Tag Archives: William Greider

Obama Cuts Deal To Reduce Social Security, Medicare, Medicaid

Hopes for any pretense of liberal change from the Obama administration collapsed yesterday, and not only because of the election in Massachusetts. While the Massachusetts voters were casting their ballots to install the upstart Republican Scott Brown to Ted Kennedy’s Senate seat, the White House was hammering out a closed-door deal to cut entitlements. Obama won the support of Democratic leaders for a plan to issue an executive order that would inevitably lead to reductions in Social Security, and especially Medicare and Medicaid.

The plan represents a capitulation to conservatives in both parties, and would leave Democratic liberals accepting unconditional surrender not only on health care, but on the most basic of all New Deal programs.  As hopes of even a tepid health care reform wane, the effect of this  plan, if accepted by Congress, will be to undermine the only single-payer health care programs this nation has ever known–Medicare for elders, and Medicaid for the poor. As an attack on entitlements, it has the potential to go beyond anything the Reagan and Bush administrations were able to achieve.

As the Washington Post explains this morning:

Under the agreement, President Obama would issue an executive order to create an 18-member panel that would be granted broad authority to propose changes in the tax code and in the massive federal entitlement programs — including Medicare, Medicaid and Social Security — that threaten to drive the nation’s debt to levels not seen since World War II.

The accord comes a week before Obama is scheduled to deliver his first State of the Union address to a nation increasingly concerned about his stewardship of the economy and the federal budget. After a year in which he advocated spending hundreds of billions of dollars on a huge economic stimulus package and a far-reaching overhaul of the health-care system, Obama has pledged to redouble his effort to rein in record budget deficits even as he has come under withering Republican attack.

The commission would deliver its recommendations after this fall’s congressional elections, postponing potentially painful decisions about the nation’s fiscal future until after Democrats face the voters. But if the commission approves a deficit-reduction plan, Congress would have to act on it quickly under the agreement, forged late Tuesday in a meeting with Vice President Biden, White House budget director Peter R. Orszag, and Democratic lawmakers led by Senate Majority Leader Harry M. Reid (Nev.), House Speaker Nancy Pelosi (D-Calif.) and House Majority Leader Steny H. Hoyer (Md.).

Senate Budget Committee Chairman Kent Conrad (D-N.D.), who has long advocated creation of an independent budget panel, called the agreement an “understanding in concept” that holds the promise of at last addressing the nation’s most wrenching budget problems.

“This goes to the question of the country’s credibility with managing its own finances. This is essential for the nation,” Conrad said.

The commission is likely to form the centerpiece of Democrats’ efforts to reduce projected budget deficits, which have soared into record territory in the aftermath of the worst recession in a generation. Government spending to bail out the troubled financial sector and to stimulate economic activity have combined with sagging tax collections to push last year’s budget deficit to a record $1.4 trillion. The budget gap is projected to be just as large this year and to hover close to $1 trillion a year for much of the next decade. 

In other words: The national treasury has been driven into deep deficits by a financial crisis caused by Wall Street greed, compounded by two wars, tax cuts for the rich, and the high prices charged by health care profiteers. And where will we turn to make up for this loss? To the poor and the old, who cling greedily to their “entitlements.”

The claim is made that we need to make these entitlements “solvent” and “sustainable” in their own right, so they don’t “run out of money”–but that’s just political flim-flam. Social Security is in fact perfectly solvent, and the fiscal problems of the Medicare and Medicaid programs stem from the excesses of profit-based health care. If cuts are made to these programs, which have saved millions of Americans out of desperate straits, it will be because there’s simply no political will to do anything else to address the deficit.

All this represents a major victory for the corporate take-over mogul Pete Peterson whose foundation has put up $1 billion to lobby the proposal. His efforts have even involved  a financial news service that pushes this rich man’s plan, and that  has wormed its way into the Washington Post.  William Greider, who has long been covering the Peterson story, writes in The Nation:

The retired mogul has created a digital news agency he dubs “The Fiscal Times” and hired eight seasoned reporters to do the work there. “An impressive group of veteran journalists,” Peterson calls them. I hope they have shaken a lot of money out of this rich geezer. Because I predict doing hack work for him will seriously soil their reputations for objectivity and independence.

With his great wealth, Peterson could have also bought a newspaper to publish his dispatches, but he did better than that. He hooked up with the Washington Post, which has agreed to “jointly produce content focusing on the budget and fiscal issues.” (This media scandal was first uncovered by economist Dean Baker.) The newspaper is thus compromising its own integrity. It’s like buying political propaganda from a Washington lobbyist, then printing it in the news columns as if it was just another news story. Shame on the Post, my old newspaper. I predict a big stink like the one that greeted the Post when its publisher decided to hold pay-for-access “salons” for corporate biggies.

