Subject: [big campaign] New Huff Post from Creamer-Any Deal to Cut Entitlements Would Be Moral, Economic and Political Disaster
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Date: Mon, 28 Mar 2011 08:50:45 -0400 (EDT)
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WhyAny Deal to Cut Social Security, Medicare or Medicaid Would be a Moral,Economic and Political Disaster
 
     Friday, theDemocratic group Third Way published a memo arguing that Democrats shouldsupport “entitlement reform” – by which they mean cuts in Social Security,Medicare and Medicaid.  I don’t doubt thesincerity or intentions of their proposal, but I believe that if Democrats tooktheir advice it would result in a moral, economic and political disaster. 
 
     Here’s why:
 
     The immorality of “entitlement reform.”  The very idea that seniors on Social Security– whose average income is $18,000 a year – should be asked to tighten theirbelts while the Federal Government still gives huge tax breaks to millionairesand subsidies to oil companies is just plain wrong. 
 
      The principlevoices for “entitlement reform” are the multi-millionaires from Wall Street whoargue that we need to cut Social Security and Medicare benefits as part of abargain to reduce the long-term federal deficit and give the “markets”confidence.  Never mind that SocialSecurity in particular does not contribute anything to the deficit and has infact generated a $2.6 trillion surplus that was paid for by workersand employers through Social Security taxes. Nevermind that the Wall Street gang clamoring for “entitlement reform” demandedextension of the Bush tax cuts for the wealthy, subsidies for the oilcompanies, tax breaks for companies that send jobs overseas and an end to theestate tax that only affects the sons and daughters of multi-millionaires.
 
     Never mind thatmany of those who promote “entitlement reform” rake in millions from the fruitsof their coupon clipping and are taxed only 15% -- while ordinary middle classpeople pay twice that much on income earned by actually working for a living. 
 
     Last year JohnPaulson madea record $5 billion in personal income as the manager of a hedge fund. Had hesomehow managed to make that astronomical sum of money laying bricks orsweeping floors, he would have paid taxes at a rate of 35% on the bulk of hisincome.  Instead, he paid at a rate ofonly 15%, since he earned his money by speculating as a hedge fund managerinstead of making a useful good or service. 
 
     The averageSocial Security benefit paid to a retiree is $14,000 per year.  John Paulson – who received a multi-billiondollar tax break compared to ordinary working Americans -- made as much lastyear as the total paid to 357,142 average Social Security beneficiaries.   And we’re asking Social Securitybeneficiaries to “tighten their belts”? That’s just plain wrong.
 
     By the way, aFederal report issued at the end of last week found that corporations made morein profits in the last quarter of 2010 than at any other time in the history ofthe United States.  That, of course, wasfar from the case for middle class incomes.
 
     For the lasttwenty years, middle class incomes have stagnated at the same time all of ourvery considerable increase in Gross Domestic Product has gone to the top 2% ofthe population.  Middle class peopleshouldn’t be asked to pay to fix the fiscal mess that was caused by massive taxcuts to the rich, two Republican wars and the collapse of the financial marketscaused by the recklessness of the big Wall Street banks. The middle class hassuffered enough from the Republican policies designed by their friends on WallStreet.  Those who had the party shouldbe asked to pay the bill.  The notionthat middle class people – and those who aspire to the middle class – should beasked to sacrifice while the wealthy few are getting richer and richer issimply obscene.
 
     “Entitlement Reform” is bad economics. Theprinciple long-term structural problem in the U.S. economy is the demise of themiddle class.  Long-term economic growthrequires that the incomes of ordinary Americans increase in proportion to theincreased productivity of the economy. Otherwise, consumers will not have enough money to buy the goods andservices produced by the economy and the result will, once again, be economiccollapse.  That “demand deficit” isprecisely what caused the Great Recession. 
 
      Middle classwages over the last two decades did not keep pace with increases inproductivity.  Every dime of growth inthe GDP was siphoned off to the financial sector and the wealthy.  For a time, this demand deficit was filledwith a credit bubble.  But when thatbubble ultimately burst, the house of cards came tumbling down. 
 
      Long-termeconomic growth requires that prosperity be widely shared. And that is not theleast bit inconsistent with the need to close a long-term structural Federaldeficit.
 
