a billionaire-backed zombie that never dies.
CNN: Bowles-Simpson back on table,

A key senator said Tuesday he would try to revive the so-called Bowles-Simpson plan as a starting point in negotiations over a long-term debt-reduction plan.
Democrat Kent Conrad, the Senate Budget Committee chairman, announced he would present the plan as his opening bid at the committee’s budget mark-up on Wednesday.

Murdoc’s (FOX) WSJ: Conrad’s Budget Surprise: Simpson-Bowles,

A key senator said Tuesday he would try to revive the so-called Bowles-Simpson plan as a starting point in negotiations over a long-term debt-reduction plan.
… The original Bowles-Simpson plan would reduce deficits by at least $4 trillion over 10 years by cutting defense and discretionary spending, curbing federal entitlement costs and reforming the tax code.

“Reforming” the tax code as used here means lowering tax rates for the rich and corporations, getting rid of a number of deductions to make it look like it isn’t such a big tax cut and then later putting back lots of new deductions and breaks for the rich and corporations.

Now Mr. Conrad could try to force the first Senate vote on the measure, though it would likely first come from the members on his committee. Mr. Conrad was on the Simpson-Bowles commission and voted for the plan in 2010. He’s also on the so-called Gang of Six lawmakers looking for a legislative path to put the proposal into law. The plan was originally designed by former Republican Sen. Alan Simpson of Wyoming and former Clinton White House Chief of Staff Erskine Bowles.

Push It Through After Election?
Citizens don’t get to vote on austerity plans.
This time they’s going to try to get this austerity plan through when few are paying attention: after the election but before the newly elected Congress comes in. This way democracy won’t get in the way, and the public doesn’t get a chance to react and hold legislators accountable. This might sound rather like the Greek austerity plan to cut working people’s wages, cut the things the Greek government does for its people, lay off public employees, and especially yo sell off the things the public owns and operates so a wealthy few can profit.
When the Greek Prime Minister proposed letting the public vote on this austerity plan he was removed, and bankers took control of the country, this is how it went:
Nov. 1, 2011: Greek PM puts bailout deal to public vote
Nov. 2: Greece sticks to bailout vote, as U.S., Europe weigh options
Nov 3: Greek prime minister abandons referendum on Greek debt plan
Nov. 9: Greek prime minister set to resign
Nov. 10: Ex-banker Papademos is new Greek prime minister
Ezra Klein talked with Conrad about his budget plan, and reports on the conversation in the Washington Post, Can Simpson-Bowles really pass the Senate?,

I’ve heard from some of my Republican colleagues who … said you’re doing exactly what needs to be done but we’re not going to be able to do something like this until after the election. And I think that’s true for many Democrats as well. … Simpson-Bowles put the vote of the commission after the 2010 election to try and insulate it from politics as much as possible. That’s what we’re trying to do here … I don’t expect a vote after the election.
… We should be swift to say to people, however, that compared to current law, it’s a $1.8 trillion tax cut.

Grand Bargain – Till They Go Back On The Deal
Aside from the whole subvert-democracy thing where they decide this after the election so no one can be held accountable, the record for “deals” is not good. The “debt-ceiling” hostage deal finally ended with Republicans agreeing to “sequestration” that includes military spending cuts. But it hasn’t worked out that way:
TPM: Bait And Switch: GOP Leaders Renege On Debt Limit Deal Defense Cuts
Oh, and if you really do want to do something about the deficit, think about this: Jobs Fix Deficits!
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Why Do So Many Elites Hate Social Security?

This week there was another big attack on Social Security by another elite. This time the attack comes from an elite columnist, other times it comes from Wall Street types, wealthy CEOs or the kind of politicians that have been in DC way too long. These attacks never come from people who depend on these programs (i.e. almost all of us.) Why do the privileged elites hate Social Security so much?

Robert Samuelson wrote this week in the Washington Post, Would Roosevelt recognize today’s Social Security? Samuelson writes that Social Security, “has become what was then called “the dole” and is now known as “welfare.” ” He discusses a book that, he writes, “shows how today’s “entitlement” psychology dates to Social Security’s muddled beginnings.”

Entitlements

Elites hate “entitlements” — those things we all are entitled to as are citizens in a We-the-People democracy. Democracies are based on “we are in this together” and “watch out for each other.” Plutocracies are based on rule by the elites. These elites especially hate what Samuelson calls “entitlement psychology” — a state of mind in which 99% of us forget our place and get all uppity about being citizens in a democracy and the things that entitles us to.

Samuelson’s core attack on Social Security is that there is no trust fund, that the money has been spent, and it is just a program where working people pay for the retirement of older people,

Millions of Americans believe (falsely) that their payroll taxes have been segregated to pay for their benefits and that, therefore, they “earned” these benefits. To reduce them would be to take something that is rightfully theirs.

And, he restates, while people think they are entitled to their Social Security benefits it really is just “welfare,” writing,

What we have is a vast welfare program grafted onto the rhetoric and psychology of a contributory pension. The result is entitlement.

The “rhetoric” and “psychology” of “entitlement.” Public pride in We-the-People democracy. Gotta stamp that out!
(Samuelson, for some reason, does not talk about how the military budget trust fund is depleted and we need to cut back on the trillion-or-so we will spend this year, how it is bankrupting us, etc. Oh, wait, there isn’t a trust fund at all for military spending… we just spend it.)

