Tag Archives: Obama stimulus package

Social Security Give-and-Take Leaves Old Folks in the Hole

Spring has come to recession-era America, which means that all across the nation, millions of old people are emerging from hibernation and hobbling out to their mailboxes in search of their long-awaited Social alan balgowlah-heights-mailbox-hoops-umSecurity stimulus checks. The first round of payments, which were provided by the American Recovery and Reinvestment Act, have just been mailed out. So while the big banks may be raking in their trillions, U.S. elders–along with recipients of SSI and veterans’ benefits–will soon have a whopping $250 to protect them from the ravages of the economic meltdown. 

 And it looks like we’d better make it last, since it’s the last addition to our monthly checks that we’re likely to see for a long, long time. Federal forecasts show that for the first time in more than three decades, there will be no increase in Social Security benefits next year. In fact, the Congressional Budget Office projects that because of low inflation caused by the recession, there will be no cost-of-living adjustment (COLA) to Social Security until 2013.

As the New York Times reports, “In theory, low inflation is good for people on fixed incomes.” In the current circumstances, however, “The absence of a cost-of-living adjustment, calculated under a formula set by law, will be a shock to older Americans already hit by plummeting home values, investment losses and rising health costs.” While Social Security levels remain frozen, the premiums and co-pays for the Medicare Part D prescription drug program will no doubt continue to rise steeply, as they have every year since the program began. For at least a quarter of Medicare beneficiaries (including working geezers like myself), Medicare Part B premiums will go up as well.

And if we don’t watch out, it might not stop there: The straw man of Social Security “reform” is yet again raising his scruffy head, this time courtesy of Congressional Democrats. As Roll Call reported last week:

In a year already jam-packed with major legislative initiatives, House Majority Leader Steny Hoyer (D-Md.) is breathing new life into the idea of tackling Social Security reform….Hoyer signaled that Democratic leaders may take steps to act on Social Security reform in the fall after Congress advances its two biggest priorities: health care reform and climate change legislation.

“Of our entitlement programs, I believe we would have the easiest challenge in reforming Social Security,” Hoyer said. “Frankly, I believe Social Security is not very difficult mathematically. It may be difficult politically, but not mathematically.”

The Washington Post confirmed that Hoyer is looking to create “a bipartisan consensus” for “overhauling the Social Security system.” Democrats, the Post reported, “have found a willing partner in the Senate,” alan como-mailbox-painting-flowers-umwhere South Carolina’s Lindsey Graham “has stated his desire to work with President Obama to make changes to keep Social Security solvent.”

Graham has long been a supporter of Social Security privatization. But after what’s happened to people’s 401(k)s in the last year, even Graham has had to admit that dog won’t hunt. Instead, he now presents Social Security reform as a “math problem”: “You can do a combination of things, give a little here and give a little there, and get it done,”  he said. 

Anyone who supports the program that lifted millions of elders out of poverty should still be concerned by the ongoing disconnect between the “reform” rhetoric and Social Security’s actual fiscal soundness. (The nation’s private financial institutions, as Dean Baker has pointed out, only dream of being as solvent as the Social Security system.) Following Hoyer’s announcement, the National Committee to Protect Social Security and Medicare commented

given the long list of critical challenges this nation faces right now…it’s hard to imagine why Social Security would share space at the top of the legislative priority list ….After all, Social Security is able to pay full benefits for at least 30 more years….

Some worry Social Security will be used as a bargaining chip in the healthcare debate, others see this as part of ongoing efforts to balance the budget through entitlement program cuts.

As I’ve written before, there are still plenty of powerful voices on the right who woulalan belfield-mailbox-long-umd like to preserve the myth of Social Security as a ticking time bomb that will one day land in the laps of the young. In doing so, they can create a phony intergenerational conflict that deflects attention from the true villains in our economic mess, while at the same time achieving their long-cherished dream of cutting entitlements. As William Greider has written, these forces are getting a new boost from the recession:

Governing elites in Washington and Wall Street have devised a fiendishly clever “grand bargain” they want President Obama to embrace in the name of “fiscal responsibility.” The government, they argue, having spent billions on bailing out the banks, can recover its costs by looting the Social Security system.