     My wife,Congresswoman Jan Schakowsky, who served on President Obama’s FiscalCommission, proposed a comprehensive plan to bring the deficit into primarybalance without asking the middle class to pay by cutting Social Security,Medicare or Medicaid. Instead, deficit reduction is achieved by raising taxeson the wealthy; requiring those who make their income from investments to paythe same tax rate as those who make their money by working; controlling thecosts of health care with a Public Option; requiring Medicare to negotiate withthe pharmaceutical companies for lower drug prices; making modest cuts in militaryspending; and eliminating many tax expenditures to special interests such assubsidies to the big oil companies. 
 
     More recently shehas also proposed creating new tax rates for millionaires andbillionaires.  At the moment the top taxrate is for all income above $375,000. The tax code currently makes no distinction between upper middle classand our nation’s economic royalty that makes millions.  Jan’s proposal would create five new bracketsbeginning at one million and topping out at a billion.  
 
      If it wereimplemented this year, it would raise $78 billion – more than the $61 billionreduction sought by the Republicans.  Andit would do this while assuring that the highest rate (for billionaires) isstill below the highest tax rate under Ronald Reagan. 
 
     Those who wringtheir hands about the long-term budget deficit act as if the deficit problem isintractable, and conveniently forget that only a decade ago President Clintonleft office with federal surpluses as far as the eye could see.  Those surpluses were squandered away byGeorge Bush and the Republicans on two wars, and tax breaks for the wealthy. 
 
     The question isnot how to reduce the deficit, it is who pays to reduce the deficit. 
 
     And the “whopays” question is not just a question of morality, it is a question ofeconomics. Economic inequality in the United States is higher today than at anytime since 1928 – before the last great economic collapse.  The last thing our economy needs is a “deficitdeal” that shifts even more income and buying power away from ordinary middleclass Americans and into the hands of the wealthy.  That would be a formula for economicstagnation and decline.  And that wouldbe precisely the effect of cutting Social Security, Medicare or Medicaidbenefits. 
 
       From aneconomic point of view, the facts are clear. We can cut the Federal budget deficit without increasing the “demanddeficit” by cutting the incomes of retirees, the disabled and lower incomeworking people. 
 
     And let’s beclear, all of the proposals for “entitlement reform” would, in fact, cut theincomes of ordinary Americans.  Let’slook at a few:
 
·     Raising the Social Security retirementage to 70 for future retirees.  Thisproposal would amount to an effective cut of about 20% in average SocialSecurity benefits received by future retirees. Some people say that since lifeexpectancy is increasing we should raise the age of retirement.  That’s easy to say if you’re a lawyer orstock-broker – not so easy if you’re a bricklayer or a maid who flips beds fora living. By the way, the numbers show that life expectancy has increasedmainly for high-income people.
 
·     Privatizing Social Security.  This proposal – which was soundly defeatedwhen George Bush proposed it in 2005 – has been resurrected by theRepublicans.  It would destroy SocialSecurity as we know it and replace it with a risky investment scheme thatturned over the Social Security Trust Fund to Wall Street. Of course gettingtheir hands on the Social Security Trust fund is the major reasons why “privatization”is promoted by the same “masters of the universe” whose reckless speculationcollapsed the economy and cost 8 million Americans their jobs.  It would trade the guaranteed benefit ofSocial Security for a bet on the stock market. If you happened to retire when the stock market lost 45% as it did in2008, you’re just out of luck.
 
·     Replacing Medicare with a “voucher”system. This is one of the major elements of Republican Budget Chairman PaulRyan’s “Road Map.” The idea here is to give seniors a fixed value voucher andtell them to go shop the private insurance market.  If private insurance companies raised rates,then seniors would have to come up with the difference.  Instead of being a health insurance plan thatseniors can count on to cover their needs like Medicare, it would become a“defined contribution” plan where the Medicare Trust fund would make a fixedcontribution to your health insurance costs without any guarantee that youcould find a plan comparable to traditional Medicare.
 
This proposal is supposed to be a wayto “control” health care costs.  Ofcourse it does nothing of the sort. Instead, it controls federal expenditures on health care by shiftingincreases in costs to seniors.  This isnot cost control – it is cost shifting. In fact, it would increase overallexpenditures on health care in the economy by replacing the most efficientinsurance system in existence – traditional Medicare – with private insurancecompanies that have massively higher administrative costs – plus take a profit.  And we’re not talking about small differencesin overhead.  Medicare spends about 2% ofevery health care dollar on administration. Private insurers spend from 15% to 30% -- or more – of every dollar onadministration and other non-medical costs like marketing and profit.   
 