Dean Baker Responds

Dean Baker answered Samuelson, writing in Robert Samuelson Shows that the Post Has no Fact Checkers on Its Opinion Pages,

Social Security and Medicare are hugely important for the security of the non-rich population of the United States. For this reason, Robert Samuelson and the Washington Post hate them.

As we know, this is a question of basic political philosophy. In the view of Samuelson and the Post, a dollar that it is in the pocket of low or middle class people is a dollar that could be in the pocket of the rich. And Medicare and Social Security are keeping many dollars in the pockets of low and middle class people.

Regarding Samuelson writing that the funds were not segregated, and have been spent,

Of course Samuelson is 100 percent wrong here. Payroll taxes have been segregated. That is the point of the Social Security trust fund and the Social Security trustees report. These institutions would make no sense if the funds were not segregated.

Samuelson is welcome to not like the way in which the funds were segregated, in the same way that I don’t like the Yankees, but that doesn’t change the fact that the Yankees have a very good baseball team. Since its beginnings, the government has maintained a separate Social Security account. Under the law, no money can be paid out in Social Security benefits unless the Trust Fund has the money to pay for them.

In this sense, the funds are absolutely segregated. Samuelson doesn’t like this, but why should any of the rest of us care? The rest of the piece shows the same dishonesty and lack of respect for facts.

Jared Bernstein Responds

In WaPo WAY Off on Social Security Jared Bernstein writes,

Here are the relevant facts about Social Security’s future (as we at CBPP see them):

–The trustees estimate that the combined Social Security trust funds will be exhausted in 2036 —a year earlier than they forecast in last year’s report.

–After 2036, Social Security could pay three-fourths of scheduled benefits using its annual tax income [Samuelson implies all benefits expire in three years!]. Those who fear that Social Security won’t be around when today’s young workers retire misunderstand the trustees’ projections.

–The program’s shortfall is relatively modest, amounting to 0.8 percent of GDP over the next 75 years (and 1.45 percent of GDP in 2085). A mix of tax increases and benefit modifications — carefully crafted to shield recipients of limited means and to give ample notice to all participants — could put the program on a sound footing indefinitely.

–The 75-year Social Security shortfall is only slightly larger than the cost, over that period, of extending the 2001 and 2003 tax cuts for the richest 2 percent of Americans (those with incomes above $250,000 a year). Members of Congress cannot simultaneously claim that the tax cuts for people at the top are affordable [or like the Ryan budget, add trillions more in tax cuts] while the Social Security shortfall constitutes a dire fiscal threat. And the shortfall is well under half the cost over 75 years of making all of the 2001 and 2003 tax cuts permanent.

Elites Hate It, Hate It, Hate It

At Balloon Juice, the first comment following John Cole’s post, It Will Never Make Sense To Me nails the real reason the elites hate Social Security so much. Cole writes in the post that it will never make sense to him …

Why our elites and media elites have such sheer contempt and hatred for social security. It’s there for everyone! It’s a solid government program which gives everyone the peace of mind that no matter what, there will be some money available for you to take care of yourself in your most vulnerable years. It’s such a miniscule portion of the taxes we pay, and for the ultra-rich screamers who hate social security the most, it’s a negligible portion of their income, and it’s capped! It’s not money wasted on fraud and abuse, it’s extremely efficient with the kind of overhead any charity or organization in the world would die to achieve, and it’s just an amazing program.

Actually that’s the reason they hate it. But the first commenter nails it, writing,

They hate it because it works; Social Security is proof that government is capable and competent. That is why it MUST be destroyed.

For elites this is the problem. Government works, and that tells We, the People that we don’t have to depend on elites. That really is why the elites hate Social Security: Because it works.

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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AARP: Social Security Should Not Be Part Of Deficit Discussion

Social Security does not contribute to the deficit in any way. The government has borrowed money from the program, not the other way around. Complaints about the need to come up with money to pay for people retiring are because Republicans used Social Security money to give tax cuts to the rich, and now that the money is supposed to be paid back so it can fund people’s retirements — which means getting the money from where the money went — they are trying to make people think the greedy old people shouldn’t be paid.
AARP: Social Security Should Not Be Part Of Deficit Discussion.
Here are facts: Social Security has a huge trust fund, and is self-funded. (Compare that to the huge military budget!) It is not in any kind of “trouble.” The propaganda that it is “going broke” is part of a strategic plan hatched by corporate conservatives to prepare the public for accepting the dismantling of the program, nothing more. I have written about this many times. Here is one post that lays this out.
AARP had to be pressured by progressives to stand up for Social Security. From the story,

Three progressive organizations — Social Security Works, Credo Action and the blog FireDogLake.com — launched campaigns aimed at pressuring AARP to stand up for Social Security after HuffPost reported that the elderly lobby was planning to host a high-level “salon-style conversation” with deficit hawks and advocates of cutting Social Security. Tens of thousands — including thousands of AARP members — signed petitions urging AARP not to support benefit cuts.