By now, we’re all used to witnessing these kinds of bait-and-switch tactics. But according to yet another Washington myth, we’re not supposed to see them coming from the Democrats.

Photos: Alan Wadell, Walk Sydney Streets

Photos: Alan Waddell, Walk Sydney Streets. (Alan was actually Australian, but these photos were too great to pass up. Find out more about Alan Waddell and his walks at http://www.walksydneystreets.net.)

Legacy of Lies: The Great Economic Cover-Up

Remember back in February, when Bill Clinton urged Obama to be more “upbeat” about the economy? Clinton actually implied that the new president could be making the economy worse by being honest about how bad it was, thereby rattling public confidence—and with it, the market. You’d have thought the primary campaign would be enough to convince Obama that nothing good could come from Clinton homme. But the president has clearly taken a page from Clinton’s playbook, largely avoiding statements that might frighten the horses in favor of cheerful declarations that we are at “a turning point in our pursuit of global economic recovery”—while at the same time promoting the latest bank bailout plan, which he says will get us there.

There are plenty of reasons why its wrong to try to buoy up a sinking economy on a raft of positive rhetoric—among them, the fact that it obscures what actually happened in the past, and clouds our judgment about what should be done to “fix” it. In the current issue of Newsweek, Daniel Gross comments on the Orwellian linguistic feat that by the government seeks to rebrand the piles of reeking crap created by our financial system.

Remember those toxic assets? The poorly performing mortgages and collateralized debt obligations festering on the books of banks that made truly execrable lending decisions? In the latest federal bank-rescue plan, they’ve been transformed into “legacy loans” and “legacy securities”–safe for professional investors to purchase, provided, of course, they get lots of cheap government credit. It’s as if some thoughtful person had amassed, through decades of careful husbandry, a valuable collection that’s now being left as a blessing for posterity.

According to this morning’s New York Times, the administration is now taking things a step further by promoting a plan that would let us ordinary folks buy what are being called “bailout bonds”—shares in mutual fund-type bundles of lousy mortgage securities. These are supposed to eventually become profitable, thereby allowing us to share in the wealth. But of course, they could also go the other way. As the Times notes: “If, as some analysts suspect, the banks’ assets are worth even less than believed, the funds’ investors could suffer significant losses.” In other words, having been screwed once by Wall Street, we’re now being asked to bend over for a twofer—which some people just might do, if they believe the rhetoric that happy days are about to be here again.

Another point of view came from William K. Black, who was the chief federal regulator during the S&L crisis, in a long interview with Bill Moyers on Friday. Black calls Bernie Madoff is a “piker” in comparison with the Wall Street giants that committed mass fraud, and are now nonetheless raking in government funds. When Moyers asks Black “why the bankers who created this mess are still calling the shots,” instead of being fired like the auto executives, Black mentions the close relationships between Washington and Wall Street, which applies to Tim Geithner and Larry Summers as much as to Henry Paulson. Then he talks about what he doesn’t hesitate to call a “cover-up”:

WILLIAM K. BLACK: But the other element of your question is, we don’t want to change the bankers, because if we do, if we put honest people in, who didn’t cause the problem, their first job would be to find the scope of the problem. And that would destroy the cover up.
BILL MOYERS: The cover up?
BLACK: Sure. The cover up.
MOYERS: That’s a serious charge.
BLACK: Of course.
MOYERS: Who’s covering up?
BLACK: Geithner is charging, is covering up. Just like Paulson did before him. Geithner is publicly saying that it’s going to take $2 trillion—a trillion is a thousand billion—$2 trillion taxpayer dollars to deal with this problem. But they’re allowing all the banks to report that they’re not only solvent, but fully capitalized. Both statements can’t be true. It can’t be that they need $2 trillion, because they have masses losses, and that they’re fine.

Black insists that “the entire strategy is to keep people from getting the facts…about how bad the condition of the banks is.” So instead of closing bad banks, as regulators did after the S&L crisis, the government is simultaneously pumping money into them and covering up their losses, while avoiding any hard-nosed investigation into their past conduct—all based on the idea that “we have to lie to the people to create confidence.”

