“Insurance Against Need, Guaranteed Return”: Why Democrats Must Get Smart On “Entitlements”
In a season of depressing budget news, the worst may have been that a majority of U.S. House Democrats signed a letter urging President Barack Obama to oppose any benefit cuts to Social Security, Medicare, Medicaid and other entitlements. That’s the last thing we need.
To hold the line on harmful cuts to discretionary spending, Obama and the Democrats must educate the public about the necessity of entitlement reform. Otherwise, the poor and needy — largely spared by the automatic reductions under sequestration — will get hit much harder down the road.
Liberals are right to reject Republican proposals that would slash social-welfare programs even as they refuse to consider closing tax loopholes for the wealthy. And I agree that the sequestration will cut into the bone of important government functions and investments in the future.
That makes two more reasons to start talking seriously about how we will pay for the insanely expensive retirement of the baby boomers.
How expensive? Anyone reaching retirement age in the next 20 years (including me) will take more than three times as much out of Medicare as he or she contributed in taxes. By 2030, the U.S. will have twice as many retirees as in 1995, and Social Security and Medicare alone will consume half of the federal budget, with the other half going almost entirely to defense and interest on the national debt. It’s unsustainable.
If Democrats don’t want to talk about these programs, they can say goodbye to every other pet program. We can preserve Medicare in amber only at the expense of investments in pre-kindergarten programs or cancer research.
To reform entitlements, we should assess what these programs were meant to do in the first place.
For starters, Presidents Franklin D. Roosevelt and Lyndon B. Johnson didn’t call them entitlements. Jimmy Carter’s administration borrowed the term from Anarchy, State and Utopia, a 1974 book by Robert Nozick, a political philosopher. “Entitlement” sounds selfish and at odds with the dignity and peace of mind that Social Security and Medicare are meant to provide.
It distorts the animating idea behind these programs, which is social insurance.
FDR didn’t have strong feelings about benefit levels, retirement ages or eligibility standards. He focused on what he called guaranteed return. By that he meant that having paid into the system through a kind of insurance premium (though in fact it was merely a payroll tax), Americans should rest easy that some money would be there for them if they lived long enough to need it. The whole point was “insurance against need.”
“Guaranteed return” and “insurance against need” should continue to be the two guiding principles of social-insurance reform.
“Guaranteed return” means no privatization or voucher system for these programs. FDR would have strongly opposed President George W. Bush’s plan to allow Social Security contributions to be invested in the stock market. He thought subjecting retirement income to what he called “the winds of fortune” was a breach of the social contract. Imagine what would happen to someone who retired in 1929 or 2008? No guaranteed return.
“Insurance against need” suggests keeping the focus on poor and middle-class recipients who depend on the money most. That means means-testing, giving wealthier retirees less. FDR, who favored high levels of taxation on the rich, would have been fine with taxing their benefits, too, as long as they were guaranteed to get at least something back.
Liberals generally oppose means-testing social-insurance programs. For decades they’ve argued that if the wealthy don’t get a heaping portion of Social Security and Medicare, it will undermine the political support of the programs and turn them into a form of welfare. Once that happens, the theory goes, the programs will be ended.
Like the word “entitlements,” this hoary idea should be retired. Social Security and Medicare are now so deeply in the marrow of the American middle class that they will never be seen as welfare. The question is not whether to reform them, but how.
Roosevelt structured Social Security as an insurance program with “contributions” through the tax code “so no damn politician can ever take it away.” He didn’t specify anything about the level of taxation or cost-of-living increases, which weren’t an issue in the 1930s but would become one shortly after World War II.
Today, only the first $110,000 in income is subject to the 7.65 percent tax that pays for Social Security and Medicare. Lifting the cap to higher income levels (say $250,000 or $400,000) could eventually generate hundreds of billions of dollars.
Republicans consider this a tax increase. That’s only true outside the context of these programs. The change could be structured so that no one paid in more than actuarial tables say they would take out. That would still raise billions and be consistent with the idea of paying for your own retirement if you can afford it.
For lifting the cap to have any chance, it would have to be matched by reforms such as adopting the chained consumer-price index, a new way to measure cost-of-living adjustments that Obama apparently favors. Liberals oppose chained CPI because it would theoretically result in lower benefits. But less frequent cost-of-living increases aren’t the same as cuts, especially if the current system is, as many experts believe, based on an inaccurate assessment of inflation.
Maybe there are better ideas for reforming social insurance. The point is, we better start talking about them. Otherwise, grandpa and grandma and their fellow Grateful Dead fans are going to eat all the food on the table.
