Monday, August 23, 2010 by This Can't Be Happening
by James Ridgeway
President Obama’s Deficit Commission is all smoke and mirrors. Its members are making a big show of laboring over ”painful” choices and considering all options in their quest to bring down the deficit. But inside the Beltway everyone knows what’s going to happen: The commission will reduce the deficit on the backs of the old and the poor, through cuts to Social Security, Medicare, and Medicaid. Some opponents have taken to calling it the Cat Food Commission, since that’s what its victims will be forced to eat once the commission gets done slashing away at their modest entitlements.
In fact, the true intent of the Deficit Commission was evident before it was even formed. That intent was only driven home when Obama appointed as its co-chair Alan Simpson, a former Republican senator from Wyoming who is well known for voicing, in the most colorful terms, what Paul Krugman calls the "zombie lie" that old-age entitlements will soon "bankrupt the country."
So why the big show? Because neither Obama nor the Congress wants to get caught cutting Social Security and Medicare in public, certainly not before the November elections. (Medicaid will be cut as well, but politicians tend not to worry so much about poor people, since they don’t go to the polls in the numbers we middle-class geezers do.) So instead, they are foisting off this unpleasant task onto the Deficit Commission, showing what the lawyers call “due diligence,” sucking their thumbs and pretending to study how to cut the deficit. They’ve got $1 billion in walk-around money to pay for propaganda so the PR industry ought to be plenty happy. So too should billionaire Pete Peterson, as he and his foundation lackeys push forward towards a victory in their longstanding attack on so-called “entitlements.”
Quite frankly, if the Republican Right could get itself together and shove the Tea Party nuts back into their cave–as Reagan did with the crackpots hanging around him–they too could reap the benefits of the Cat Food Commission’s work. Ever since the New Deal, the Right has been kicking and screaming about Social Security. Things just got worse in the 1960s with Medicare and Medicaid. And now, thanks to our supposedly “socialist” president, they are within a few inches of cutting a nice hefty hunk out of the largest social programs this nation.
But just when it looks like the right wingers have collected themselves, the nutcases throw spanners into the works. This time it’s not the Tea Party, but economists from the Federal Reserve and intellectuals from NYU and Harvard. Four of these people have united to publish an 8-page paper via Boston College’s Center for Retirement Research last month entitled What is the Age of Reason?
This paper is about what to do when old people start losing their marbles, plunging into dementia, euphemistically called "Cognitive Decline among Older Adults," and simply aren’t up to such basic tasks as investing their own money. To save these poor fools from themselves, the intellectuals propose "possible policy choices," including such anemic remedies as full disclosure in such things as mutual fund and 401(k) fees.The authors doubt disclosure will have much import. Then there is the intriguing prospect of "Financial `Driving Licenses,” which would require "that individuals pass a `license’ test before being allowed to make nontrivial financial decisions,such as opting out of `safe harbor’ investment products."Another scheme envisions " mandatory advance directives. It is described as follows: "One direct way to address the impact of cognitive decline on financial decision-making would be to require older adults to put in place a financial advance directive before reaching a certain age, so that the management of their assets could be transferred to a third party in the event of incapacity."
Get the picture? Cuts in entitlements, including Social Security and Medicare, will be accompanied by a push to get people to invest part of their Social Security income in Wall Street so as to make up what is being lost in the cuts. And since we are to believe that old people are going crackers, why then, wouldn’t it make more sense to let Wall Street take charge and invest the money directly? That would save a lot of hassle and bring about a windfall in earnings. Remember how we made so much money in our 401(k)s in the recent recession that we all went broke? Wouldn’t it be fun to do it all over again?
It’s going to take a lot to waylay the likely course of future events: The Cat Food Commission will undoubtedly recommend, and a lame duck Congress will pass, legislation that looks fairly innocuous: trimming Social Security a bit, maybe by upping the age by a few years, and cutting a little from Medicare–none of it affecting anyone who is over 65 right now. That will enable the politicians now in office to look like they are protecting seniors and fending off any drastic cuts, while at the same time appearing “tough” on the deficit. But the legislation, in the usual Washington mode, will gradually widen as the years go by, so that by the time this bunch of pols are retired (on their fat pensions) and out of the fray, the new rules will be eating into entitlements in a big way.
The other side of this Faustian bargain would appear to be Congress passing some tax increases. ”In setting up his National Commission on Fiscal Responsibility and Reform,” William Greider recently wrote in The Nation, ”Barack Obama is again playing coy in public, but his intentions are widely understood among Washington insiders.” As Greider puts it, “The president intends to offer Social Security as a sacrificial lamb to entice conservative deficit hawks into a grand bipartisan compromise in which Democrats agree to cut Social Security benefits for future retirees while Republicans accede to significant tax increases to reduce government red ink.”
It remains to be seen how “significant” those tax increases actually turn out to be. But even former Federal Reserve Chair Alan Greenspan seems to be on board with this general plan. Greenspan’s credentials include chairing the first major entitlement-cutting commission back in the 1980s, as well as promoting the Bush-era tax cuts that helped the deficit grow to its current proportions. He still says that reductions to Medicare benefits are necessary–but in a recent interview in the New York Times, Greenspan also says that he now wants to remove all the Bush tax cuts. Seeing as it comes from the champion of “let them eat cake” economics, this pronouncement must be seen as predictor of how conservatives could end up voting. In short, the old and the poor will have to eat cat food, but the rich might kick in a few crumbs as well.
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