MOYERS: Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?
BLACK: Absolutely.
MOYERS: You are.
BLACK: Absolutely, because they are scared to death. All right? They’re scared to death of a collapse. They’re afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we’ll run screaming to the exits. And we won’t rely on deposit insurance. And, by the way, you can rely on deposit insurance. And it’s foolishness. All right? Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, “We just can’t let the big banks fail.” That’s wrong….
MOYERS: So, you’re saying that people in power, political power, and financial power, act in concert when their own behinds are in the ringer, right?
BLACK: That’s right. And it’s particularly a crisis that brings this out, because then the class of the banker says, “You’ve got to keep the information away from the public or everything will collapse. If they understand how bad it is, they’ll run for the exits.”

Promoting this scenario, of course, serves the interests of these same bankers, since it insists that the only way to prevent complete catastrophe is to keep bailing out the big financial institutions, regardless of their credibility and regardless of the cost.

Black believes that the only antidote for this self-serving myth lies in Congress having the wherewithal to launch a real investigation and reveal the facts to the American people—and then base future policymaking on these facts, instead of on a legacy of lies.

How Much Is a Year of Your Life Worth?

If they know what’s good for them, older folks will be especially attentive to one undercurrent in our present health care debates: an increasingly widespread view that the allocation of medical treatments—and indeed, the worthiness of human life—should be subject to a cost-benefit analysis.

Obama’s stimulus plan, for example, includes substantial funding for what’s called “comparative effectiveness research,” to test various treatments for the same illnesses and report their findings to the president and Congress, which will presumably use it in their policymaking decisions. As the New York Times reports, “Supporters of the research hope it will eventually save money by discouraging the use of costly, ineffective treatments.”

On one level, this is only sensible. And thusfar, the main opponents of comparative effectiveness research seem to be conservatives, who fear any kind of government intervention into the current–and highly unequal–private system of health care dispensation. But what worries me about this approach is how the data it acquires might be used—or misused. 

On its Economix blog, the Times has been running a series of posts by Princeton economics professor Uwe E. Reinhardt, the latest of which discusses the concept of “QALYs”–“quality adjusted life-years”—which could be used to help determine how the government spends its health care dollars. 

QALYs are a metric widely used now in cost-effectiveness research. They are meant to adjust for the fact that not all years added to people’s lives are equal. A medical intervention yielding a given number of additional life-years in perfect health makes a greater contribution to human well-being than an intervention that yields the same number of life-years in less-than-perfect health. QALYs are used to adjust for that difference in a patient’s quality of life. 

Who, I wonder, is going to determine the quality of our life-years—especially as we get older? I’m 72, and I know it’s been a long time since I had a year in “perfect health.” It seems to me a very short leap from calculating QALYs to instituting age-based health care rationing, an increasingly popular proposition under which the elderly are told they should sacrifice some of their “less than perfect” life-years for the good of all by forgoing costly medical treatments.

As I’ve written before, arguments for age-based health care rationing are in turn based upon the idea that if we don’t do something like this, health care costs—and especially Medicare—will soon bankrupt what’s left of the American economy. But this idea rests upon a major fallacy:  that there’s nothing else we can do to lower costs other than withhold care from the greedy geezers who want a new hip or a heart bypass when they haven’t got long to live, anyway.

In fact, there are plenty of other things we can do to cut costs—for a start, kicking the insurance companies out of the mix, reining in the drug companies, and instituting a single-payer system, which could lower our national health care  bill by as much as 40 percent while providing improved care to Americans of all ages. This fact is supported by numerous studies comparing health care in the United States and other industrialized countries, conducted by the World Health Organization, Congressional Research Service, Kaiser Family Foundation, and Commonwealth Fund, among others. 

So I’ll say it again: As a public-spirited old person, I might be willing to give up some costly, life-sustaining treatment if the future of humanity depended upon it. But I’m not going to sacrifice a single life-minute to preserve our system of medicine for profit.

