The Folks Who Missed the Bubble Want Your Social Security

by: Dean Baker, t r u t h o u t | Op-Ed

The Folks Who Missed the Bubble Want Your Social Security
(Image: Jared Rodriguez / t r u t h o u t; Adapted: hickoryhollow113, Joe Higgins.eu)

If you fail disastrously at most jobs, you get sent packing. But, there are different rules for Washington policy wonks. The same crew who could not see the $8 trillion housing bubble that wrecked the economy are convening in Washington this week to hatch new schemes to take away people's Social Security and Medicare in the name of "fiscal responsibility."

You might think there would be a little bit of humility here. After all, it was the job of these policy wonks to prevent the sort of economic collapse that the country is now experiencing. The basic story really was very simple. Nationwide house prices diverged from a 100-year trend; eventually rising by more than 70 percent above their trend levels.

There was no remotely plausible explanation for this run-up based on the fundamentals of either the supply or demand side of the housing market. Furthermore, there was no remotely corresponding increase in prices in the rental market, which continued to track its long-term trend. This situation should have screamed "bubble," but the highly educated Washington policy wonks either couldn't see the bubble or thought the bubble was cute.

Of course an $8 trillion housing bubble is not cute. When a bubble this size collapses, it gives us the sort of economic nightmare that we are now seeing. But, no one lost their job for failing to prevent this debacle. Instead the policy wonks tell us not to play the "blame game" as they run around saying, "who could have known?"

This isn't just a question of holding to account those responsible for the Great Recession; the point is to stop them before they do even more harm to tens of millions of ordinary workers and their families. This crew is now devising schemes to cut Social Security and Medicare, arguing that the country cannot afford these core elements of the social safety net.

Of course, the budget deficit has exploded in the last two years, but this is a direct result of the economic collapse, not profligate spending as our policy wonks claim. Furthermore, this deficit is directly supporting the economy - it is creating jobs. The people who complain about current budget deficits want to throw people out of work and make it so that parents can't support their children. Those who care about the economy and care about our children should be pushing for larger deficits right now, not smaller ones.

Over the longer term it will be necessary to take steps to bring the budget in line. First and foremost, this will require fixing our health care system. The huge deficits highlighted by the deficit hawks are almost entirely attributable to projections of exploding private sector health care costs. If our per-person health care costs were comparable to those in Germany, Canada, or any other wealthy country with a longer life expectancy than the United States, then we would be looking at enormous budget surpluses in the long-term future.

But the deficit hawks aren't interested in going after the pharmaceutical industry, the insurance industry, the highly paid medical specialists, and others responsible for out-of-control health care costs. They want to take away the Social Security benefits that workers have already paid for and cut their Medicare. Apparently, it was not enough to take away people's jobs and the equity they accumulated in their homes.

Fortunately, we can turn this budget debate around. The best way to reduce the deficit in the near-term would be a modest tax on Wall Street financial speculation. Versions of this tax have been put forward by Rep. Peter DeFazio in the House and Tom Harkin in the Senate. Such a tax could easily raise more than $100 billion a year, while leaving the vast majority of ordinary investors largely unaffected. It is a great way of making the Wall Street crew that caused the damage pay for the mess they have created.

A financial speculation tax probably will not be on the agenda at the deficit conclaves taking place around Washington this week, but that can be changed. The public can insist that instead of talking about cutting Social Security and Medicare, we start talking about seriously taxing Wall Street.

Creative Commons License
This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.





     

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Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He is a regular Truthout columnist and a member of Truthout's Board of Advisers.


Comments

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This is just the predictable

This is just the predictable and expected route of neoliberals, to dissolve or privatize everything "government." It's a run of the mill strategy that has been used around the globe for decades. Now it's come home to roost. This country will be eaten by the capitalist, free market vultures who've eaten up third world countries and invented sweatshops, the IMS and World Bank. Diane Feinstein leads the attack from Ca. Before she ran for Mayor of San Francisco, she was a life long Republican. Now she's one of the strongest hypocritical bitches in the Senate.



