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Dean Baker

 

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

I first met Ted Kennedy in the fall of 1995. The context was truly bizarre.

Alan Greenspan had testified to the Senate Finance Committee in the fall of 1994 that the consumer price index (CPI) overstated the true rate of inflation. He told the committee that if it lowered the annual cost of living adjustment (COLA) for Social Security to correspond to the true rate of inflation, rather than the CPI, it could largely eliminate the budget deficit.

Greenspan told the committee that the gap was between 1-2 percentage points annually, so that after a decade, his plan would cut annual Social Security payments by more than 10 percent. And, the great thing was that Congress could do this cut by claiming it was just a technical adjustment.

Over the next half year, the idea of changing the COLA for Social Security gained considerable support in Congress from both parties. (Daniel Moynihan was the strongest proponent.) There was also support for the idea in the Clinton White House.

In this context, I was invited to talk to Senator Kennedy and his staff about the CPI, since I was one of the few economists who disputed the claim that the CPI overstated inflation. I was very happy when I got to his office to see 5 senior looking staffers. I assumed that these were the people that I really had to convince and I focused my attention on them, only occasionally looking back at Kennedy to avoid appearing rude.

After about 10 minutes of boring econ jargon (price indices are even boring to economists), Senator Kennedy started asking me probing questions. It was clear that he had listened carefully and understood everything I said. I then began to focus my attention directly on Kennedy and we had a very good discussion of the issues. I walked away with a very valuable ally in this fight.

I saw exactly how valuable about a month later. The scene was a meeting of an ad hoc House-Senate Democratic committee that had been established to help hammer out a balanced budget proposal that Congressional Democrats could sign onto. This was the period when the government was shut down, as President Clinton and the Republican controlled Congress could not agree on a budget.

The Congressional Democrats felt that it was important that they have their own budget to establish themselves as an independent force in the debate. The ad hoc committee was supposed to focus on the issues of the CPI adjustment and corporate welfare. The CPI adjustment was being debated because there were many Democratic members of Congress who found it an attractive way to achieve deficit reduction.

Senator Kennedy invited me to this committee meeting so that I could speak about the accuracy of the CPI. I met with him and his staff before the committee meeting. He explained that his goal was to keep corporate welfare on the agenda and the CPI adjustment off the agenda. He said that he wasn’t sure that he could succeed, but that was his plan.

The corporate welfare discussion came first. Senator Kennedy framed the issue. He noted hundreds of billions of dollars in tax breaks and subsidies that could be identified as corporate welfare. He said that the Democrats should set a target of reducing corporate welfare by some substantial amount as a major part of their program for a balanced budget.

Kennedy then shut up. He let the rest of the group spout off about all sorts of related and unrelated topics, only briefly intervening at a couple of points to keep the conversation moving forward. At the end of the discussion, corporate welfare was on the agenda.

Then we got to the CPI. He briefly, but accurately, laid out the case that the claims for an overstated CPI were weak. He then introduced me as an expert on the CPI and invited me to say a few words to the committee.

The ensuing discussion again went all over the place with Kennedy largely remaining silent. However, at the end of the debate, the CPI adjustment was off the table.

I was tremendously impressed. Kennedy had gotten exactly what he wanted on both issues and he never broke a sweat. He framed the debate and just let things run their course. It was truly masterful.

From the standpoint of the policy involved, although the details are incredibly obscure, the impact would have been very visible and quite large. If the CPI adjustment had taken effect, someone who had been receiving Social Security in 1996 would be getting about 13 percent less in their monthly check today (a cut of roughly 1 percent a year for 13 years). That would be a very painful cut for a segment of the population that doesn’t have much money to spare.

If the Democrats in the Congress had joined the chorus of those pushing for a CPI adjustment, it is very likely that it would have gone through. So, even though almost no one knows the details of this particular incident, Senator Kennedy played an enormously important role in protecting the financial security of tens of millions of current and future retirees.

***

Dean Baker is the author of the new book, “Plunder and Blunder: The Rise and Fall of the Bubble Economy.”

This piece was first published on Huffington Post.