Cuts and Consequences – How Budget Cuts Hurt The Economy

Is smaller government really better for the economy? Conservatives chant that taxes and government “take money out of the economy” and we need to “cut and grow,” meaning if government spending is cut way back the economy will grow as a result. Europe’s conservatives are also forcing cuts in the things their governments do for regular people, claiming “austerity” will bring “confidence” that grows their economies. How is this experiment working out? What are we learning about the effect on the larger economy when government is cut?
What Does Government Do?
Almost everything the government does is because it needs to be done. We need roads, bridges, schools & colleges, dams, courts, police & fire departments, water management, etc. (We can discuss the need for military spending another time.)
These are all needed and contribute to the functioning of the economy. So if government is cut back and doesn’t do something that is needed, then how does it get done? Or does it just not get done? Either way, the real question we should be asking is what is the effect on the larger economy when our government cuts back on or stops doing needed things? If you save the “government” a bit of money but cost the economy a lot of money, are you saving money? Or are cuts in government really just shifting and even increasing the costs in the larger economy of doing these things?
Who Is Our Government For?
In the United States, our Constitution says that government is supposed to be of, by and for We, the People. The country was established after the colonists rebelled against the aristocracy of England — a few people who had all of the wealth and power and would not let the colonists have a say in how things were run and who would benefit. So they fought the Revolutionary War and established a country where “We, the People” all have an equal say, and to “promote the general welfare.” In other words, a country that aspires to be of, by and for the good of all of us.
So cutting back on government means cutting back on We, the People doing things for the good of all of us. It means cutting back on the things we have a say over. It means relinquishing the wealth and power that we hold in common to … well, just where does our common wealth and power go if our government is cut back?
Medicare, For Example
Republicans say we need to cut back on what the government spends on Medicare. But if you cut Medicare the health problems of elderly people and the larger problem of fast-rising health care costs in the larger economy don’t disappear. In fact, both problems just get worse.
The “Ryan Budget” that Congressional Republicans voted to approve actually converts Medicare into a program that gives seniors a voucher that pays for part of a private medical insurance policy that seniors have to shop for. The Center for Economic and Policy Research (CEPR), in Cost of Medicare Equivalent Insurance Skyrockets under Ryan Plan, took a look at that plan and explains what happens to the cost of health care. Summary: it shifts the costs to us, except each of us ends up paying as much as seven times as much as the same care costs under Medicare. From the CEPR explanation:

[The Republican] plan to revamp Medicare has been described as shifting costs from the government to beneficiaries. A new report from the Center for Economic and Policy Research (CEPR), however, shows that the [Republican] proposal will increase health care costs for seniors by more than seven dollars for every dollar it saves the government, a point missing from much of the debate over the plan.
… In addition to comparing the costs of Medicare to the government under the current system and under the [Republican] plan, the authors also show the effects of raising the age of Medicare eligibility. The paper also demonstrates that while [the Republican plan] shifts $4.9 trillion in health care costs from the government to Medicare beneficiaries, this number is dwarfed by a $34 trillion increase in overall costs to beneficiaries that is projected …

Repeat, the Republican plan to cut Medicare would cost the larger economy seven times as much as it cuts government spending.
Social Security, For Example
Conservatives have been trying to cut or gut Social Security for decades. While this might mean government has to pay out less of what is owed to seniors, such cuts would have a negative effect on the larger economy.
Social Security allows working people to retire with at least a minimal income. If this is cut many could not retire for many more years (if ever), which would increase the unemployment rate because their jobs would not open up. The same is true as the retirement age is increased – fewer job openings. If it is cut, the spending (on cat food) at local grocery stores and other necessities is reduced by the same amount. And the effect on children of retirees is increased, if they contribute to make up the difference.
This is why cutting Social Security or raising the retirement age only shifts costs onto the larger economy, dragging it down (and cruelly hurting our elderly).
Cutting Disease Control, For Example
One of the clearest examples of the way government helps us all, rich and poor, is the government’s Center for Disease Control (CDC). One of the jobs of the CDC is to help prevent the spread of infectious diseases. If an epidemic is spreading and killing people it doesn’t matter if those people are rich or poor. And if a serious outbreak spreads this can damage the economy as people are too sick to, or decide not to show up for work. So of course cutting back the budget of the CDC could cause damage to the economy in any given year and is certain to cause damage eventually. (The CDC budget was cut back 11% last year.)
Budget Cuts Hurt The Economy
The above are only a few examples.
A government budget cut is like a huge tax increase on regular people because it increases what each of us pays for the things government does — or forces us to go without. This is because cuts in government spending don’t actually cut the cost or the need for those things, they just shift those costs onto the larger economy. But because these shifts attack the economy-of-scale, transparency, integrity and public-good management that government provides, they almost always increase the costs and harms to the larger economy.

  • As government health care is cut (or not provided in the first place) each of us must take on those costs on our own, and as demonstrated, pay up to seven times what the same care would/could have cost.
  • As infrastructure maintenance and modernization is cut, our economy becomes less competitive, unemployment increases and our wages and spending power fall.
  • As spending on education is cut, our costs of educating ourselves and our kids increase. College costs soar. And the overall education level of our people will decrease, making our country less competitive in the world.
  • As environmental regulation and enforcement is cut the costs of the resulting health problems and cleanups increase and our quality-of-life will decrease.
  • As enforcement of labor laws is cut, our wages and protections fall.
  • As etc. is cut, the costs of etc. are shifted to the larger economy, and the total costs of accomplishing etc. actually increase.

