Consensus forming in among Washington politicians for cuts in "entitlements".

[Better Believe It]

Consensus is forming on what steps to take in cutting the deficit

By Lori Montgomery
Washington Post Staff Writer
November 22, 2010

After an election dominated by vague demands for less debt and smaller government, the sacrifices necessary to achieve those goals are coming into sharp focus. Big cuts at the Pentagon. Higher taxes, including those on home ownership and health care. Smaller Social Security checks and higher Medicare premiums.

A debate is raging over the size and shape of those changes, particularly the wisdom of cutting Social Security benefits. But a surprisingly broad consensus is forming around the actions required to stabilize borrowing and ease fears of a European-style debt crisis in the United States. As a presidential commission struggles to build political momentum for such a package, even Republicans who initially opposed the commission's creation are still at the negotiating table.

Whatever the outcome, the plan unveiled this month by co-chairmen Erskine B. Bowles, a chief of staff in the Clinton White House, and Alan K. Simpson, a former Republican senator from Wyoming, has been respectfully received with a few exceptions by both parties. Its major elements are also winning support from a striking line-up of commentators.

Former AARP chief Bill Novelli, who sits on a separate budget-balancing panel, has acknowledged the need to trim benefits to make Social Security solvent for future generations. This second panel is chaired by Alice M. Rivlin, a budget director under President Clinton, and Pete Domenici, a former Republican senator from New Mexico.

After hours of talks by the presidential deficit commission, which includes some of most liberal and conservative lawmakers in Congress, Bowles said it is clear that "there is common ground there."

Although some powerful Democrats, including House Speaker Nancy Pelosi (Calif.), have rejected benefit cuts, others are leaving the door open.

"I'm going to listen to everything," Rep. Xavier Becerra (D-Calif.), one of Pelosi's appointees to the deficit commission, said after emerging from a private session with Bowles and Simpson last week week. "I'm not going to rule anything out."

Read the full article at:
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/21/AR2010112103919.html

[villager]

1. "Just as long as we don't have to tax rich people!"

n/t

[Bucky]

21. Quiet you! Tax cuts to the rich aren't an Entitlement. It's just something they're entitled to.

um...

[Zenlitened]

2. How lovely.

http://www.ourfuture.org/report/2010062630/statement-commission-deficit-reduction

Social Security and Medicare “Solvency” is not part of the Commission’s Mandate

I note from Chairman Simpson’s conversation with Alex Lawson that the Commission has taken up the questions of the alleged “insolvency” of the Social Security system and of Medicare. If true, this is far outside any mandate of the Commission. Your mandate is strictly limited to matters relating to the deficit, debt-to-GDP ratio and fiscal stability of the U.S. Government as a whole. Social Security and Medicare are part of the government as a whole, so it is within your mandate to discuss those programs – but only in that context.

To make recommendations about the matching of benefits to payroll taxes – now or in the future – would be totally inappropriate. Within your mandate, the levels of payroll taxes and of Social Security benefits are relevant only insofar as they influence the current and future fiscal position of the government as a whole. Their relationship to each other is not relevant. You are not a “Social Security Commission” and there is no provision in your Charter for a separate discussion of the alleged financial condition of either program taken on its own. Such discussions, if they are occurring, should be subjected to a point of order.

The usual “solvency” arguments directed at the Social Security system and at Medicare as separate entities are in any event complete nonsense. These programs are just programs, like any others, in the Federal Budget, and the Social Security and Medicare “systems” are thus fully solvent so long as the Federal Government is. Further, as explained below, under our monetary arrangements there is no “solvency” issue for the federal government as a whole. The federal government is “solvent” so long as U.S. banks are required to accept US. Government checks – which is to say so long as there is a Federal authority in the Republic. This point has been demonstrated repeatedly in times of stress, notably during the Civil War and World War II.

As a Transfer Program, Social Security is Also Irrelevant to Deficit Economics.

Political discussions of “long-term fiscal sustainability” – including in the Charter for this Commission – make an economic error when they loosely use the word “entitlements” and suggest that supposed economic dangers of federal deficits (for instance, rising real interest rates) can be reduced by “entitlement reform.” As a matter of economics, this is not true.

