Firing Back on the “Fiscal Responsibility" Lobby
- From: ww <lbt006@xxxxxxxxxxx>
- Date: Sat, 21 Feb 2009 20:05:00 -0800 (PST)
Firing Back on the “Fiscal Responsibility" Lobby
By Sara Robinson
February 18th, 2009 - 8:51pm ET
Yes, it's true. The conservatives—that's right, the very same folks
who just dragged us along on an eight-year drunken binge during which
they borrowed-and-spent us into the deepest financial catastrophe in
nearly a century—are now standing there, faces full of moral
rectitude, fingers pointing and shaking in our faces, righteously
lecturing the rest of us on the topic of "fiscal responsibility."
I didn't think it was possible. I mean, they were mean enough drunk—
but hung over, in the clear light of morning, it turns out they're
I know. The choice is hard. Laugh? Cry? Scream? All three at once? It
would almost be funny, if it weren't such clear evidence of a complete
break with objective reality—and their ideas of what that "fiscal
responsibility" means weren't so dangerous to the future of the
The next episode in this surreal moral drama is set to take place next
Monday, when President Obama will convene a “fiscal responsibility
summit” at the White House to discuss the right's bright new idea for
getting us out of this hole: let's just dismantle Social Security and
As usual, this proposal is encrusted with a thick layer of diversions,
misconceptions, factual errors and out-and-out lies. Here are some of
the most pungent ones, along with the facts you need to fire back.
1. Conservatives are "fiscally responsible." Progressives just want to
spend, spend, spend.
The comeback to the first assertion is easy: Just point and laugh. Any
party that thought giving cost-plus, no-bid contracts to Halliburton
was fiscally responsible (and let's not even get started on handing
Hank Paulson $700 billion, no questions asked) deserves to be made fun
of for using words that are simply beyond its limited comprehension.
And a quick look back at actual history makes them into even bigger
fools. For decades now, liberal presidents have been far and away more
restrained in their spending, and more likely to turn in balanced
budgets. Part of this is that they've got a good grasp of Keynes, and
know that the best way out of bad financial times is to make some up-
front investments in the American people—investments which have almost
always, in the end, returned far more than we put in.
Conservatives believe wholeheartedly in investment and wealth-building
when individuals, families, and corporations do it. But their faith in
the power of money well-spent—and the value of accumulated capital—
completely vanishes when it comes to government spending. They think
it's morally wrong for government to ever invest or hold capital—
despite the long trail of successes that have enriched us all and
transformed the face of the nation.
Under the conservative definition of "fiscal responsibility, " we'd
have never set up the GI Bill and the FHA, which between them launched
the post-war middle class (and made possible the consumer culture that
generated so much private profit for so many). We wouldn't have 150
years of investment in public education, which for most of the 20th
century gave American business access to the smartest workers in the
world; or the interstate highway system, which broadened trade and
tourism; or research investment via NASA and DARPA, the defense
research agency that gave us the microchip and the Internet and made a
whole new world of commerce possible. There wouldn't be the consumer
protection infrastructure that allowed us to accept new products with
easy confidence; or building and food inspectors who guarantee that
you're not taking your life in your hands when you flip on a light or
sit down to dinner.
What we're proposing now is not "spending." It's the next round of
investment that will create the next great chapter in the American
future. And the most fiscally irresponsible thing we can do right now
is lose our nerve, and fail to prepare for what's ahead.
2. It's not gonna work. Everybody knows the Democrats spent us into
this mess in the first place.
The only remaining "everybodys" who "know" this are the ones who are
simply impervious to facts.
Ronald Reagan came into office with a national debt of less than $1
trillion. Mostly by cutting taxes on the rich, he grew that debt to
$2.6 trillion. George H.W. Bush broke his "no new taxes" pledge, but
it wasn't enough to keep the debt from ballooning another 50 percent,
to $4.2 trillion.
Bill Clinton''s aggressive budget balancing slowed the growth rate a
bit: eight years later, he left office with a debt of $5.7 trillion—
and a tight budget in place that, if followed, would have paid whole
thing off by 2006. Unfortunately, George W. Bush had no intention of
following through with Clinton's plan: on his watch, the debt nearly
doubled, from $5.7 to $10.6 trillion. So, nearly 80 percent of the
current debt—about which conservatives now complain—was acquired on
the watch of the three most recent conservative Presidents.
3. $10.6 trillion? But I got this e-mail that says we're looking at a
national debt of $56 trillion...
Wow. That's a big, scary number, all right. It's also a perfect
example of one of the classic ways people lie with statistics.