As budgets are cut, the costs are increased and shifted to the larger economy.
Austerity In Europe
Several countries in Europe are severely cutting budgets. The result is that the economies in those countries are slowing. Reuters: Euro zone’s slump in late 2011 points to recession.

A collapse in household spending, exports and manufacturing sucked the life out of the euro zone’s economy in the final months of 2011, the EU said on Tuesday, showing the scope of the downturn that looks set to become a fully fledged recession.
… The European Commission forecasts a recession of the same magnitude this year. That would be the euro zone’s second contraction in just three years as the bloc’s debt crisis drags on a region that generates around 16 percent of the world’s economic output.
[. . .] The battle between austerity and growth was already evident in the fourth quarter. Euro zone government expenditure fell 0.2 percent, while industry contracted 2 percent and imports were down 1.2 percent, making for some of the worst readings since the world was dragged into the 2008/2009 financial crisis.

The austerity experiment is making the case: cutting government budgets just shifts costs and hurts the larger economy.
Who Benefits From Cuts?
Governments dance with the ones that brung ‘em. Whoever controls government is naturally going to direct government to benefit them – and only them. We-the-People democracies do things for We, the People; plutocracies do things for plutocrats. So when, as now, plutocrats are running government, you will get a government that only does things that benefit plutocrats. And when We, the People were running government, we did things that benefit We, the People — all of us.
The plutocrats now demanding government budget cuts obviously understand that this will result in slowing economies, but don’t care — they are already fabulously wealthy. What they want is reduced taxes and increased power. They say that cuts will bring growth, in order to persuade people to accept cuts. Blocking governments from providing things that don’t directly benefit them and only them is a means to that end. And cutting government cuts government’s ability to reign them in.
What We, the People Want
When We, the People are running government we insist that government increases overall prosperity. We demand laws and regulations that bring us good wages, benefits and safe working conditions. We demand good public schools & colleges, parks, safety and opportunities for our smaller businesses to fairly compete. We insist on a clean environment, consumer protections, regulations on business behavior, rules against monopolies and (after learning the hard way) rules that keep banks from taking risks that threaten the economy. And we want controls and limits on the use of wealth and power by the 1%ers.
Plutocrats — the 1%ers — of course see all of these protections of regular people as hindering their power and ability to make as much for themselves as they can grab. Plutocrats just don’t see how public parks benefit them. They just don’t see why they should have to pay for public schools. What good do public schools do them, today? Plutocrats don’t see why it should be anyone else’s problem if old people don’t have health care — health care for seniors certainly isn’t their problem.
They explain that things for anyone other than themselves and their interests just “wastes money.” Things for regular people are not their problem. And when plutocrats run government, it isn’t their problem.
The fact is a public park “costs money.” Schools and infrastructure are just more “government spending.” Things like that just “redistribute income” because taxes on the income of plutocrats is used to build that park or school that anyone can use. The basic message of the plutocrat is, “Why should I pay for anything that benefits you?”
You and I might argue that this kind of austerity, cutting schools, Medicare, infrastructure, etc. slows the larger economy, hurting the plutocrats, too. But that doesn’t hurt the ones who are already rich, which is the definition of plutocrat. It puts more in their pockets, today, by lowering their taxes. They want out of taxes and they don’t want government (We, the People) interfering with their power.
What We, The People Need
Democracies where We, the People make decisions demand things that are good for regular people and their small businesses: pensions, health care, modernized infrastructure, good schools & colleges, child care, regulations on the behavior of giant corporations… This is why strong democracies have proven to be more prosperous for regular people and for longer than other forms of government that leave people on their own against the wealthy and powerful and drive all of the income and wealth to a few at the top. This is why so many regular working people in our country were so much more prosperous in the decades before the plutocratic 1%-favoring policies of Reagan steered us toward plutocracy.
Understand what is going on here. Demands for budget cuts and austerity are really about shifting from democracy to a system where regular people — the 99% — are on their own, up against the wealthy and powerful. This is about shifting from a system where regular people can be prosperous together, to a system where a few — the 1% — have all the wealth and power.
We, the People need democracy restored. We need to be in charge again, before the economy can improve.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Another Washington Post Social Security Mistake

See if you can spot the big mistake (giving them the benefit of the doubt) in this Washington Post story: Payroll tax cut raises worries about Social Security’s future funding:

This year, the Social Security system projects that it will pay out $46 billion more in benefits than it will collect in cash. It made up for the shortfall by redeeming Treasury bonds bought in years when there were cash surpluses.

Here is the mistake, thanks to Dean Baker: Social Security Is NOT Selling Government Bonds,

This is not true. The Social Security trust fund is projected to earn $114.9 billion in interest on the bonds it holds. It will use a portion of these earnings to pay current benefits. It will not be redeeming its bonds.

