Watch out, they're coming. After an election cycle in which Republicans worked themselves into a lather in an attempt to convince voters that the deficit was the source of all their economic woes, the political elites and their Bankster backers are coming for the middle class. What better time for us to start a new publication -- "Pillage and Plunder Alert"? And what better inaugural event than the release of the draft report prepared by the co-chairs of the Presidential Deficit Commission?
The two chairmen of the deficit commission, former Clinton Chief of Staff Erskine Bowles and former Republican Senator Alan Simpson, surprised Washington Wednesday with the release of their own draft recommendations on federal debt reduction. They were supposed to issue a report December 1, after the full 18-member panel had been given a chance to vote on each item. Knowing that it would be next to impossible to achieve a high level of support on the commission for their recommendations, the raiders decided to go it alone. Their package appears to be about three-fourths cuts and one-fourth revenue raisers.
First, Go After the Sick and the Elderly
High on the list of people who have to "feel the pain" are the sick and the elderly. The co-chairs want to "increase cost-sharing for Medicare." In other words, they want seniors' copays and deductibles to increase. Plus, they want a cap on catastrophic medical costs, tossing the severely ill over the cliff. But in what many found to be the most ominous development, the co-chairs navigated far outside the boundaries of their mandate to launch a frontal assault on Social Security.
"The commission's mandate was to deal with the country's fiscal problems. Since Social Security is legally prohibited from ever spending more than it has collected in taxes, it cannot under the law contribute to the deficit. Their proposal would cut benefits for tens of millions of middle class workers who are overwhelmingly dependent on Social Security for their retirement income," said economist Dean Baker.
The commission co-chairs also recommend raising the retirement age for Social Security. "They're talking about raising the retirement age, because people live longer -- except that the people who really depend on Social Security, those in the bottom half of the distribution, aren't living much longer. So you're going to tell janitors to work until they're 70 because lawyers are living longer than ever," says Nobel Prize-winning economist Paul Krugman.
When millions of seniors have just seen their retirement savings go up in smoke, is it really the time to be talking about slashing Social Security? AFL-CIO President Richard Trumka was blunt: "The chairmen of the Deficit Commission just told working Americans to 'Drop Dead.' Especially in these tough economic times, it is unconscionable to be proposing cuts to the critical economic lifelines for working people, Social Security and Medicare."
Spare the Whales, Harpoon the Minnows
Most economists agree that focusing on the deficit during a major economic downturn is counterproductive. But if you are sincerely concerned about the deficit caused by endless war and a massive financial crisis, the best way to solve the problem is to put America back to work. Working people pay taxes. The unemployed do not.
Economist Jamie Galbraith puts it best: "The only way to reduce a deficit caused by unemployment is to reduce unemployment. This must be done with a substantial component of private financing, which is to say by bank credit, if the public deficit is going to be reduced. This is a fact of accounting. It is not a matter of theory or ideology; it is merely a fact. The only way to grow out of our deficit is to cure the financial crisis."
At Wednesday's press conference Alan Simpson said, "we have harpooned every whale and some minnows" in order to come up with their recommendations. But it is notable that while the minnows are drowning, those blubbery whales on Wall Street have dodged the harpoon. Galbraith recommends that the big banks be forced -- once and for all -- to clear their books of the toxic assets that are preventing them from lending. Private lending is critical to getting the economy moving again. But it may not be enough.
With a recession this steep, more revenue is needed to put Americans back to work. Dean Baker notes that the "glaring omission" of the Deficit Commission draft is that while it includes taxes on the middle class, it does not include plans for any type of tax on the financial sector, an idea supported by commission members. He notes that a tiny tax on destructive Wall Street speculation alone could raise $1.5 trillion over 10 years, a hefty chunk of change that can be used to put Americans back to work and reduce the deficit.
Despite the deficit hype, polling shows the American public is clear that the deficit didn't crash the economy, Wall Street did. Moreover, Americans know that the big bailed-out banks are doing nothing to improve the situation. Nomi Prins nailed it when she wrote in her book It Takes a Pillage, that to stop the rampage we need to restructure the financial system to help the many and not the few. We can start by making Wall Street pay to put America back to work.
(Stay on top of the fight for a financial transaction tax and sign up for Pillage and Plunder Alerts at www.BanksterUSA.org.)