This particular mathematical confection was whipped up by Wall Street
billionaire and former Nixon Commerce Secretary Pete Peterson, whose
Peterson Foundation is the driving force behind the effort to defund
Social Security. According to this group, “As of September 30, 2008,
the federal government was in a $56 trillion-plus fiscal hole based on
the official financial consolidated statements of the U.S. government.
This amount is equal to $483,000 per household and $184,000 per
This "fact" is only true if you're willing to do a reckless amount of
time traveling. The $56 trillion number is what you get if you project
the entire U.S. debt a full 75 years into the future, which is how far
out you have to go before you can get into numbers that big. In other
words: we're not in that hole now—but we might be in 2084, if we keep
going the way we're going now.
Of course, it should be obvious that we're not going to keep going
that way—and that's the other fatal flaw. Peterson's calculations
assume that there will be exactly no changes in Social Security and
Medicare policy or inputs in the next 75 years—something that has
almost a zero chance of actually happening. Also, there's the usual
problem with any kind of long-range projection: even a small error in
the calculations at the start will compound over time, creating
enormous errors at the end of the range. If he's off by even one
percent (which is highly likely), the projection's worthless, even 20
years down the road.
Peterson and his posse are laying bets that Americans are too
mathematically and logically challenged to notice the flaws in his
reasoning—even though the holes are big enough to drive an entire
generation of retired Boomers through.
4. Whatever. It's still irresponsible to take on that much debt.
Even John McCain's economic adviser thinks this one's wrong. Here's
what Mark Zandi said about the U.S. national debt on the February 1
edition of Meet The Press:
It's 40 percent of GDP now. If the projections are right, we get to
60, maybe 70 percent of GDP, which is high, but it's manageable in our
historic—in our history we've been higher, as you pointed out. And
moreover, it's very consistent with other countries and their debt
loads. And more—just as important, investors understand this. They
know this and they're still buying our debt and interest rates are
still very, very low. So we need to take this opportunity and be very
aggressive and use the resources that we have at our disposal.
To repeat: Debt is never a good thing; but history is on our side
here. We've carried a lot more debt than this in the past; and so have
other fiscally responsible countries. And the world's investors are
still flocking to buy U.S. bonds—even though with inflation, they're
getting slightly negative interest rates, which means they're
effectively paying us to use their money. If they have that much faith
in our economy, we're probably not wrong to have a little faith in
ourselves. By world standards, we're still looking like a very good
5. But Social Security is headed for disaster. It's out of control!
It's a testament to the short attention spans of the media that the
cons try to launch this talking point every six months or so—and every
damned time, the punditocracy goes running flat-out after the bait,
fur flying, like an eager but not particularly bright Irish Setter.
And then people like us need to collar them, make them sit, scratch
their ears, and calmly explain all over again (as if it were brand-new
information) that Social Security is in perfectly fine shape, and the
conservatives are making much ado about nothing—again.
The Congressional Budget Office projects that the Social Security
trust fund will continue to run a surplus until 2019. (More
conservative fund trustees put the date at 2017.) The fund’s total
assets should hold out until 2046. And that's assuming that nothing
changes at all.
If it turns out we do need to make adjustments, there are two very
simple ones that will more than make up the difference. One is that we
could raise the cap. Right now, people only pay Social Security taxes
on the first $102,000 they earn; everything over that goes into their
pockets tax-free. Increasing that amount would cover even a fairly
large shortfall. And in the unlikely event that fails, we can talk
about raising the retirement age to 70—a sensible step, given how much
longer we live now.
6. Ending Social Security would be well worth it, because putting
those deductions back in people's pockets would provide a big enough
stimulus to get us out of this mess.
Anyone who spouts this is apparently not counting on the 70 million
Boomers whose wallets would snap shut permanently if you withdrew
their retirement benefits just a few years before they're going to
need them. As Digby put it:
Boomers are still sitting on a vast pile of wealth that's badly needed
to be put to work investing in this country. But it's shrinking
dramatically and it's making people very nervous. As [Dean] Baker
writes, if one of the purposes of the stimulus is to restore some
confidence in the future, then talk of fiddling with social security
and medicare is extremely counterproductive. If they want to see the
baby boomers put their remaining money in the mattress or bury in the
back yard instead of prudently investing it, they'd better stop
talking about "entitlement reform." This is a politically savvy
generation and they know what that means.
If they perceive that social security is now on the menu, after losing
vast amounts in real estate and stocks, you can bet those who still
have a nestegg are going to start hoarding their savings and refusing
to put it back into the economy. They'd be stupid not to.