“Government Spending” – as any textbook will verify – is a component of GDP only insofar as the spending is directly on purchases of goods and services. That alone is what economists mean by the phrase “government spending.” GDP is the final consumption of produced goods and services, and government is one of the major consuming sectors; the others being private business (investment) and households (consumption).

Social Security is a transfer program. It is not a spending program. A dollar “spent” on Social Security does not directly increase GDP. It merely reallocates a dollar from one potential final consumer (a taxpayer) to another (a retiree, a disabled person or a survivor). It also reallocates resources within both communities (taxpayers and beneficiaries). Specifically, benefits flow to the elderly and to survivors who do not have families that might otherwise support them, and costs are imposed on working people and other taxpayers who do not have dependents in their own families. Both types of transfer are fair and effective, greatly increasing security and reducing poverty – which is why Social Security and Medicare are such successful programs.

Transfers of this kind are also indefinitely sustainable – in fact there can intrinsically be no problem of sustainability with transfer programs. Apart from their effect on individual security, a true transfer program uses (by definition) no net economic resources. The only potential macroeconomic danger from “excessive” transfers is that the transfer function may be badly managed, leading to excessive total demand and to inflation. But there is no risk of this so long as the financial crisis remains uncured. Under present conditions Social Security and Medicare are bulwarks for stabilizing a total demand that would otherwise be highly deficient.

Similarly, cutting Social Security benefits, in particular, merely transfers real resources away from the elderly and toward taxpayers, and away from the poor toward those less poor. One can favor or oppose such a move on its own merits as social policy – but one cannot argue that it would save real resources that are otherwise being “consumed” by the government sector.

The conclusion to be drawn is that Social Security should in any event be off the agenda of your Commission, as it is a transfer program and not a program of public spending in the economic sense. In particular it does not use capital resources and will not drive up interest rates. This is true whether the “Social Security System” is in internal balance or not.

[dkf]

7. Transfers from workers to retirees aren't sustainable if a worker isn't making enough to support

Themselves much less retirees.

The real danger of not buying a house that can be paid off before retirement is that housing costs will go up and up as time goes on. Someone who hasn't bought and paid off a house will be fighting inflation forever and medical bills are even worse. For a worker, providing for their own crazy housing, health, and retirement expenses is overwhelming. Add on to that support of a growing retired population and it is too much for many.

People must save as much as they can in their working years because being dependent on an overstretched younger generation is not a guarantee of comfort.

[girl gone mad]

14. The government is free to fund any shortfalls.

It's not a matter of intergenerational transfers. Every generation is free to determine the fiscal priorities of government.

Social Security is one of the wiser spending programs, with virtually all of the money ending up back in our domestic economy. It also frees up more jobs for young people and is solvent for decades.

This is much smarter than, say, the trillions we've funneled into zombie banks, or the trillions we've quite literally obliterated in foreign wars.

[dkf]

19. Is that the incentive we should tout...pay social security to free up jobs for young people?

As to every generation deciding their own priorities that was half my point, that an overstretched working class won't be able to pay a livable sum to their elders. Their priority will be their own survival and maybe that of their parents, but not necessarily non related seniors.

[girl gone mad]

20. We're giving trillions to the banks.

I have no idea why you believe we can't afford to cover our Social Security obligations.

[dkf]

23. Keeping banks solvent keeps faith in our economic system.

If you think about it the only reason that piece of paper or that bank statement has any worth is because all people acknowledge it's value. If we begin to doubt the value of IOUs and bank accounts then it all falls apart.

It all seems rather precarious to me.

[girl gone mad]

28. First, the banks are not currently solvent.

Second, it's the height of hypocrisy to claim we need to be funneling trillions to the banks, money which has largely ended up being spent on bonuses and speculative activity, as a matter of faith in our supposed "IOUs" at the same time you are arguing for defaulting on the actual obligations our government made to the American people.