Yeah, I read that the

Yeah, I read that the proposed budget which the Republicans have offered up as an alternative to the Obama budget includes the privatizing of Social Security. They never give up, do they?

I'm waiting for the teabaggers to wake up about this--but I wonder if they still think SS and Medicare are not government programs?



What are "ordinary

What are "ordinary investors?" It seems that the old-fashioned idea of investing disappeared 30 years ago. Ordinary investors may now be more properly referred to as "marks" or "rubes."

Here's a tip: "expropriate the expropriators!"



Easy to write a critical

Easy to write a critical piece when you don't bother to include any specifics. Who are "they"? When and where are "they" meeting? What authority or influence to "they" have to effect these alleged changes? What are "they" considering that will take away people's Social Security and Medicare? This strikes me as about as credible as Palin's "death panels" except that her misinformation at least had a set of facts that could refute it.



Comment to22:13 Dick Moser:

Comment to22:13 Dick Moser: If you don't know who "they" are, you have not read your Howard Zinn.



Until we're willing to

Until we're willing to prosecute the criminals, they will continue to terrorize us. I've given up on the political system. If I have to give up on the economic system too, then all that's left is deciding whether it's cheaper to commit suicide with a gun or with pills.



With hollow man Obama at the

With hollow man Obama at the helm we haven't a chance.



Quite likely to occur, given

Quite likely to occur, given the deceptive record of this administration. The big banks and corporations are now legally qualified to buy the needed votes in Congress to pass the laws they want. Zero filibuster. Thanks to the SC. However, the privatization of Social Security and Medicare may, in the long run, create a social tsunami of catastrophic proportion. The cyclical crises of Capitalism are very well documented. It’s not Marxism. It’s the reality and our history is full of evidence in this regard. If SS is privatized, we may expect to have someday, during the next recessions, not 50 million but close to 200 million poor. Our population is aging and many will depend on the Social Security. The banks may be counting on more bailouts, once they bankrupt the Social Security. But that will be gambling with the future of million of people. I read somewhere that SS had a surplus during the Reagan administration and this surplus is being allocated for other purposes. Anybody has heard anything in this regard?



Please refrain from using

Please refrain from using the word bitch, no matter what woman you are referring to. It's as offensive as nigger.



they didn't miss the housing

they didn't miss the housing bubble debacle and they didn't fail...they succeeded beautifully. Why do people keep suggesting that this was a failure? An accident? Stupidity? It was freaking brilliant and nothing will ever be the same and we will keep turning over our money and tax dollars for whatever "bailout,"

This is not a mistake nor a disaster that has to be fixed. It is a brilliant success and until we figure that out they'll keep doing it because we'll allow ourselves to continue to be gullible.



2258/VivaldiCO-Consider your

2258/VivaldiCO-Consider your next life in eternity.Your random thought of ending your life will affect you forever.The plan of your life has much more positive meaning ahead-for all of us,this too will pass!Regards.



Privatize the profits,

Privatize the profits, socialize the losses. You tell 'em, Dean!



Why look at SS and Medicare

Why look at SS and Medicare for possible savings to balance the budget? Certainly money spent on SS is rapidly circulated back into the economy. Why not look to the military? Bombs and bullets may stimulate the economy in their production but after that it is all destruction and waste.
How about the wealthy, that upper 2% that has had an excellent income while that of working people has stagnated or shrunk? When asked why he robed banks, a famous outlaw said "That is where the money is!" We need a super tax say on all income over $300,000 to pay for the wars and get rid of the deficit. How Much? in 1944 the supertax on income over $200,000 was 94% and WWII was paid for in five years!!! Do the wonks not know history? I am not an economist, just an 86 year old retired surgeon but I lived through those years. We have to change our system of voting to public financing, proportionate voting or instant run off so that money no longer has all the power.



We need to tax the rich

We need to tax the rich again. They have robbed the middle class since 1987 and it's time to put the money back. The rich squandered it away on get-richer-quicker schemes on Wall Street. They did not invest it in a real, tangible 21st century economy. They have proven so irresponsible and greedy that we should never entrust them with such wealth again.