In fact, a General Accounting Officereport found that in 2006, Medicare Advantage plans – the part of Medicare thatalready involves private insurance plans -- spent only 83.3 percent of theirrevenue on medical expenses, with 10.1 percent going to non-medical expensesand 6.6 percent to profits. That’s 16.7 percent administrative share comparedto 2% for the traditional Medicare that does not involve private insurancecompanies. 
 
The bottom line is simple: replacingMedicare with vouchers for private insurance would shift costs to seniors andincrease overall costs by allowing private insurance companies to take a chunkof every dollar without adding any value whatsoever.
 
·     Turning Medicaid into a block grant tothe states.  In this case, the plan wouldbe to control federal outlays on health care for low-income Americans – andnursing homes for the seniors and disabled -- by shifting the burden to thestates.  The states could then either anteup more cash when health care costs rose – or they could simply cut benefitsand shift costs to low-income working people. If the states came up with the additional money, a higher percentagewould be coming from middle class Americans, since most state tax systems relyon sources that are less progressive than the Federal income tax.  If they chose to simply cut benefits, theburden would also fall squarely on ordinary Americans.   
 
A group that would be especially hardhit would be middle class seniors who need nursing home care, since a third ofMedicaid dollars goes to pay for long-term care.  Much of that burden would ultimately fall ontheir children and families, who would be forced to come up with the money or watchtheir loved one be thrown out of the nursing home. 
 
And once again, the plan to turnMedicaid into a block grant would do absolutely nothing to control health carecosts.  It would only shift those coststo everyday Americans and go a long way to undo the expansion of coverage tomillions under the new Affordable Care Act.
 
     Social Security, Medicare and Medicaid arethree crucial progressive achievements that have marked major mileposts alongAmerica’s journey to realize our core values. Democrats have to be clear: we won’t go back.
 
     “Entitlement Reform” would spell politicaldisaster for Democrats. The Third Way memo argues that next year’s electionwill be about “deficits.”  That’s justnon-sense.
 
     First, a recentCBS News poll found that 51% of Americans say the economy and jobs are the mostimportant problem facing our country today – but just 7% cited the budgetdeficit.
 
     But morefundamentally, elections are never “about issues.”  Swing voters make their decisions based ontheir evaluations of the qualities of the competing candidates. People voteabout whether a candidate is on their side, strongly committed to core values,a strong effective leader, self-confident, respectful – whether she or heinspires them.  
 
      Issues oftenbecome symbols in the voters’ minds of whether a candidate is “on their side”or “a strong effective leader.”  Butelections are never “about” an issue. They are about candidates.
 
      Last yearDemocrats were thrown out of office because people were sick of an economy thathad become worse and worse for them. As a consequence, many swing votersdecided that Democrats weren’t on their side.  If the economy had been roaring back from recession, they would havevoted differently.  Their positions ondeficits, or Federal spending, would have made very little difference becausethey are abstractions that have no direct, palpable impact on individual votersor their families. 
 
      On the otherhand if a voter becomes convinced that a candidate actually intends to takesomething away that they value – to cut their Social Security or Medicarebenefits, for instance – they will decide in a nano-second that the candidateadvocating that position is not on their side.   That is particularly true because mostAmericans believe that they are owed their Social Security and Medicare benefitssince they have paid throughout their working lives into Social Security andMedicare.  Voters don’t view SocialSecurity and Medicare just as “government programs.”  They view them as “insurance programs.”  Americans believe they deserve Social Securityand Medicare benefits just as they would the benefits owed under any otherinsurance contract.
 
     The notion thatindependent voters will some how be swayed by an abstraction like a “deficitdeal” is a fantasy that must have been dreamed up by folks who spend all oftheir time talking to other policy wonks inside the beltway – certainly notsomeone who has experience with real world electoral politics. 
 
     The Third Waymemo argues that seniors rarely break for Democrats anyway.  Precisely. President Obama won in 2008 while losing seniors by eight points.  Last fall, Democrats lost seniors by 21points.  The President can winre-election while losing seniors by 8 points – but not by 21.  The election passes through states with oldpopulations – like Pennsylvania, Ohio, Michigan, Wisconsin, and Florida. 
 