Sorry, but the government never promised to backstop toxic derivatives. They did promise to pay Social Security bondholders. Defaulting on our obligation to SS will cause actual systemic risk. Forcing private debt holders to accept losses for their irresponsible risk taking is not an act which would threaten our financial sovereignty in the least.

[laughingliberal]

32. +1000 nt

[laughingliberal]

31. Keep the FICA tax where it is and raise the cap. SS is 100% solvent for the next 27 years and...

can pay 78% of benefits thereafter as far as the eye can see.

Those of us working the past 30 years funded our parents retirement and created the $2.5 trillion surplus that exists now.

This is not at all about the poor, younger workers. This is about Wall Street wanting our money so they can steal it like they did our 401k's.

[Igel]

11. The first heading and what follows misses the point.

The second heading and what follows makes sure you miss that the first one misses the point.

The only way that SS can be solvent *and* redeem the debt obligations held by Treasury is for the Congress to authorize payment. This requires money. For that they need to reduce spending to free up the money, increase revenues, or issue general debt obligations to the public at large (which the Fed could also buy up, of course, but since it's general debt obligations it's still part of the debt). Or they could just inflate the money supply, i.e., print money to cover the debt. If we use fiscal policy to help control the economy, then printing money serves other ends; it's "taken".

The deficit commission looks at spending cuts, revenue "enhancement," and deficits involving the general fund--precisely what the SS trust fund would affect. The only way to make the Social Security benefits program *not* be relevant is to make sure that it never needs to redeem the special debt obligations: Which is to say, making sure that benefits paid out are matched to incoming FICA tax revenues. In other words, stipulating that SS be made irrelevant is not just relevant but required--because the default hypothesis is that it will be very much relevant and affect spending, debt, or the need for raising revenues.

The only ways to make it so SS never has to redeem the special debt obligations are to cut benefits and/or increase taxes. I can see saying that the report need not concern itself with the specifics, but since most people would just as soon assume that the special debt obligations are somehow magic and redeeming them is cost-free "in for a penny, in for a pound" isn't entirely imprudent.

[girl gone mad]

15. You should read Galbraith's entire testimony.

He directly addressed these supposed concerns.

[Zenlitened]

29. What GGM said. - n/t

[CurtEastPoint]

3. Well, how AARP's Novelli has changed his focus, apparently:

From Georgetown U's website where he is a Distinguished Prof at the School of Business:

While at AARP, where he completes eight years of service as chief executive officer in April, he more than doubled the organization’s operating budget, increased membership by more than five million, and made AARP the nation’s leading voice calling for comprehensive health care reform. He worked across partisan lines to help create Medicare Part D; led a successful fight against attempts to carve private accounts out of Social Security; transformed and broadened AARP’s relevance to more than 78 million boomers by offering revolutionary, market-changing products and services to meet their needs and interests; launched Divided We Fail, the largest and most coordinated effort AARP has ever undertaken, to urge U.S. leaders to take steps to ensure affordable, quality health care and long-term financial security for all; and created the AARP Global Network, establishing AARP as a leading voice on international aging issues.

[Raine]

4. I'm sick to death of the dirtying of the word "entitlement"

an entitlement is what people have worked for, put money into and are entitled to have. People aren't demanding more than they deserve it's no more, no less but simply WHAT THEY ARE ENTITLED TO!

[Igel]

8. My mother retired 20 years ago.

She'd worked for 33 years. She's collected a fair chunk of change since then, and collects about 1/3 of her former salary, adjusted for inflation.

However, at no point, including her employer's portion, did more than 15.8% of her salary go into the system.

So she's collected over 6 years' full pay, but only put in about 4 1/2 years' full pay--at most. I say "at most" because for much of her 33 years at work the FICA tax was less than 15.8%.

If you put it in dollar amounts, it's even more stunning--not because of inflation, but because you can't include inflation any more than you can include interest. What she paid in the '50s was paid out, fully, in the '50s to others. What she paid in the '60s was paid out fully, as well.