Social Security has a huge trust fund — if you think $2.6 trillion is huge. That trust fund is invested in US Treasury Bonds, and earns interest.
When you hear that Social Security is “in trouble’ or “going broke” you are hearing from people who ignore this huge, huge trust fund and the interest it earns. This trust fund, along with the money people pay in, means that Social Security has enough to pay full benefits until 2037. Even then it will still be able to pay everyone more than they receive today. (Yes, more, because of cost-of-living adjustments.)
One of the problems with Social Security is that the “cap” — the top income that is taxed to pay into the fund — was calculated in the 80′s, and they didn’t foresee that all income gains after the 80s would only go to those at the top, where the income isn’t taxed to pay into the fund. So, since the 80s, as more and more of the income gains went to the top few, the Social Security fund started to not have quite enough to go on forever. So now it it projected to only last until 2037. This is, of course, easily fixed — as are so many of our country’s problems — by asking those at the top to pay in a little more.
So … will I be attacked with pepper spray and batons for suggesting that the rich should pay back a bit more?
See also, Jan 2010, Washington Post Joins Wall Street Sneak Attack On Social Security.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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People Want Jobs – Congress Focused On Taking Money Out Of Economy

This situation of crony government protecting the connected rich while people are in the streets demanding change is more and more reminiscent of Egypt under Mubarak. In the real world tens of thousands are in the streets around the country demanding taxes on the rich and an end to corporate rule, as a new report lists profitable companies that pay no taxes at all. Today’s jobs report is not enough to even keep up. But in the Congress Senate Republicans filibuster another jobs bill and the “super committee” is looking at how much to take out of the economy and out of the things We the People do for each other — in order to keep taxes low for the rich and their giant corporations.
Filibustering Jobs
Yesterday Senate Republicans again filibustered a jobs bill – a plan to hire people to repair our country’s infrastructure. This is work that has to be done, and right now millions of people need work. But Republicans filibustered this bill. The corporate-owned mainstream media, however, largely refused to tell the public what is happening, instead blaming “the Senate.” The Washington Post headlined, Senate blocks $60 billion infrastructure plan, another part of Obama jobs bill. Politico blamed “both parties,” with Both parties block jobs bills. MSNBC: Senate blocks $60B part of Obama jobs plan. CNN: Competing infrastructure spending measures fail in Senate.
So the big-corporate media leads the public to blame “the Senate” and government, providing few clues that tell people where to apply the pressure that makes representative democracy function.
Big Corps Paying No Taxes, Not Just Low Taxes
From Citizens for Tax Justice report: Corporate Taxpayers & Corporate Tax Dodgers, 2008-2010,

280 Most Profitable U.S. Corporations Shelter Half Their Profits from Taxes.
“These 280 corporations received a total of nearly $224 billion in tax subsidies,” said Robert McIntyre, Director at Citizens for Tax Justice and the report’s lead author. “This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit.”

  • 30 Companies average less than zero tax bill in the last three Years, 78 had at least one no-tax year.
  • Financial services received the largest share of all federal tax subsidies over the last three years. More than half the tax subsidies for companies in the study went to four industries: financial services, utilities, telecommunications, and oil, gas & pipelines.
  • U.S. corporations with significant foreign profits paid tax rates to foreign countries that were almost a third higher than they paid to the IRS on their domestic profits.
  • Who Are “The Markets?”
    Who are we talking about, when we talk about “corporate taxes?” Just who do we mean when we talk about “the markets?” See for yourself why the #occupy movement talks about the 1% vs the 99%.
    When you hear about corporations and “the markets,” think about how that connects to this chart:

    wealth2

    People In The Streets
    Yesterday, in the post, Oakland Occupied — Will Washington Listen At Last?, I wrote about the large demonstrations that are spreading and growing: spreading to more and more cities, and growing with larger numbers in each city. I warned that this is starting to look like Egypt with the people in the streets protesting Mubarak’s cronyism:

    A Warning Shot At Washington’s Increasing Irrelevance
    As I said, this public protest is spreading and growing. People have had enough and are taking to the streets in increasing numbers. But Washington continues to ignore the public, debating a national motto, as Repubicans block jobs and an elitist “super committee” debates cutting the things government does for the 99%.
    Poll after poll shows the public overwhelmingly supports increasing taxes on the wealthy, bringing corporations under control, and reigning in trade agreements that suck our jobs, factories, companies and industries out of the country. People do not want Medicare, Social Security and other essential government programs cut, they want the rich and corporations and Wall Street to start paying their share.
    The public wants something done about these problems. They want jobs, they want something done about the increasing
    If Congress continues to ignore the people of the country it will not be long before the situation is like Mubarak pretending he is still in charge of Egypt, while the people of the country are in the streets planning how they will run the country without him and his cronies.

    Super Committee To Take Money Out Of The Economy
    A representative democracy serves the 99%, a plutocracy serves the 1%. Currently in Washington Congress’ elite “super committee” represents the 1%, looking at ways to take more money out of the economy, discussing cutting Social Security at a time when many people have lost their pensions and savings. They are discussing cutting Medicare and other health services at a time when more and more people are in need. They are discussing cuts and cuts and cuts, when working people are falling behind and behind and behind.
    But the actual causes of the deficits that have Congress so concerned are ignored. Reagan and the Bushes cut taxes on the rich and increased military spending, and the deficits and resulting debt soared. It is right there in front of our faces. But even with such “concern” about deficits the tax cuts for the rich continue and the huge increases in military spending are left alone. Instead Congress discusses austerity – making the 99% pay for the benefits and bailouts for the 1%.
    People are fed up, and rightly so. Poll after poll shows that the public wants taxes on the rich increased to pay for the deficit, infrastructure, education, health care, retirement and the rest of the things We, the People need. But our captured government is only serving the top few when they talk about cutting these things in order to keep taxes low at the top. The 1% would be well-advised to pay attention to what has happened in other countries where government ignores the people and takes care only of the connected rich.
    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
    Sign up here for the CAF daily summary.