The Federal Reserve Passes the Buck—and Prints a Trillion More

Financial crises have a way of exposing the real structures of economic and political power. The current “big mess”—as the White House has taken to calling the worst economic disaster since the Great Depression—has revealed, among other things, the monstrous power of the Federal Reserve.

I’ve never put much stock in conspiracy theories that posited “secret   images-fedteams” or “shadow governments” pulling the strings behind the scenes. But the Fed comes as close as it gets. While we focus all our attention on our elected government—the Democrats and Republicans who fight it out over how much to spend on the stimulus package—the Federal Reserve goes on operating behind closed doors, making financial decisions that could make the stimulus look like chump change.

The Fed’s power was abundantly clear on Wednesday: While the politicians, the press, and the public remained riveted on the battle over a few hundred million in AIG bonuses (which the Fed, it turns out, knew all about months ago, and didn’t bother telling the president), the Federal Reserve decided on its own to pump $1 trillion into the economy—nearly doubling all its previous cash injections. This is accomplished, as the New York Times points out, by “creating vast sums of money out of thin air.” And that’s not a metaphor: The banks that more or less run the Fed are helping themselves to $1 trillion plus by printing new money.

It works like this: The Fed creates the money. It then buys long term Treasury bonds to jump start credit flowing through the economy. The Treasury issues these bonds secured, in effect, by the combined assets of the American people. This injection of cash may help out banks–although past injections, since the recession began, have been largely ineffective—but it will surely end up causing inflation and ballooning the already swollen federal debt.

All this is done in the name of supporting the economy, but it’s the American public that serves as the banking industry’s cash machine. And we have virtually nothing to say about it, even through the remote apparatus of electoral politics. The basic economic policy of our supposedly democratic nation is effectively being run by and for private industry.

Members of the Fed’s board of governors may be nominated by the president and rubber stamped by the Senate. But as I’ve written before, it’s the member banks who call the shots. This so-called public-private entity was long ago given authority to control the money supply in the United States, and it does so with little transparency, oversight, or accountability. Politicians of both parties bowed to the deregulatory will of Alan Greenspan for decades. Now we have a Treasury secretary who comes from the New York Fed, and we wonder why the banks seem to be getting everything they want. Since the recession began,  the Federal Reserve system has only grown still more powerful, and no one seems to mind it a bit.

In The Nation this week, William Greider, who has written extensively on the Fed, argues that “to restore the broken financial system, Washington has to fix the Federal Reserve” and outlines why the Fed “has lost its ability to govern the credit system….In its present condition, the Fed may even make things worse.”  Yet the Federal Reserve seems to be catching remarkably little blame for the current economic crisis.

In a sharp piece on Huffington Post, economist Ann Pettifor expresses her astonishment at the fact that Fed chair Ben Bernacke has “dodged the bullet” when it comes to public rage and disgust, despite the fact that as a longtime Federal Reserve governor, he was supposed to be minding the store while companies like AIG built their hollow mountains of debt. (The Fed even has a seat on AIG’s board.) Pettifor parses Bernecke’s rare interview with CBS news on Sunday, in which he attacked AIG:

The interview was just an opportunity, I would argue, to deflect attention from the Fed’s negligence and whip up popular opinion against Liddy and the other buckin’ broncos of AIG. In the macho style of Rodeo, the Fed Chairman was angrily slamming the barn door shut—long after the bucking broncos had charged out of the barn, clutching bonuses.

But while Bernecke may be using one hand to slap the wrist of everyone’s favorite corporate villain, he’s using the other to hand out fistfuls of cash to institutions that behaved just as badly as AIG. It all gives a whole new meaning to passing the buck.

Robbing the Old to Give to the Young (and the Rich)

Advocates for the preservation of so-called old-age entitlements have been warning for some time that Social Security and Medicare may be offered up as a sacrifice to offset the cost of the bailout and stimulus.  This would suit conservatives, who for years have been looking for ways to undermine the popular programs. Leading that charge are the the “granny bashers” hunkered around the Peter G. Peterson Foundation. With an endowment of $1 billion, the Foundation pursues an agenda that consists mainly of bitching and moaning that greedy geezers are taking money away from poor young things with their unconscionable demands for basic health care and income support. With increasing support from the media, the punditry, and some members of Congress, they warn that aging boomers will soon bankrupt the country and destroy the lives of future generations.