The deal is based on rickety interpretation of the country’s basic laws governing taxation.  Normally, any change in taxes must be passed first by the House, with legislation wending its way through the Ways and Means Committee up to the floor. This proposed arrangement short cuts—indeed appears to bypass—this procedure. The appointed commission is to make a recommendation on the budget after the election and that recommendation then goes straight to Congress where it might go through hearings,floor debate and a vote,or as some proponents of the idea would like, just get an up or down vote. To rub salt in the wounds, it was largely crafted not by members of the House, but by vice president and former Delaware senator Joe Biden along two senators–Kent Conrad, the North Dakota Democrat, once considered heir to the Great Plains progressive tradition, and conservative Judd Gregg, from New Hampshire. The man behind the commission plan is Pete Peterson.

The National Committee to Preserve Social Security and Medicare, which has been fighting against the creation of the commission, recently sent a letter to Congress, saying in part: 

We appreciate the concerns of legislators who are looking for a means of reducing the federal deficit and slowing the growth in the debt. However, we have significant concerns about any process – including the Conrad-Gregg Commission – that would disenfranchise American voters and subject Social Security beneficiaries to harmful cuts in benefits. As supporters of Social Security, we are surprised to see the federal deficit and the federal debt cited as the reason a commission needs to be established to make cuts in Social Security. The truth is that neither the $1.4 trillion deficit nor the nearly $12 trillion debt has anything to do with Social Security benefits.   

For nearly three decades, Social Security has taken in more revenue each year than it has paid out in benefits. These excess funds have been invested in special issue U.S. government securities. Thus, Social Security has effectively been loaning its excess funds to the federal government to spend on other programs. Rather than increasing the federal deficit, Social Security’s annual surpluses have actually been covering up the true size of the deficit in the general fund.

 

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.

William Greider on “Looting Social Security”

Veteran progressive journalist and radical geezer Bill Greider has written an essential article in the current issue of The Nation, on the strategic attack now underway against Social Security and Medicare.

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. They are also targeting Medicare and Medicaid. The pitch sounds preposterous to millions of ordinary working people anxious about their economic security and worried about their retirement years. But an impressive armada is lined up to push the idea–Washington’s leading think tanks, the prestige media, tax-exempt foundations, skillful propagandists posing as economic experts and a self-righteous billionaire spending his fortune to save the nation from the elderly.

These players are promoting a tricky way to whack Social Security benefits, but to do it behind closed doors so the public cannot see what’s happening or figure out which politicians to blame. The essential transaction would amount to misappropriating the trillions in Social Security taxes that workers have paid to finance their retirement benefits. This swindle is portrayed as “fiscal reform.” In fact, it’s the political equivalent of bait-and-switch fraud.

I addressed this subject last month in a series of posts on the coming “entitlement wars“–but Greider does a better job than I ever could, laying out the history, the players, and the tactics employed in this long-brewing struggle. He documents how conservatives are working to exploit the recession, along with public fears and misapprehensions, to manufacture intergenerational conflict, and thereby achieve their cherished goal of rolling back the entitlement programs responsible for rescuing millions of elders from desperate poverty. He also explains why this fight “could become a defining test for ‘new politics’ in the Obama era.”

Defending Social Security sounds like yesterday’s issue–the fight people won when they defeated George W. Bush’s attempt to privatize the system in 2005. But the financial establishment has pushed it back on the table, claiming that the current crisis requires “responsible” leaders to take action. Will Obama take the bait? Surely not. The new president has been clear and consistent about Social Security, as a candidate and since his election. The program’s financing is basically sound, he has explained, and can be assured far into the future by making only modest adjustments.

But Obama is also playing footsie with the conservative advocates of “entitlement reform” (their euphemism for cutting benefits). The president wants the corporate establishment’s support on many other important matters, and he recently promised to hold a “fiscal responsibility summit” to examine the long-term costs of entitlements. That forum could set the trap for a “bipartisan compromise” that may become difficult for Obama to resist, given the burgeoning deficit. If he resists, he will be denounced as an old-fashioned free-spending liberal. The advocates are urging both parties to hold hands and take the leap together, authorizing big benefits cuts in a circuitous way that allows them to dodge the public’s blame. In my new book, Come Home, America, I make the point: “When official America talks of ‘bipartisan compromise,’ it usually means the people are about to get screwed.”

The Social Security fight could become a defining test for “new politics” in the Obama era. Will Americans at large step up and make themselves heard, not to attack Obama but to protect his presidency from the political forces aligned with Wall Street interests? This fight can be won if people everywhere raise a mighty din–hands off our Social Security money!–and do it now, before the deal gains momentum. Popular outrage can overwhelm the insiders and put members of Congress on notice: a vote to gut Social Security will kill your career. By organizing and agitating, people blocked Bush’s attempt to privatize Social Security. Imagine if he had succeeded–their retirement money would have disappeared in the collapsing stock market.

Old folks–and anyone who plans on becoming old some day–need to gear up for this one. A good start is to read Greider’s long article in its entirety.