    Scrap The Cap

    Just Scrap the Cap
    There is really only one way to fix Social Security and that is to scrap the cap: raise the limit on incomes that pay into Social Security. Income gains only go to the top few now, so the calculations that established the “cap” are wrong. So get rid of the cap and make the rich pay into the system.
    Cutting benefits only shifts costs onto seniors and their kids who will have to support them. This video shows what that will be like for the kids.

    Sen. Sanders’ Plan To Actually Fix Social Security

    You hear over and over that Social Security is “in trouble” or that we “can’t afford it.” This is as far from true as can be, and the idea behind this is to convince people to just give up on defending the program and let the haters have their way. The people who hate Social Security the most are the ones who say they want to make these changes to “save” it. Well Bernie Sanders loves the program and has introduced a bill that actually will save it.
    The Haters
    Conservatives have hated Social Security from the start, because it is a program that demonstrates once and for all the value of progressive governance. Social Security is as clear an example of We, the People watching out for and taking care of each other as there ever was. It has made a huge difference n the lives of older people, and their/our families. It works, is cost-effective and requires minimal overhead to keep it going. So they hate it.
    A very recent example of conservative hatred for Social Security came from Senator Marco Rubio of Florida, who said, that We, the People helping each other makes us weak,

    “These programs actually weakened us as a people. … All of a sudden, for an increasing number of people in our nation, it was no longer necessary to worry about saving for security because that was the government’s job.”

    Substitute the words “We, the People” or “each other” for “government” in Rubio’s statement and you’ll get the point: people don’t have to worry so much because we’re taking care of each other. He says that makes us weak. Yikes!
    Decades Of Attacks
    For decades conservatives who hate Social Security have been using every trick in the book to turn people against the program. Over and over you hear, “It’s a Ponzi scheme.” “It won’t be there for you.” This latest attack is that it “makes us weak.” And of course the old classic: “Social Security is broke.”
    The “it’s going broke” and “won’t be there for you” attack strategy goes back to a 1983 Cato Institute Journal document, “Achieving a Leninist Strategy” by Stuart Butler of Cato and Peter Germanis of the Heritage Foundation. The document is still available at Cato, and select quotes are available at Plotting Privatization? from Z Magazine. If you have time it is worth reading the entire document (in particular the section “Weakening the Opposition”) to more fully understand the strategy that has been unfolding in the years since. But if you can’t, the following quotes give you an idea:

    “Lenin recognized that fundamental change is contingent upon … its success in isolating and weakening its opponents. … we would do well to draw a few lessons from the Leninist strategy.”
    ” construct … a coalition that will … reap benefits from the IRA-based private system … but also the banks, insurance companies, and other institutions that will gain from providing such plans to the public.”
    “The first element consists of a campaign to achieve small legislative changes that embellish the present IRA system, making it in practice a small-scale private Social Security system.
    “The second main element … involves what one might crudely call guerrilla warfare against both the current Social Security system and the coalition that supports it.”
    “The banking industry and other business groups that can benefit from expanded IRAs …” “… the strategy must be to propose moving to a private Social Security system in such a way as to … neutralize … the coalition that supports the existing system.”
    “The next Social Security crisis may be further away than many people believe. … it could be many years before the conditions are such that a radical reform of Social Security is possible. But then, as Lenin well knew, to be a successful revolutionary, one must also be patient and consistently plan for real reform.”

    Here is what to take away from this: Every time you hear that “Social Security is going broke” you are hearing a manufactured propaganda point that is part of a decades-old strategy. Every time you hear that “Social Security is a Ponzi scheme” you are hearing that strategy in operation. Every time you hear that “Social Security won’t be there for me anyway” ” you are witnessing that strategy unfold.
    The Problem
    The Social Security program is entirely self-funded, separate from the way that the government taxes and spends for other programs. People set aside money in their working years, they get a monthly amount when they retire. (The program also has other benefits including disability benefits, survivors funds and others.) Social Security does not contribute to the deficit in any way.
    You never hear that the huge, vast, bloated, enormous, mammoth military budget is “going broke” or “won’t be there for you.” But year after year you hear that Social Security is “in trouble.”
    Currently the program has built up a huge trust fund — over $2.5 trillion. This is invested in US Treasury Bonds, and is earning interest. But there are projections that this trust fund will be depleted in approx. 2037, and if this happens the program will have to cut payouts by as much as 25%. (Hey. when does the military budget Trust Fund run down?)
    One big reason for this shortfall is that the last time the programs was comprehensively adjusted (1983, Greenspan Commission) certain economic growth and income projections were used to decide how much “payroll tax” to take out of people’s paychecks. They increased the amount taken out of paychecks, and set up an increasing “cap” on the income that would be taxed. Right now 6.2% (temporarily reduced to 4.2%) is taken out of paychecks, and employers kick in another 6.2%, on income up to a “cap” of $106,800. There is no “payroll tax” on amounts above that “cap.”
    But something changed between 1983 and now: almost all the income gains have gone to a few at the very top. Instead of people who mostly were under that “cap” getting raises, thereby increasing the amount they pay into the fund, the raises went to people who already pass that amount, so the increased income is not contributing to the program. So that money that was calculated would go into the Social Security Trust Fund instead went to the top few. As a result the program is no longer bringing in enough money to keep the trust fund fully-funded past 2037.
    Sen. Sanders’ Solution
    Senator Bernie Sanders is introducing a bill to the Senate to fix this, once and for all. In simple terms, this bill will start taxing income above $250,000 a year to cover this Social Security shortfall. So instead of just “raising the cap” it lets that cap stay, and then takes it off again on income above $250,000. In effect it means there will be a gap between the current top income that is taxed, and $250K.
    Get the money from where the money went: So because much of the real Social Security problem is that so much income is now going to just a few at the top, this gets the money to fix the problem from those top-level incomes.
    Here is Sanders, talking about his bill:

    “When [Social Security] was developed, 50 percent of seniors lived in poverty. Today, poverty among seniors is too high, but that number is ten percent. Social Security has done exactly what it was designed to do!”

    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
    Sign up here for the CAF daily summary.

    Will American Majority Outnumber Gang Of 6?

    Our deficit and debt came from cutting taxes on the rich and big corporations, increasing military spending and sweetheart deals with big pharma and health insurance companies. Elite “solutions” always involve cutting back what We, the People do for each other while keeping taxes low for the rich and big corporations. The latest “Gang of 6” solution is being pushed hard, manipulating a sense of inevitability, but is just more of the same. Don’t be fooled, there is significant opposition. Grassroots organizations oppose it, progressives in Congress oppose it and The American Majority opposes it. But you won’t hear that from our elite media.
    The Latest Back-Room Deal From Well-To-Do Elites
    If you are following the day-by-day accounts of the back-room debt-ceiling “crisis” negotiations, the latest “deal” to emerge out of closed-room, secret negotiations between well-to-do elites is much like all the other deals that come out of closed rooms of well-to-do DC insider types: keep taxes low on the rich and corporations and cut back the things We, the People do for each other and for the non-Wall Street parts of our economy.
    These insiders serve the interests of the biggest corporations and the extremely well off, not the interests of regular people, entrepreneurs and small businesses that democracy protects and empowers. Their closed rooms never include low-wage working people, unemployed people, teachers, mechanics, roofers, carpenters, veterinarians, lab technicians, trash collectors, nurses or law-enforcement officers in them.
    If all you hear from is America’s elite media you would think the problem is solved and everyone is happy. You would think this is inevitable, and you must go along or be blamed for obstructing. The “gang of 6” deal is supposedly “bipartisan.” They say it is receiving a “warm reception” in Congress. For example, the Washington Post, New debt plan gains support in Senate, describes the “warm response” the proposal received in the Senate,

    In the Senate, the plan received a warm response, both during the invitation-only morning session and during separate luncheon briefings for Democrats and Republicans. Sen. Lamar Alexander (Tenn.),the No. 3 Senate Republican, offered strong support. And Sen. Tom Coburn (R-Okla.), a leader in the GOP on budget issues, backed the plan as well, after dropping out of the Gang of Six in mid-May.
    “There was palpable relief from folks in that room this morning. Like they were saying, ‘Here’s something we can actually be for,’ ” said Sen. Mark R. Warner (D-Va.), a Gang of Six member who has relentlessly pressed his colleagues to reach consensus.

    And the NY Times is on the bandwagon: Bipartisan Plan for Budget Deal Buoys President,

    Financial markets rallied on the news. And with time running out before the deadline of Aug. 2 to raise the government’s $14.3 trillion debt ceiling, Mr. Obama’s quick embrace of the plan left House Republicans at greater risk of being politically isolated on the issue if they continue to rule out any compromise that includes higher tax revenues.

    Higher tax revenues? Actually the deal lowers tax rates for the wealthy and big companies. It raises revenues by removing things like the mortgage interest deduction for the rest of us.
    Not So Fast
    But if you look at polls you start to see that the American Majority has come to some very different conclusions about how to fix America’s deficit problems. The pubic says solve this problem the same way most economists say we should solve it. The public wants cuts in military spending, and increases in spending on infrastructure and other job-creation, economy-growing investment. The public wants taxes increased on the rich and big corporations. The public does not want Social Security benefits cut. The public wants health care reformed in the ways that the rest of the world has discovered saves money while providing better care.
    Not So Fast, says the CPC
    The Congressional Progressive Caucus says, “Not so fast!” Congressional Progressive Caucus (CPC) co-chair Rep. Raúl M. Grijalva today released the following statement on the Senate “Gang of Six” budget proposal:

    House “Gang of 70-Plus” to Senate “Gang of Six”: We Outnumber Your Plan to Slash Medicare, Medicaid and Social Security
    “This terrible plan could cut Medicare and Medicaid to unsustainably low levels and put seniors’ well-being at risk. Anyone who wants to pass it through Congress should remember that more than 70 House Democrats have already pledged their opposition, and more are signing on every day. The letter we sent to Leader Pelosi July 8 vowing to oppose any cuts to Social Security, Medicare or Medicaid as part of these budget negotiations has become a growing wave of House resolve to protect these programs. We’re keeping it open for more signatures, and our Gang of 70-plus has the ‘Gang of Six’ completely outnumbered. Newly minted Rep. Janice Hahn signed on as one of her first official acts as a Congresswoman – that’s how quickly it’s picking up momentum.
    Republicans have already said they won’t vote for any package, period, because of their opposition to a functional economy. House Democrats hold the key to whatever plan can pass Congress. That’s why the Senate ‘Gang of Six’ proposal is dead on arrival. Instead of toying with ways to slash vital programs in just such a way as to make different budget numbers align on paper, Congress and the White House should follow the path of our People’s Budget: creating jobs, protecting Social Security, Medicare and Medicaid, ending corporate subsidies and millionaire tax giveaways, and ensuring our economy works for everyone rather than a greedy few.”

    Not So Fast, Says Senator Bernie Sanders
    Sen. Bernie Sanders has issued the following statement on a deficit-reduction proposal by a group of senators called the Gang of Six:

    “While all of the details from the so-called Gang of Six proposals are not yet clear, what is apparent is that the plan would result in devastating cuts to Social Security, Medicare, Medicaid and many other programs that are of vital importance to working families in this country. Meanwhile, tax rates would be lowered for the wealthiest people and the largest, most profitable corporations.
    “This is an approach that should be rejected by the American people. At a time when the rich are becoming richer and corporate profits are soaring, at least half of any deficit-reduction package must come from upper income people and profitable corporations. We must also take a hard look at military spending, which has tripled since 1997.”

    Visit msnbc.com for breaking news, world news, and news about the economy

    Not So Fast, Says MoveOn
    Here s a statement from Justin Ruben, Executive Director of MoveOn.org on the Gang of 6 proposal:

    “While details are sketchy, the “Gang of 6″ proposal appears to ask seniors, the middle class and the poor to bear the burden of deficit reduction, with cuts to Social Security benefits, billions in stealth cuts to be named later, and no real effort to make corporations and millionaires pay their fair share. MoveOn’s 5 million members are counting on Leader Pelosi, Senate Majority Leader Reid, and other Democrats to stand by their promise to reject any benefit cuts to Social Security and Medicare. We cannot allow a minority of Tea Party led Republicans in the House to hold our nation’s economy hostage in order to protect tax breaks for the rich and corporations, while forcing cuts to programs families depend on. The President and Democrats in Congress must stand up for everyday Americans and not give into politicians more interested in protecting their corporate backers than ensuring our economy recovers.”

    Not So Fast, Says Citizens For Tax Justice
    Citizens For Tax Justice issued a statement, “Gang of Six” Plan Would Reduce Revenue and Encourage Corporate Tax Dodging,

    Because our tax system allows U.S. corporations to indefinitely “defer” U.S. taxes on their offshore profits, it already encourages corporations to move jobs overseas and to disguise their U.S. profits as “foreign” profits by shifting them to tax havens.
    There would be even more incentives for corporations to do both these bad things under the “territorial” tax system promoted by corporate lobbyists and included in the Gang of Six plan.

    Not So Fast, says Strengthen Social Security Campaign
    Nancy Altman, Co-chair of the Strengthen Social Security Campaign, released a statement (read the full statement here) in response to the release of the Gang of Six’s “Bipartisan Plan to Reduce Our Nation’s Deficits.”

    “The Gang of Six proposes immediate and significant cuts to Social Security benefits, and a process for addressing the program’s funding shortfall projected to appear 25 years from now. The process would virtually guarantee devastating cuts. This plan breaks faith with the American people, who overwhelmingly oppose benefit cuts.
    “The Gang of Six framework contains very few specifics but one is glaring – the immediate cuts that would affect all 55 million Social Security beneficiaries by changing the way the annual cost-of-living adjustment (COLA) is calculated. Their plan would substitute the less accurate and less-generous chained consumer price index (CPI) for the current CPI in calculating the COLA. This breaks a promise made by many politicians to not cut the benefits of anyone over age 55.

    Not So Fast, Says American Majority
    Polls show the public gets it. Along with the polling data on the American Majority Polling Page, here is some info from recent polls:

    • NBC News/Wall Street Journal, July,58% want tax increases on the wealthy as part of a deficit solution vs 36%.
    • Pew Research Poll, June 15-19, 60% say Keep Social Security and Medicare benefits as they are vs 32% say change them to reduce deficits.
    • McClatchy/Marist, 64% support raising taxes on income above $250,000.
    • And finally, this Gallup Poll just out today: Concerns About Economy, Jobs Outweigh Worries About Deficit,

      Americans name the economy and unemployment/jobs as the most important problems facing the nation, as they have all year, despite the dominant focus in Washington on the federal debt ceiling. The deficit comes in third as the top problem.

    Politicians In Peril
    Politicians who are fooled by this manipulated sense of inevitability, and who ignore deficit solutions the public wants, are asking for trouble. If they support these back-room deals made by elites the public won’t support them.
    In addition Democrats who support any deal that cuts Social Security and/or Medicare undermine their ability to campaign as the defenders of the people, of Medicare, of Social Security over the interests of the wealthy and giant corporations.
    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
    Sign up here for the CAF daily summary.