It’s particularly absurd that this argument emanates from the likes of Peterson, himself now an octagenarian, who was Nixon’s Secretary of Commerce and and more recently chair of the Council on Foreign Relations. Peterson, who is worth $2.8 billion, was also head of the now-defunct Lehman Brothers, and is probably best known as senior chairman of Blackstone Group, a finance company currently enjoying harsh criticism from the Chinese for having lost that country $80 billion in lousy business. While attacking the programs that support poor elderly people, Peterson seems to have no objection to government bailouts for his old comrades on Wall Street. Bill Greider recently wrote a comprehensive piece in The Nation on the machinations of Peterson and his anti-entitlement cohort. 

This week, Dean Baker, co-director of the Center for Economic and Policy Research,  a Washington think tank,  points out the essential flaws in the granny bashers’ prognostications of doom. In fact, he argues, they have it backwards:

The recent collapse of the housing bubble and the resulting stock market plunge have reduced the wealth of older workers and retirees by close to $15 trillion. This is a transfer to the young, since they will be able to buy the housing stock and the corporate capital stock for a far lower price than they would have expected to pay just two years ago.

Remarkably, the granny basher crew has somehow failed to notice this enormous transfer of wealth from the old to the young. They just continue their crusade to cut Social Security and Medicare as though nothing has happened.

It should be evident that the granny bashers don’t care at all about generational equity. They care about dismantling Social Security and Medicare, the country’s most important social programs. It is important that the public recognize the granny bashers’ real agenda so that they can give them the respect they deserve.

A Tale of Two Democrats

Every once in a while I think about the fact that my life, like the lives of many members of the so-called Silent Generation, began during a depression—and may well end during another.

I can’t say that I remember much about the hardships of the first one. My family, like so many others, was rescued from the threat of poverty by a federal government job, when my father was offered a modest position in the Roosevelt administration. I do remember how my parents felt about FDR—the trust they placed in him. I don’t expect to ever feel that way about any politician in my lifetime.

I know what Obama is up against and want to give him the benefit of every doubt. But as Sam Smith pointed out in a typically eloquent post yesterday, these are very different times, the Democrats are a very different party, and the window for truly bold action may be closing.

In the late summer of 1933, when it appeared that the National Recovery Administration would not be able to provide adequate employment, FDR aide Harry Hopkins began laying the groundwork for a jobs program. Hopkins — who had pledged to himself to put four million people to work within four weeks — fell somewhat short. In the first four weeks only 2.8 million workers were put on the government payroll. Hopkins didn’t reach the four million goal until January.

In other words, Harry Hopkins got the same number of people employed in four weeks as Obama has promised within two years.

It was a different time in other ways. For example, Democrats didn’t apologize for the federal government as June Hopkins explained in Presidential Studies Quarterly:

“One hot summer day in 1935, federal relief administrator Harry Hopkins presented his plan for alleviating the effects of the Great Depression to a group of shirt-sleeved Iowa farmers, not noted for their liberal ideals. As Hopkins began to describe how government-sponsored jobs on public projects would provide both wages for the unemployed and a stimulus for foundering businesses, a voice shouted out the question that was on everyone’s mind: ‘Who’s going to pay for all that?’ . . .

“‘You are,’ Hopkins shouted, ‘and who better? Who can better afford to pay for it. Look at this great university. Look at these fields, these forests and rivers. This is America, the richest country in the world. We can afford to pay for anything we want. And we want a decent life for all the people in this country. And we are going to pay for it.”…

To use the archaic language of the party’s earlier days, we need jobs and business — not stunningly non-specific stimuli and fiscal packages, but things people can see and feel, leading them to invest in America again as well….