Bad economies get that way because people no longer trust the future,
and refuse to take on the risks associated with spending, lending, or
investing. Social Security was created in the first place because FDR
understood that a guaranteed old-age income is a major risk-reducer—
not just for elders, but also for their working adult children. And it
still is. Affirming the strength of Social Security not only raises
the confidence of the Boomers, as Dean and Digby have pointed out, but
also of their Xer and Millennial children, who are going to have to
add "looking after Mom and Dad" to their list of big-ticket financial
obligations if that promise is broken.
Breaking a 70-year-old generational promise for the sake of a little
temporary financial stimulus is the very definition of penny-wise and
7. OK, forget I even mentioned Social Security. Besides, the real
problem is Medicare.
Finally, we come down to the truth. There's no question that
exponentially rising health care costs—both Medicare and private
insurance—are unaffordable in the long term; and that getting
ourselves back on track financially means getting serious about
On close examination, even Peterson's figures eventually reveal this
truth. (About 85% of his projected 2084 debt comes from expected
Medicare.) Unfortunately, though, most of his materials lump Social
Security and Medicare together, creating a fantasy figure that blows
the real problem so far out of proportion that you can't even begin to
have a rational conversation about it—which was, of course, the whole
point of ginning those numbers up in the first place.
8. Next, you're going to tell me that some kind of government-
sponsored health care is the answer.
Yes, we are. The Congressional Budget Office notes that health care
costs were only 7 percent of the GDP in 1970—and are over double that,
at 14.8 percent, now.
Much of that increase came about because in 1970, most health care
providers ran on a not-for-profit basis. Hospitals were run by
governments, universities, or religious-based groups; in some states,
private for-profit care was actually illegal. Even insurance
companies, like Blue Cross, were non-profit corporations.
AdminIstrators and doctors were still paid handsomely; but there were
no shareholders in the picture trying to pull profits out of other
The first step to restoring affordability is to kick the profiteers
out of the system. (According to the most conservative estimates, this
one step would drop the national health care bill by at least $200
billion a year.) The second is to put it in the hands of
administrators whose first concern is providing high-quality care
instead of big bottom lines; and who are accountable to the voters if
they fail to perform. Our experience with Medicare and the VA—which,
between them, currently provide care to over 70 million Americans, or
about 22% of the country—proves that we are perfectly capable of
providing first-class, affordable care through the government.
If Costa Rica and Canada can manage this, why can't we?
9. But this Peterson guy's a billionaire Wall Streeter. Obviously, he
knows something about finance...
Let's punt this one to William Greider:
Peterson, who made his fortune on Wall Street, never raised a word
about the dangers of hyper leveraged finance houses gambling other
people's money. He never expressed qualms about the leveraged buyout
artists who were using debt finance to rip apart companies. He didn't
fund an all out effort to stop Bush from raiding the Social Security
surplus to pay for tax cuts for the rich.
But now he wants folks headed into retirement who have already prepaid
a surplus of $2.5 trillion to cover their Social Security retirements
to take a cut and to work a few years longer to cover the money
squandered on bailing out banks, wars of choice abroad, and tax cuts
for the few.
Basically, we're only having this conversation in the first place
because a conservative ideologue was willing to pony up $1 billion of
his own money to fund a "foundation" devoted to killing Social
Security. Given that most politicians—both Democrat and Republican—are
extremely unwilling to touch the notorious "third rail of politics,"
it's pretty clear that next Monday's "fiscal responsibility summit"
wouldn't even be happening if Peterson wasn't bankrolling the Beltway
buzz on this terrible idea.
10. OK—if killing Social Security isn't the answer, just how do you
propose to get us out of this?
The idea of a White House summit on fiscal responsibility is a good one
—but only if it focuses on real solutions to our real problems.
Cutting health care costs by getting all Americans into a rationally-
managed system that puts delivering excellent care above delivering
shareholder profits has to be a central part of any long-term economic
health strategy. We're also about 15 years overdue for a complete
overhaul of our military budget, too much of which is still focused on
fighting the Soviet Union instead of responding to the actual
challenges we're currently facing. Finally, it's time to ask the
wealthy—who've profited more than anyone from the past 15 years, and
yet haven't paid anywhere near their fair share—to step in a pay up
for the system that enabled them to build that pile in the first
There's plenty we can be doing to actually reduce the national debt,
and really stimulate the economy for both the short run and the long
haul, without ending Social Security and sending hundreds of millions
of Americans into sudden panic over their retirement. True "fiscal
responsibility" can never be achieved by breaking promises.
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