Obama sells GOP agenda to Democrats

The battle now going on in Washington over taxes and entitlements is a fixed fight.  Democratic and Republic leaders now agree that crucial safety net programs such as Social Security and Medicare would be cut.  The only question is whether reductions in entitlements will be accompanied by moderate tax increases on the upper-income brackets, as the Democrats propose, or not, as the Republicans insists.

I blame President Barack Obama more than I blame right-wing Republicans such as Rep. Paul Ryan.  It is obvious what Ryan’s objective is—to destroy the social safety net, minimize taxes on rich people and give free rein to corporations.  And his supporters are in full agreement with his objective.

Obama’s actions are the opposite of his rhetoric, and, unlike with Ryan, the opposite of what his core supporters want.   I oppose the whole right-wing corporatist coalition—Ryan, Scott Walker the Koch brothers, the American Legislative Exchange Council and all the rest.  But I feel betrayed by Obama.

When it comes to the Bill of Rights, President Obama lacks the courage to do what’s right in the face of public opinion.  But when it comes to going against the economic interests of his core supporters, he does possess the courage, as well as the political skill, to enact unpopular policies that are deeply wrong.

I forget who said that if Barack Obama is a liberal, he is an idiot, but that if he is a conservative, he is a genius.   I think he’s a genius.  Who else could have created a situation in which Democrats regard attacks on Social Security and Medicare as the moderate liberal position?

Washington’s elite vs. the American public

Thomas B. Edsall wrote a good article in the New York Times earlier this weekmonth about how the consensus of the Washington elite goes against the views of the majority of American voters.

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Public opinion polls indicate that most Americans want to protect the social safety net by, if necessary, raising taxes on rich people, while the Washington consensus, including both Democrats and Republicans, is that taxes should be kept low and the social safety net should be reduced.

Social Security and Medicare policy are a good example.

Cutting benefits is frequently discussed in the halls of Congress, in research institutes and by analysts and columnists. The idea of subjecting earned income over $113,700 to the Social Security payroll tax and making the Medicare tax more progressive – steps that would affect only the relatively affluent — is largely missing from the policy conversation.

The Washington cognoscenti are more inclined to discuss two main approaches that are far less costly for the affluent: means-testing of benefits and raising the age of eligibility for Social Security and Medicare.  Sidenote: policy makers and national journalists who weigh in on this issue generally earn more than $113,700 a year.

via NYTimes.com.

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Raising the age of eligibility for Social Security is a bad idea.   It means a net cut in Social Security benefits.   It especially hurts poor people because they don’t live as long, on average, as rich people.  In today’s USA, if you’re laid off from work in your 50s, it is going to be exceedingly difficult to get a new job that pays a middle-class salary.

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Means-testing Social Security—that is, denying Social Security benefits to people who are well off—is a bad idea.  It would penalize people for saving and trying to provide for themselves, which would be bad in itself and also provide ammunition for those who want to get rid of Social Security altogether.

Another popular proposal is the tinker with the cost-of-living adjustment by tying it to something called the Chained Consumer Price Index, which would rise more slowly than actual prices.  As I argued in a previous post, this would be a stealth cut in Social Security benefits and all other programs that are tied to the existing CPI.

Edsall said that raising the cap on income subject to Social Security taxes would solve the problem.  With an increase in payroll taxes amounting to 0.6 of a percentage point of Gross Domestic Product, the Congressional Budget Office projects that the Social Security trust fund would be in surplus for 75 years.  Federal taxes in 2009, 2010 and 2011 were 15.1, 15.1 and 15.4 percent of GDP, which is the lowest since 1950, Edsall said.  While this is off the table for discussion in Washington, public opinion polls indicate that this is the solution favored by a majority of the American public.

Elite anxiety over entitlement-driven budget deficits and accumulating national debt has created a powerful class in the nation’s capital.  The agenda of this class is in many respects on a collision course with mounting demands for action by those lower down the ladder to address the threat to government social insurance programs.  Intransigent opposition by the better off and their representatives to raising the necessary revenue means that not only Social Security and Medicare face a budgetary ax.

Among the additional likely casualties: WIC, which provides free nutrition for women, infants and children; long-term and emergency unemployment compensation benefits; low-income housing vouchers; vaccines for poor children; schooling for children with disabilities; special education; preschool programs; child care for disadvantaged and vulnerable children; after-school programs; treatment of the mentally ill; and meals for sick and homebound seniors.

This conflict could not have come at a more difficult time: the United States is in the midst of a zero sum struggle requiring politicians to pick losers, not winners.  The population of those over 65 is set to multiply, with longevity steadily increasing even as median annual household income for the population at large has shrunk to $51,584 in January 2013 from $54,000 in 2008.

In this kind of conflict over limited goods, one of the most valuable resources that can get lost in the fray is the wisdom of the electorate at large. In this case, the electorate is pointing toward progressive tax increases for those closer to the top far more readily than members of the political class, for whom high-earners are a crucial source of campaign contributions.

via NYTimes.com.

Edsall wrote a book published last year called The Age of Austerity: How Scarcity Will Reshape American Politics.  I have skimmed it but not studied it, but I can say that his general assumption is that the age of shared prosperity is over, and that no group of Americans can now gain except at the expense of someone else.  The rich are going to cling to their riches, we senior citizens are going to cling to Social Security and Medicare, nobody else is going to give up anything either, and American politics is going to be increasingly bitter.

It’s very true that many social and economic problems would go away, or become a lot easier to deal with, if we had a full-employment, high-wage economy as in the 1950s and 1960s.  Our political debate would be over who is going to gain the most rather than who is going to have to sacrifice the most.  Edsall doesn’t think these days are coming back.  He is an astute observer and he could be right.