By Leo W. Gerard
International President

Public service
The Democratic Party paid homage at its convention Monday night to a Kennedy scion whose family values demand public service and who believed it was his duty as a senator to speak for the voiceless, not champion the causes of the already powerful.
The film clip played for the delegates showed Ted Kennedy, who is fighting for his life after being diagnosed with a brain tumor, on a sailboat, explaining his favorite pastime and his relationship with the sea.
This son of wealth could have done nothing more with his life than sail. But he descended from a family that gave so much to this country – a son in World War II, two more to assassination – that he was compelled to perform for all of their names.
His service has always been to the basic values of the Democratic Party, that the American Dream should be for everyone, not just a few, not just the privileged, not just the Kennedys. And he has anointed Barack Obama as the successor to that legacy.
Kennedy’s philosophy stands in stark contrast to Reagan-Bush-McCain values. Those Republicans worship the almighty dollar, the amassing of large quantities of dollars, and the claim that sufficient coins will trickle out of the pockets and down the legs of the wealthy to sustain the poor.

Reverse trickle

In fact, however, over the past 30 years, Republicans have put in place government programs that reverse the trickle process. So the way it actually works is that the tax dollars of the many trickle up to make the wealthy wealthier. Just one example: Corporations shortchange their pension plans to make the companies appear more profitable, so the CEOs gets large stock options. When the pensions failed, the workers got less and the taxpayers provided the funds through the Pension Benefit Guarantee Corporation. But the CEOs laughed all the way to the bank.
Lobbyists, paid by corporations and aided by Republicans with their “trickle down” philosophy, have established untold numbers of schemes like this in law to benefit the rich at the expense of the many.
They’ve been so successful that income disparity in this country has widened to the point that the 300,000 wealthiest make more money than the other 150 million wage earners put together. Remember, Republicans even opposed an increase in the minimum wage – the first in nearly a decade – from $5.15 an hour to a measly $7.25 an hour.
There’s no doubt the Kennedys are wealthy. But they’re Democrats. They don’t believe in trickle down. Here’s what Ted Kennedy said Monday night, “This is a season of hope. . .of justice and prosperity for the many, not just for the few.”
He mentioned the decline in health insurance coverage, a problem he has long struggled to resolve. “This is the cause of my life,” he told the delegates. Gridlock must be broken, he said, so every American can have decent quality healthcare as a fundamental right, not a privilege.

Medicare vote

This from a man who left his hospital bed in Massachusetts in July to travel to Washington, D. C. to break a stalemate on stalled Medicare legislation. An earlier balloting had fallen one vote short of passage of the bill to prevent a scheduled 10.6 percent cut to physicians who treat Medicare patients.
Obama was at Kennedy’s side when he entered the Senate for the first time since his brain surgery on June 2.
Taking a different path, McCain did not bother to show up for the vote on the legislation crucial to senior citizens.
A scion as well, McCain is the son and grandson of admirals. He had much to live up to, and after a less-than-distinguished stint at the Naval Academy, served with honor in Vietnam.
Afterward, he returned to the states, where, he concedes to philandering, cheating on a wife who’d cared for their children while he’d been held captive for nearly five years and who, herself, had been terribly injured in a car accident.
While in Hawaii, and still married, John McCain, the “family values” political party’s presumptive nominee, met Cindy Lou Hensley, the beer distribution heiress 17 years his junior who is now his second wife.
Today, John McCain’s wealth equals a Kennedy’s. The McCain-Hensley fortune is estimated at $100 million.

Ferragamo flash

And he likes to flash it. He’s been wearing $520 Ferragamo loafers on the campaign trail – even to a supermarket where he talked about the tough economy — the failing economy brought on this country by eight years of the Bush Administration.
Cindy Lou bought him a private jet to help him get around Arizona when campaigning there because it’s such a big state, and she didn’t want him to have to drive, like a normal person, or anything.
And then there are the McCain homes. None in foreclosure, by the way. Seven in all. Too many for John to count apparently. When asked just how many houses he owned, he hesitated, then told a reporter he’d have an aide count them up and get back with those weighty statistics.
That sort of absentminded elitist air would be one thing, but the real distinction is his philosophy. He believes the rich, like him, should stay rich. And too bad for the middle class, which is supporting that wealth.
This guy espouses Bush’s tax cuts for the rich. He wants to make permanent those tax cuts that the wealthy didn’t ask for and don’t even need –  tax cuts that have significantly worsened the national debt, thus weakening the economy and confidence in Wall Street.
At the same time, John McCain plans to create a new tax – on your middle class health care benefits – if you’re one of those lucky enough to still have them.
Tax cuts for the rich. New taxes for the middle class.
This is not a Kennedy. This is definitely not a man who works, as Caroline Kennedy said at the convention of her uncle, Ted Kennedy, to champion the cause of those left out, the poor, the elderly, those without education.
John McCain is no Ted Kennedy. And because of what he believes, John McCain is not someone the middle class can afford to elect president.