      A decent chunkof seniors who voted against Democrats last year have to be convinced thatDemocratic candidates are on their side in 2012, or Democrats are toast.  If they see Democrats bargain away theirSocial Security, Medicare and Medicaid benefits – or those of their kids – theywon’t vote Democratic in November of 2012. It’s that simple. 
 
      The pollingshows clearly that the voters oppose cuts in in Social Security, Medicare andMedicaid. 
 
·      The public opposes cutting Social Security benefits by 70% to 80%. 
·     Two-thirds of likely voters oppose raising the retirement age.
·     Up to two-thirds support making the Social Security Trust fund solvent forgenerations by raising the payroll tax to cover income above $107,000 a year. 
     
     A memo last weekfrom Democracy Corps summarized the findings of a survey they conducted in 50of the most competitive Republican-held Congressional districts – nearly all ofwhich gave a majority to Obama in the last presidential election.  
 
     In November,Republicans won these districts by 11 points. Now, as they’ve got to know them in practice, their lead has shrunk totwo – a loss of 9 points.  
 
     Under 40 percentof the electorate in these districts sees their incumbents as “on their side.”
 
     Democracy Corpsreports, the more these voters learn of the Republican budget in a balanceddebate, the less they like it.  Just 46percent of voters in these Republican districts support the GOP plan to cut $61billion, and by 48 to 40 percent, voters there say they are less likely tosupport the incumbent if the incumbent backs the Tea Party agenda.  
 
     Another pollfound that 37% of Americans agreed with Democrats’ approach to cutting spendingas opposed to 25% for Republicans. 
 
     One of thereasons is that as Americans have begun to look at Republican budget proposalsup close – in the concrete, not the abstract.  They don’t like what they see.  That’s especially true when they hear thatRepublicans want to cut things that are important to them, at the same timethey give tax cuts to the rich, or subsidies to oil companies.  To voters this means that the problem isn’tthat we’re “broke” – as House Speaker Boehner claims – but rather that the Republicansgive priority to the wealthy and big corporations instead of their needs. 
 
     Contrary to muchinside-the-beltway opinion, a recent NBC/WallStreet Journal poll showed that a 51% to 46% majority says the governmentshould do more, rather than less. 
 
    It found that by54% to 18%, Americans do not believe that cuts in Medicare are necessary toreduce the deficit. Forty-nine to twenty-two percent say cuts in SocialSecurity are not needed.  Fifty-sixpercent say cuts in Headstart programs are “mostly” or “totallyunacceptable.”   Seventy-seven percentsay the same of cuts in primary and secondary education. Majorities also callunacceptable cuts to defense, unemployment insurance, student loans, and heatingassistance to low-income families.
 
     On the other hand, while Republicans railagainst increases in taxes – even for the rich -- a whopping 81% favor placinga surtax on people who make more than a million dollars.  Sixty-eight percent want to end the Bush taxcuts on those who make over $250,000. 
 
     Many “deficithawks” argue that we have to “get real” and “make the tough choices” to balancethe budget.  How about we really get realand deal with the deficit using the approaches supported by the Americanpeople: increasing taxes on millionaires, or cutting tax subsidies to specialinterests like oil companies – not by cutting Social Security, Medicare andMedicaid benefits.
 
     Fortunately, alot of major Democrats get the picture. Today, Senate Democratic Leader Harry Reid will hold a “Back Off SocialSecurity” event at the Capitol with senior groups and a large group of his colleagues.  
 
      They realizethat any long term “deal” with Republicans over entitlements this year wouldinevitably erode Social Security, Medicare and Medicaid benefits because itmust pass a House that is now dominated by the Tea Party. That is simplyunacceptable.
 
     Democratic acquiescence to any deal thatcuts in Social Security, Medicare and Medicaid would be a moral, economic andpolitical disaster.
 
      The Democratic message on entitlementsshould be simple and clear: to paraphrase the late Charlton Heston – you willhave to take cuts in Social Security, Medicare and Medicaid benefits out of ourcold, dead hands. 
 
Robert Creamer is a long-timepolitical organizer and strategist, and author of the book:  Stand Up Straight: How Progressives Can Win,available on Amazon.com. Follow him on Twitter @rbcreamer.

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