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Dean Baker

By Dean Baker
Co-Director, Center for Economic and Policy Research

By this point, many people have come across the name “Hugh Jidette,” the fictional presidential candidate created by the Peter G. Peterson Foundation to advance its agenda of cutting Social Security and Medicare. In the more realistic version of this story we would have Hugh Janus, the Wall Street lobbyist who is constantly plotting ways to take away the benefits that tens of millions of retired workers depend upon.

Apologies for the descent into fourth-grade humor, but that is now the level of the public debate on budget and economic issues in Washington. Every chapter of this debate seems more corrupt and further removed from reality than the last one.

To start, we have President Obama’s deficit commission, led by two self-described clowns, former Senator Alan Simpson and Erskine Bowles. Senator Simpson’s established his notoriety by sending out late night e-mails that were both insulting to the recipients and revealed his stunning ignorance of Social Security’s finances. (Full disclosure: I was one of the recipients.)

One e-mail implied that the director of a major national women’s organization could not read a simple graph. It also expressed his alarm over Social Security projections that had been known to the policy community for almost two decades. (more…)

Dean Baker

By Dean Baker 
Co-Director, Center for Economic and Policy Research

Most people are familiar with the concept of “chicken hawks.” Chicken hawks are the politicians who are anxious to send other people to risk their lives in war, but somehow managed to avoid service when they had the opportunity to fight themselves. Former Vice-President Dick Cheney and former President George W. Bush are the leading members of the chicken hawk society.

It turns out that we have a similar story with budget policy, where there appears to be a large contingent of budget deficit chicken hawks. The deficit hawks have been filling the news lately. These are the folks who are yelling that something terrible will happen if we don’t reduce the deficit. Most of them seem to have missed the fact that something terrible is now happening. We have almost 15 million people unemployment and 9 million underemployed, with several million facing the loss of their home in the next few years.

People of all ages are seeing their lives wrecked by a economic disaster that was entirely preventable, if the folks running economic policy were not too incompetent to notice an $8 trillion housing bubble. In fact, one of the reasons that this bubble did not get noticed was that even before the bubble burst – creating large deficits — the deficit hawks were running around yelling about the deficits. These deficit hawks were able to get far more attention for their whining than the people who were warning about the dangers posed by the housing bubble.

Now that we have seen this collapse, rather than supporting action to get the economy back on its feet, the deficit hawks are again yelling about the long-term deficit. But, what is really striking is that many of the people who whine loudest about the deficit are the most reluctant to take steps to reduce the deficit – at least when it involves powerful interest groups. (more…)

Roger Hickey

By Roger Hickey
Co-Director of the Campaign for America’s Future

On Saturday, the group known as America Speaks (funded by Wall Street mogul Peter G. Peterson and two other foundations) brought together several thousand people in meetings in 60 cities. They gave participants misleading background information about the federal deficit and economic options to achieve fiscal “balance” and future prosperity.

Peterson cannot be pleased with the participants’ mainly progressive policy choices, which will be presented on June 30 to the Deficit Commission that Peterson encouraged President Obama to create.

According to America Speaks’ own press release, when a scientifically selected group of participants picked up their electronic voting devices, they overwhelmingly supported proposals to

Raise tax rates on corporate income and those earning more than $1 million.

Reduce military spending by 10 to 15 percent,

Create a carbon tax and a securities-transaction tax.

This pretty progressive set of solutions emerged from the process many feared would be skewed to the solutions of conservative deficit hawks.

America Speaks was certainly not pushing the discussion in a progressive direction. The background materials — and policy options — provided to participants were anything but fair and balanced, as analysis by economist Dean Baker demonstrated. Most egregious were the following:

Social Security. America Speaks gave participants no explanation of the fact that Social Security has its own source of funding, and thus does not contribute a dime to the deficit. Americans actually have been paying extra payroll taxes to create a trust fund that will make sure full benefits can be paid for decades into the future — and thus there is no rational reason to cut Social Security benefits (or raise the retirement age) in order to reduce the Federal deficit. But you wouldn’t know that from the America Speaks materials or explanations. The Social Security program is simply presented as another big spending program and participants were presented with various ways to cut benefits. Given all this, a majority endorsed raising the retirement age for full benefits to 69 — a benefit cut for future retirees. But they also chose the progressive plan to raise the cap on taxable earnings subject to Social Security taxes, thus producing income for the system from greater portion of higher income peoples’ wages.

Medicare and Medicaid. The America Speaks background materials actually did acknowledge that the rising budgetary costs of Medicare and Medicaid are driven by the fact that our whole health care system is broken — and costing both the private sector and government programs much more per person than in countries that have much better health outcomes. They even acknowledged that thoroughgoing reform — like single-payer health care system — is the only way to control those rising costs.