No policy wonk of any stature has dared to suggest restoration of real progressive taxation that I know of, but it's what we need.



To those who wonder who

To those who wonder who "THEY" are:

http://www.naplesnews.com/news/2010/feb/16/george-bush-jeb-bush-naples-visit/

among many appeasers.



We were never given a choice

We were never given a choice of paying into Social Security and Medicare; just like taxes, the money's gone from your paycheck before you get it. And not only you pay - your employer is forced to match your deductions. I began working at 15 and am approaching the age of receiving Social Security and Medicare. I've paid into them, my employers over the years have paid into them for me, and receiving them is what I expect and consider my due. I wasn't providing funds for speculators, they've already messed up my IRA and 403b, I was preparing for my old age when I wouldn't be able to work. I'm still able to work but can't find a job, and of course the more of us unemployed, the less of us are paying in.
My mother was a British teenager in WWII, my Dad an American GI who wooed her to America. I grew up with my mum's terrifying war stories and fortunately developed an understanding of how wrong and wasteful war is. War is not inevitable and the money we waste murdering others and destroying the environment is sinful. If we're so strapped for cash, I can't understand why we can't use that Pentagon budget for life instead of death. That money is our various and many taxes and we can reallocate it. If SS is going to get messed with, this is one granny who's going to starve and die protesting in view of the White House.



Budget cuts are

Budget cuts are inevitable.

If social security and medicare are to be protected, we must hack away at the bloated "defense" budget. This has very little to do with defense and everything to do with maintaining a global empire.

If the war budget continues to grow serious cuts in domestic social programs are just around the corner.



I add my voice to that of

I add my voice to that of Dr. Christoferson, Jackie and others. As a consultant to the business world for 20 years, I would direct my clients to the large piles of money when looking for expense reductions and away from the pennies and nickles that protective managers sought to offer up as distractions. Same applies here, except more so. According to one recent source, 44 cents of each tax dollar go to military related purpose. According to a study commissioned by the Department of Defense, in 2004 the US crossed the threshold and accounted for 50% of all world military spending; that has remained the case since. As of 2009, the US arms industries and related businesses account for a whopping 68.9% of all sales, globally. That is the unpleasant smelling thing floating in the punch bowl. Yup, let's screw grandma and grandpappy; hell, we're too darn old to do much about it - or so they figure.



I have to assume that when

I have to assume that when he says, "highly educated", it is tongue-in-cheek. Our representatives are woefully under-educated. Most have only a bachelor's degree or an MBA (hint: an MBA is not a substantial education; "Business Administration" is just an easy out for students who can't hack it in the sciences or humanities).

How is it that so many people in powerful positions think there is some "debate" over evolution? Or that anthropogenic climate change is not real? Or that the selective genetic process dubbed "survival of the fittest" has any relevance to human society? These are not "educated" people!



Pinochet, the Chilean

Pinochet, the Chilean military dictator, privatized the national pension funds, on the advice of the Chicago Boys. But, curiously, he did not privatize the pension of the military. The Chile’s model was used as an example in the last attempt (Bush) to privatize SS. Today the famous Chilean model is discredited, like the Bolivian’s and Colombian’s, and others who followed the same path. The private managed funds are practically bankrupted and have not proven to be a better alternative. They do not grow and the benefits of people are dwindling. The only beneficiaries are the CORPORATE MANAGERS who get big salaries and big bonuses without investing a single penny or risking a single coin. Some Governments had to pump some money into them. Some other are going back to State managing pension plans.



The American public will

The American public will continue to be taken advantage of by the ruling elite until we institute meaningful literacy testing for voters. If you cannot understand English, your vote shouldn't count much. And that goes for those who speak only English. Something like 11% of Americans don't believe we put a man on the moon. George Carlin put it best: Think about the intelligence of the average American, & consider that half of them are even dumber than that!



You tel em "hark"! We need

You tel em "hark"! We need to tax the plutocracy again, and get publicly funded campaigns. It's a start.



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