She is entitled to her $1260 per month in two ways: Because of what her salary was and the law as set by Congress, she gets her benefits set at that level; because of having paid into it for the minimum number of years as specified by Congress, she gets the benefit. She doesn't get that amount because at some point some actuary sat down and said, "Mama Igel paid in $X, her cohort is expected to live Y years, so therefore she'll get $X/12Y each month." It's not an investment account, with the monies held in trust. Congress has said she is entitled to that much money; therefore she is entitled to that much money. If there was a COLA increase for 2011, she'd be entitled to an increase in her Social Security, not because they suddenly found that she had paid in more or because there was a sudden spike in interest payments on the money held by the government, but because Congress would have said she was entitled to it.

[Historic NY]

5. Raise the SS wage base ceiling.....

people making a million are paying the same as those making 100 thousand.

[pa28]

17. That's what Obama is on the record as supporting.

Let's see if he sticks to it. Boosting the cap is a better option than raising the retirement age and then further stripping equity from future FICA contributors to finance tax cuts for the wealthy.

Unfortunately the OP's source points to a consensus developing in the wrong direction.

[billlll]

6. AARP and Novelli - IIRC GINGRICH's book had its forward written by Novelli

Be very skeptical of claims that he ever helped AARP

[postulater]

9. I'm entitled to a war. But I would give it up to help cut the deficit. nt

[grahamhgreen]

10. Tax the rich - they got us into this mess, duh.

[eridani]

12. Jesus effing keerist!! I thought Becerra was on our side! n/t

[pa28]

13. Boehner's comments are especially revealing.

He alludes to deductions for mortgage interest, dependents and health insurance costs as "loopholes". Meanwhiles he applauds the recommendation to give a massive tax cut to the wealthiest and calls the whole package "something we can say yes to".

Should be a clue that we're about to see (more) wealth distributed upwards.

[kenny blankenship]

16. Consensus forming outside of Washington for cuts in politicians

[Ted_White]

18. I can't even believe what direction this country is heading in. It is disgustingly sad.

[Better Believe It]

22. It's all about class.

[jtown1123]

24. This article is total HORSESHIT. Montgomery reveals her bias in this paragraph:

"But fiscal experts say the Bowles-Simpson plan would be more gradual and less draconian than critics suggest.

'Even 75 years from now, individuals would still have the option of claiming benefits at age 65, the age established by Franklin Roosevelt,' said Social Security trustee Chuck Blahous."

Notice she never says who these "fiscal experts" are and Blahous is a George Bush appointee Republican hack with history of hating Social Security.

WaPo has proven yet again its hatred for anyone who isn't a Washington elite. Appalling reporting, terrible article.

Why didn't she bother to mention that numerous polls show the American public isn't swallowing this crap?

See this article by Campaign for America's Future: http://www.ourfuture.org/blog-entry/2010114723/does-it-matter-what-public-wants-or-needs

[Better Believe It]

25. Read the article. It's not about public opposition to cuts. It's about a

consensus developing among Washington politicians that supports massive cuts in Social Security, Medicare and other programs that benefits the public.

That's two entirely different questions and issues.

[jtown1123]

26. I did read the article, early this morning. I've been following

Montgomery's coverage on the Fiscal Commission and Social Security for the past 7 months now and I've known since day one there was consensus among the Washington politicians and elite. Montgomery is an extremely loyal accomplice in this crusade to destroy SS, Medicare and basically cut the deficit by bleeding the middle and lower classes.
What pisses me off is that she never acknowledges other economists or politicians like Jan Schakowsky or Dean Baker who disagree with this so called "consensus." Nor does she ever interview anyone who questions the motives for these commissions.

[Better Believe It]

30. Of course the big corporate media support the cuts. The point of the article is that

Washington politicians from both political parties agree on making those cuts on the backs of working people and the elderly and I think that is true.

[jtown1123]

27. Also, why isn't it valid to get the consensus of the people?

It's no surprise to Dems who read WaPo that the Pete Peterson talking points have invaded every aspect of the coverage on the deficit. I guess what I am trying to say is that this is shitty journalism, plain and simple. No sh** the Republicans and Blue Dog Pete Peterson minions support these cuts. This is not news. Dig a little deeper and you'll see that most members on these deficit commissions have extreme conflicts of interest in this deficit discussion.