However, when it came to options the participants were allowed to vote on, they were all variations on how much people wanted to cut Medicare and Medicaid benefits. At this point in the proceedings, the America Speaks founder and President, Carolyn Lukensmeyer had to acknowledge a rebellion in the ranks. People were demanding to have the option of voting for “single-payer” reform instead of cutting Medicare and Medicaid, and when she announced a complicated process of writing in that alternative, a roar of approval went up from the crowd in several locations. Their press release doesn’t report how many people chose this difficult to select option, but the organization clearly had had to scramble to quell a revolt by participants. (Note: their press release states that people chose to “cut health care spending by at least five percent,” but the choice was really to cut government health programs five percent — and my reading of the charts online was that only 21 percent of participants chose that option, with 71 percent choosing “no change.”)

Austerity vs Growth. Finally, the organizers had heard enough protests from the Economic Policy Institute and the AFL-CIO that they felt they had to assure the audience that they were not prioritizing deficit reduction over the need for economic stimulus to get the economy to start producing jobs. But after that ritual disclaimer, they went on to devote the vast majority of the day to deficits as our defining economic program.

David Dyen, an LA participant, wrote in a post on firedoglake,

“While the cumulative effect of all this tends towards social safety net cuts rather than tax fairness, the crowd in Los Angeles, at least, wasn’t biting at first. In surveying the discussion groups, most people seemed more concerned about the desperate need for more stimulus spending to move the economic recovery forward… In the nationwide instant survey, taken by participants through electronic devices at all 19 America Speaks sites, 61% said the government needed to do more to strengthen the recovery, with only 25% opposed. Even with a push poll question asking if participants supported government programs to increase growth ‘if it increases the deficit,’ got a majority, 51%, of the nation-wide group of participants.”

My next-day posting here — claiming participants mostly rejected conservative nostrums — is based on watching the process online, from reports from people who attended events around the country — and on a fairly sketchy press release put out by America Speaks on Thursday, just after the town meetings. But America Speaks billed these events as a nation-wide scientific experiment in finding out what the “American people” think about the economic way forward. They are thus duty bound to publish a full report on the details of every single question — and voting results — that participants were asked to make decisions about. It is especially important that they put out this comprehensive report because they are also scheduled to summarize their findings before a special public meeting of the White House Deficit Commission on June 30. Only then can the people who participated in the process judge whether their surprisingly progressive decisions are being accurately presented to the Commission.

Note: Click here for a blog post on the Augusta, Maine America Speaks event by participant Barbara Burt, director of the Frances Perkins Center.

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Roger Hickey was a leader of the campaign to stop the privatization of Social Security, and he is a founder and member of the steering committee of Health Care for America Now. In the late 1980s, he and Jeff Faux created the Economic Policy Institute.

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Follow Roger Hickey on Twitter: www.twitter.com/rogerhickey

Mike Hall

By Mike Hall
AFL-CIO Senior Writer

There’s a national town hall meeting this weekend—at brick and mortar sites in dozens of cities and also online—to discuss ways to address the nation’s budget, fiscal future and economic recovery.

The meetings begin Saturday, June 26, at 11:30 a.m. EDT. They will be connected via satellite video, webcast and interactive technologies. Click here to find an event in your area and here to join the discussion online.

Working families need to take part in the discussion to make sure our views aren’t drowned out by deficit hysterics who have Social Security and Medicare in their crosshairs.  The nonpartisan group sponsoring the national town hall—America Speaks—will submit the budget strategies and priorities that come out of the weekend’s meeting to President Obama, Congress and the budget deficit commission Obama formed in February.

It’s certain some panelists and participants will point to Social Security, government spending for job creation, rebuilding our infrastructure, providing educational opportunities or even immigration as problems at the center of the budget deficit.

But Social Security can pay full benefits through the 2040s and can be brought into long-term actuarial balance with relatively modest adjustments and without cutting benefits.

Also, according to the nonpartisan Congressional Budget Office, most of the deficit over the next 10 years will come from the Bush administration’s tax cuts for the rich, the wars in Afghanistan and Iraq and the staggering economy. Says AFL-CIO President Richard Trumka:

The main driver of the recent increases in deficit projections is worsening economic conditions—in short, the present deficit crisis is largely a symptom of the jobs crisis.

Solving the jobs crisis and the deficit will require large amounts of public investment in the short term, which should be paid for in future years by taxing Wall Street.