By: Jonathan Alter, The National Memo, March 1, 2013
“Sequester Of Fools”: We Should Be Spending More, Not Less, Until We’re Close To Full Employment
They’re baaack! Just about two years ago, Erskine Bowles and Alan Simpson, the co-chairmen of the late unlamented debt commission, warned us to expect a terrible fiscal crisis within, um, two years unless we adopted their plan. The crisis hasn’t materialized, but they’re nonetheless back with a new version. And, in case you’re interested, after last year’s election — in which American voters made it clear that they want to preserve the social safety net while raising taxes on the rich — the famous fomenters of fiscal fear have moved to the right, calling for even less revenue and even more spending cuts.
But you aren’t interested, are you? Almost nobody is. Messrs. Bowles and Simpson had their moment — the annus horribilis of 2011, when Washington was in thrall to deficit scolds insisting that, in the face of record-high long-term unemployment and record-low borrowing costs, we forget about jobs and concentrate exclusively on a “grand bargain” that would supposedly (not actually) settle budget disputes for ever after.
That moment has now passed; even Mr. Bowles concedes that the search for a grand bargain is on “life support.” Let’s convene a death panel! But the legacy of that year of living foolishly lives on, in the form of the “sequester,” one of the worst policy ideas in our nation’s history.
Here’s how it happened: Republicans engaged in unprecedented hostage-taking, threatening to push America into default by refusing to raise the debt ceiling unless President Obama agreed to a grand bargain on their terms. Mr. Obama, alas, didn’t stand firm; instead, he tried to buy time. And, somehow, both sides decided that the way to buy time was to create a fiscal doomsday machine that would inflict gratuitous damage on the nation through spending cuts unless a grand bargain was reached. Sure enough, there is no bargain, and the doomsday machine will go off at the end of next week.
There’s a silly debate under way about who bears responsibility for the sequester, which almost everyone now agrees was a really bad idea. The truth is that Republicans and Democrats alike signed on to this idea. But that’s water under the bridge. The question we should be asking is who has a better plan for dealing with the aftermath of that shared mistake.
The right policy would be to forget about the whole thing. America doesn’t face a deficit crisis, nor will it face such a crisis anytime soon. Meanwhile, we have a weak economy that is recovering far too slowly from the recession that began in 2007. And, as Janet Yellen, the vice chairwoman of the Federal Reserve, recently emphasized, one main reason for the sluggish recovery is that government spending has been far weaker in this business cycle than in the past. We should be spending more, not less, until we’re close to full employment; the sequester is exactly what the doctor didn’t order.
Unfortunately, neither party is proposing that we just call the whole thing off. But the proposal from Senate Democrats at least moves in the right direction, replacing the most destructive spending cuts — those that fall on the most vulnerable members of our society — with tax increases on the wealthy, and delaying austerity in a way that would protect the economy.
House Republicans, on the other hand, want to take everything that’s bad about the sequester and make it worse: canceling cuts in the defense budget, which actually does contain a lot of waste and fraud, and replacing them with severe cuts in aid to America’s neediest. This would hit the nation with a double whammy, reducing growth while increasing injustice.
As always, many pundits want to portray the deadlock over the sequester as a situation in which both sides are at fault, and in which both should give ground. But there’s really no symmetry here. A middle-of-the-road solution would presumably involve a mix of spending cuts and tax increases; well, that’s what Democrats are proposing, while Republicans are adamant that it should be cuts only. And given that the proposed Republican cuts would be even worse than those set to happen under the sequester, it’s hard to see why Democrats should negotiate at all, as opposed to just letting the sequester happen.
So here we go. The good news is that compared with our last two self-inflicted crises, the sequester is relatively small potatoes. A failure to raise the debt ceiling would have threatened chaos in world financial markets; failure to reach a deal on the so-called fiscal cliff would have led to so much sudden austerity that we might well have plunged back into recession. The sequester, by contrast, will probably cost “only” around 700,000 jobs.
But the looming mess remains a monument to the power of truly bad ideas — ideas that the entire Washington establishment was somehow convinced represented deep wisdom.
By: Paul Krugman, Op-Ed Columnist, The New York Times, February 21, 2013
“A Renewed Alligance”: Echoes Of FDR, President Obama’s Inspiring Address Links Freedom With Security And Dignity
So much for the “Grand Bargain” – or at least for the not-so-grand gutting of Social Security and Medicare that the “very serious” thought-leaders of Washington political and media circles have always found so appealing. Whatever President Obama may have contemplated up until now, his second inaugural address, delivered yesterday on the steps of the Capitol, bluntly repudiated Republican arguments against the social safety net – and forcefully identified those popular programs with the most sacred American values.