FDR got his pressure from the left; Obama gets his from the right thanks to the unwillingness of progressives to push him. FDR could take action without a gang of media manipulators telling him to be careful. There wasn’t an inordinate pyramid of bureaucracy chipping away at every decision before it went into action. Liberals had more passion than status and really cared about those at the bottom of the American heap.

Are we trapped forever in this contemporary paradigm? Or can we face what has happened to us and start to change it? Can liberals once again represent the ordinary American or can such Americans only expect a few nods in their direction? Can we condemn a whole class of citizens because of what we fear some rightwing Republicans will say if we do something real to help them?

This is a time when status, style and semantics won’t save us. Reality has entered the house of America without knocking. It can’t be spun away. And time is running out.

There’s more to the post—read the whole thing here.

fdr-new

[1933 cartoon from the Basil O’Connor Collection at the FDR Library and Museum in Hyde Park, New York; many of these FDR political cartoons have been placed online in a database created by students at Niskayuna High School in upstate New York.]

Financial “Experts” Need to Seek Professional Help

I hate to keep harping on AARP. But they are after all the leading public voice for old folks–and so much of what they have to say about the current economic crisis is just such godawful drivel.

Last week I commented on AARP magazine’s relentlessly upbeat take on being old and out of work. A recent bulletin piece was full of the same kinds of useless pick-me-ups. What really took the cake for me this time, though, was the financial planning advice offered to recession-battered geezers:

Avoid early withdrawals. “Taking hits on your retirement accounts, especially when the stock market is falling, generally isn’t a good idea,” says Matt D’Arcy, of Greybridge Financial in Cleveland. Seek professional help. “There are a lot of strategies that might help people avoid touching retirement investments,” he says. “The point is to sit down with someone who can help you map a plan.” If possible, delay Social Security. Benefits are reduced before full retirement age.

OK, let’s just take these statements one-by-one. First, “Avoid early withdrawals.” Nice advice if you can afford it. Or maybe not even then: These financial “experts” have been warning us for more than a year not to take our money out of the market. I just checked to see where the Dow Jones Average was a year ago–hovering around 12,000. I don’t need to tell you where it is now. Here’s a chart that tells the story all too clearly:

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Now, don’t you wish you’d made a couple of “early withdrawals” some time in the last year? Instead, we’ve been told again and again that we have to “hold tight” and “wait it out.” Not very useful for people who are already retired and depending on their savings–and could die before this thing hits bottom.

Second piece of advice: “Seek professional help.” How anyone can still say things like this with a straight face is beyond me. By now it would seem pretty clear that these financial “professionals” haven’t got a clue, and that anyone who tells you otherwise should–well, should probably seek professional help.

Let’s not forget all those people who sought professional help from the likes of Bernie Madoff. In a recent letter to the judge in the Madoff case, Massachusetts School of Law Dean Lawrence Velvel, writing on behalf of a group of 300 Madoff victims, noted:

Many–perhaps even most–are elderly, in their late 60s, 70s, or 80s. Many had no other savings or income except what they had in or received from Madoff. Many are completely devastated, financially and psychologically. They are selling their homes in order to obtain money to live. They are attempting to reenter the work force, sometimes in menial jobs, in their 60s, 70s and 80s, in order to obtain money for food and shelter.

Some of these Madoff victims were described in a Reuters article last month; they include a 90-year-old who retired 25 years ago, but has now returned to work in a California supermarket. That’s where seeking professional help got him.

Finally, we come to the third piece of advice: “If possible, delay Social Security.” We all know that the earlier you start collecting Social Security, the lower your monthly payments will be. But right now, Social Security is about the only thing that older people can count on. While everything else is going down, Social Security benefits for 2009 went up almost 6 percent, the largest increase in 25 years. So a better piece of advice might be to do everything you can to protect Social Security from being undermined in the name of “entitlement reform.”

The bottom line is, a whole lot of newly unemployed, newly broke elders will have no choice but to start taking their Social Security as soon as they can–unless they can figure out how to stretch their $250 stimulus checks until the recession ends.

(By the way, last night on “60 Minutes,” Fed Chair Ben Bernecke assured us that the end will come soon–“probably this year.” And if you believe that, I’ve got some shares of AIG to sell you…)