If we create jobs today, the payoff comes not just in workers’ paychecks now, but in a stronger economy and smaller deficit in the future.

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Re-Posted from the AFL-CIO Now Blog

Dean Baker

By Dean Baker
Co-Director, Center for Economic and Policy Research

Next weekend will feature another milestone in the drive to cut Social Security and Medicare. The organization America Speaks will be hosting a series of 20 meetings in cities across the country. They will ask the people at these meetings, a cross section of the nation, to come up with proposals for dealing with the country’s projected long-term budget deficit.

The way the problem is outlined for these meetings virtually guarantees that most of the participants will opt for big cuts to Social Security and Medicare. The results of this song-and-dance exercise will then be presented to President Obama’s fiscal responsibility commission on June 30th, which will use it as further ammunition for plans by its co-chairs to gut these programs.

The rigged deck approach should come as no surprise. America Speaks is largely funded by Peter G. Peterson, the investment banker billionaire who has been on a decades long crusade to gut these programs. In recent years, Peterson has redoubled his efforts, committing more than a billion dollars to a wide variety of groups in addition to America Speaks. To advance his agenda Peterson has even set up a fake news service, the Fiscal Times. To fill the staff, Peterson’s son hired a number of reputable reporters who were displaced by the collapse of the newspaper industry.

Federal Budget 101, the guidebook for the discussion, follows a predictably shoddy path. The book discusses the budget in almost complete isolation from any larger discussion of the economy. There is virtually no discussion of the ways in which the budget fosters growth, for example by funding education, research and infrastructure; nor the way in which the pattern of growth affects the budget.

For example, the booklet never discusses the extent to which the economic mismanagement that allowed the unchecked growth of an $8 trillion housing bubble contributed to the debt that is its central concern. The downturn caused by the resulting economic collapse will eventually add more than $3 trillion to the country’s debt, according to the Congressional Budget Office’s projections.

The booklet also neglects to point out the extent to which the long-term budget disaster story is driven by our broken health care system. If per person health care costs in the United States were the same as in any other wealthy country, we would be looking at enormous budget surpluses in the long-term, not deficits.

Incredibly, the booklet does not even point out the fact that income is projected to grow over time. The average hourly wage is projected to buy 20 percent more in 2025 (the year for which participants are supposed to design a budget) than it does today.

This knowledge might affect how people view things like tax increases. For example, if we know that people will be on average 20 percent richer, we might be less concerned if their tax rate were to rise by 1-2 percentage points.

The booklet also never mentions the plunge in wealth that older workers have suffered as a result of the collapse of the housing bubble and plunge in the stock market. This has left the bulk of near retirees (those in their late 40s and 50s) facing retirement with almost nothing other than their Social Security and Medicare.

The booklet even gets its basic economics wrong, warning participants at the very beginning that rising deficits can lead to a weaker dollar. In the real econ 101, students learn just the opposite — that budget deficits can jack up interest rates leading to a stronger dollar. This is how a budget deficit can be tied to a trade deficit — by raising the value of the dollar. A higher dollar makes U.S. exports more expensive to foreigners and imports cheaper for people living in the United States.

People who want to see our trade deficit fall want a lower dollar. Getting the value of the dollar down (not up) is an argument that more serious people would give for a smaller budget deficit. Peterson should have been able to get a better product for his millions.

Finally, it is striking that not a single person connected with this project was among those who warned of the housing bubble before its collapse wrecked the economy. Ostensibly, America Speaks tried to include a diverse range of economists and policy analysts. Yet, in the category of people who recognized the biggest economic disaster of the last 80 years, America Speaks came up completely empty.

To put this in perspective, suppose Peter Peterson had funded this exercise back in 2004, when the housing bubble was already huge, but still at a point where it could have been deflated without devastating the economy. This group would have given us a great discussion of the 2020 deficit, but said nothing about the tsunami that was about to wreck the economy (and send the deficit skyrocketing).

Unfortunately, there is no reason to assume that the America Speaks crew’s understanding of the economy is any better today than it was in 2004. We need more serious analysis than this propaganda exercise as a basis for deciding the fate of essential programs like Social Security and Medicare.

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This blog was first published on The Huffington Post

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Dean Baker is author of the new book, “Plunder and Blunder: The Rise and Fall of the Bubble Economy,” PoliPoint Press, LLC. This piece was first published on the Center for Economic and Policy Research’s Jobs Byte. CEPR’s Jobs Byte is published each month upon release of the Bureau of Labor Statistics’ employment report. For more information or to subscribe by fax or email contact CEPR at 202-293-5380 ext. 102 or chinku@CEPR.net.