“We, the people, still believe that every citizen deserves a basic measure of security and dignity,” said Obama – not only because it is the responsibility we have to each other as human beings, but because security and dignity, for every man, woman, and child, are the existential foundations of freedom.
“For we remember the lessons of our past, when twilight years were spent in poverty and parents of a child with a disability had nowhere to turn,” he said. “We do not believe that in this country freedom is reserved for the lucky or happiness for the few. We recognize that no matter how responsibly we live our lives, any one of us at any time may face a job loss or a sudden illness or a home swept away in a terrible storm. The commitments we make to each other through Medicare and Medicaid and Social Security, these things do not sap our initiative. They strengthen us.”
In a modern nation, suggested the president, those commitments are indeed fundamental to life, liberty, and the pursuit of happiness. This is essentially the same message articulated by Franklin Delano Roosevelt in his 1941 “Four Freedoms” State of the Union address, which included employment, social security, and health care as defining aspects of a truly democratic society.
Every liberal and progressive (and presumably every conservative and wingnut, too) recognized that moment as renewing Barack Obama’s allegiance to principles that have sustained the Democratic Party since FDR. Far from undermining freedom, enterprise, and productivity, as right-wing propaganda insists, the president argued that those guarantees – still cherished by the overwhelming majority of Americans — have strengthened the nation.
Obama acknowledged the financial problem that rising health care poses for Medicare; eventually, he said, the federal budget must be stabilized, with “hard choices” ahead. Yet that objective will not be achieved, he pledged, by undoing the ligaments of security and liberty that American leaders have stitched together over the past century, nor by pitting younger people against their parents and grandparents (as the opponents of Social Security and Medicare habitually attempt to do). He pointedly rejected “the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future.”
Precisely what the president means when he talks about hard choices should be revealed next month, when he will no doubt feel politically obliged to discuss how to reduce the deficit in his State of the Union address. Troubling signals have emanated from the White House that he might accept sharp and unnecessary cuts in Medicare and Social Security to achieve the “grand bargain” – which Washington’s conventional wisdom often defines as the only legacy worth pursuing for him.
Indeed, Obama has sometimes appeared to be listening when such very serious types, the over-privileged and under-informed, complain about burdensome “entitlements.” Those worthies might well have assumed that he would ultimately implement their mindless, heartless, and destructive proposals.
But in yesterday’s inspirational new beginning, this country’s 44th president set forth a very different expectation, promising hope and not disappointment to the people who re-elected him. The responsibility of his most devoted supporters will be to hold him true to it.
By: Joe Conason, The National Memo, January 21, 2013
“Bedford Falls Or Pottersville?”: The Mr. Potter’s Are Still Alive And Well In America
It’s easy to feel discouraged about the bullying by right-wing Republicans and their patrons over everything from gun control to taxes and social safety nets to trade unions and jobs.
Every year about now I watch “It’s a Wonderful Life” again to remind myself what Frank Capra understood about America — its essential decency and common sense.
In many ways the nation is better than it was in 1946 when the movie first appeared. Women have gained economic power and reproductive rights; we enacted Civil Rights and Voting Rights and, through Medicare and Medicaid, dramatically reduced poverty among the elderly; we began to tackle environmental devastation; we stopped treating gays as criminals and have even started to recognize equal marriage rights. We elected and then re-elected the first black president of the United States. We have enacted the bare beginnings of universal healthcare.
But we are still in danger of the “Pottersville” Capra saw as the consequence of what happens when Americans fail to join together and forget the meaning of the public good.
If Lionel Barrymore’s “Mr. Potter” were alive today he’d call himself a “job creator” and condemn George Bailey as a socialist. He’d be financing a fleet of lobbyists to get lower taxes on multi-millionaires like himself, overturn environmental laws, trample on workers’ rights, and shred social safety nets. He’d fight any form of gun control. He’d want the citizens of Pottersville to be economically insecure – living paycheck to paycheck and worried about losing their jobs – so they’d be dependent on his good graces.
The Mr. Potters are still alive and well in America, threatening our democracy with their money and our common morality with their greed.
Call me naive or sentimental but I still believe the George Baileys will continue to win this contest. They know we’re all in it together, and that if we succumb to the bullying selfishness of the Potters we lose America and relinquish the future.
Happy holidays.
By: Robert Reich, Robert Reich Blog, December 22, 2012
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