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The Angry Rich

Paul Krugman’s New York Times column today is our selection for a “Networthy Award” for outstanding coverage on the net. In “The Angry Rich”,  Mr. Krugman challenges the notion that the nation’s workers, retirees and middle class need to sacrifice even more than they already have in this economic crisis, so that America’s top 1% can keep their spoils of recent decades. Please take the time and forward to your friends, because preserving tax cuts for the wealthy while also proposing benefit cuts to Social Security is exactly the game plan proposed by too many, Republicans and Democrats alike,  in Washington today. 
Anger is sweeping America. True, this white-hot rage is a minority phenomenon, not something that characterizes most of our fellow citizens. But the angry minority is angry indeed, consisting of people who feel that things to which they are entitled are being taken away. And they’re out for revenge. No, I’m not talking about the Tea Partiers. I’m talking about the rich.  These are terrible times for many people in this country. Poverty, especially acute poverty, has soared in the economic slump; millions of people have lost their homes. Young people can’t find jobs; laid-off 50-somethings fear that they’ll never work again.  Yet if you want to find real political rage — the kind of rage that makes people compare President Obama to Hitler, or accuse him of treason — you won’t find it among these suffering Americans. You’ll find it instead among the very privileged, people who don’t have to worry about losing their jobs, their homes, or their health insurance, but who are outraged, outraged, at the thought of paying modestly higher taxes.  The rage of the rich has been building ever since Mr. Obama took office. At first, however, it was largely confined to Wall Street. Thus when New York magazine published an article titled “The Wail Of the 1%,” it was talking about financial wheeler-dealers whose firms had been bailed out with taxpayer funds, but were furious at suggestions that the price of these bailouts should include temporary limits on bonuses. When the billionaire Stephen Schwarzman compared an Obama proposal to the Nazi invasion of Poland, the proposal in question would have closed a tax loophole that specifically benefits fund managers like him.  Now, however, as decision time looms for the fate of the Bush tax cuts — will top tax rates go back to Clinton-era levels? — the rage of the rich has broadened, and also in some ways changed its character.  For one thing, craziness has gone mainstream. It’s one thing when a billionaire rants at a dinner event. It’s another when Forbes magazine runs a cover story alleging that the president of the United States is deliberately trying to bring America down as part of his Kenyan, “anticolonialist” agenda, that “the U.S. is being ruled according to the dreams of a Luo tribesman of the 1950s.” When it comes to defending the interests of the rich, it seems, the normal rules of civilized (and rational) discourse no longer apply.  At the same time, self-pity among the privileged has become acceptable, even fashionable. Tax-cut advocates used to pretend that they were mainly concerned about helping typical American families. Even tax breaks for the rich were justified in terms of trickle-down economics, the claim that lower taxes at the top would make the economy stronger for everyone.  These days, however, tax-cutters are hardly even trying to make the trickle-down case. Yes, Republicans are pushing the line that raising taxes at the top would hurt small businesses, but their hearts don’t really seem in it. Instead, it has become common to hear vehement denials that people making $400,000 or $500,000 a year are rich. I mean, look at the expenses of people in that income class — the property taxes they have to pay on their expensive houses, the cost of sending their kids to elite private schools, and so on. Why, they can barely make ends meet.  And among the undeniably rich, a belligerent sense of entitlement has taken hold: it’s their money, and they have the right to keep it. “Taxes are what we pay for civilized society,” said Oliver Wendell Holmes — but that was a long time ago.  The spectacle of high-income Americans, the world’s luckiest people, wallowing in self-pity and self-righteousness would be funny, except for one thing: they may well get their way. Never mind the $700 billion price tag for extending the high-end tax breaks: virtually all Republicans and some Democrats are rushing to the aid of the oppressed affluent.  You see, the rich are different from you and me: they have more influence. It’s partly a matter of campaign contributions, but it’s also a matter of social pressure, since politicians spend a lot of time hanging out with the wealthy. So when the rich face the prospect of paying an extra 3 or 4 percent of their income in taxes, politicians feel their pain — feel it much more acutely, it’s clear, than they feel the pain of families who are losing their jobs, their houses, and their hopes.  And when the tax fight is over, one way or another, you can be sure that the people currently defending the incomes of the elite will go back to demanding cuts in Social Security and aid to the unemployed. America must make hard choices, they’ll say; we all have to be willing to make sacrifices.  But when they say “we,” they mean “you.” Sacrifice is for the little people.

The Deficit No One is Talking About

Washington’s deficit hawks and Wall Street billionaires have invested an enormous amount of time and resources to convince the American public that reducing our national deficit should be a top economic priority, even though our nation is still struggling to create jobs and boost the economy.  Many have even targeted Social Security as a way to pay down our debt.  But a new report released today provides a startling look at a deficit no one is talking about---the $6.6 trillion Retirement Income Deficit  facing millions of Americans.  The Retirement Deficit is the gap between the retirement savings and pensions Americans have today and what they should have.   “While policymakers talk about budget deficits, there is a massive and growing Retirement Income Deficit that has largely been ignored by Washington. This deficit shows just how bad the crisis has become.” Karen Friedman, Pension Rights Center  “The key sources of income that retirees have relied on are either under attack – in the case of Social Security – or disappearing – in the case of traditional pensions. 401(k) plans are not working, and millions of workers have neither a pension nor a 401(k) account.  Clearly, the current private retirement system is failing most Americans.” Ross Eisenbrey, Economic Policy Institute   “Just to give you a sense of the magnitude of this number, that is about 5 times the projected Federal Deficit for 2010.  Another way of understanding the size of this figure is the often-used trip to the moon analogy.  $6.6 trillion is enough dollars that, if lined up end to end, they would stretch to the moon and back 1,000 times and still leave enough left over to pay NASA’s budget for the next 83 years – and you’d still have enough pocket change left over to give every person in this room $100 million each! That is a lot of money.”  Maria Freese, National Committee to Preserve Social Security and Medicare  Retirement USA, an initiative working for a new retirement system, has launched a month-long campaign “Wake Up Washington” to do just that—wake up lawmakers to the reality that our nation is facing a retirement income crisis in which working Americans now face a very uncertain future.  It’s time America’s retirees ensure Washington is not allowed to continue to ignore the largest deficit threatening working Americans--the Retirement Income Deficit.

$250 Payments to Seniors Stimulates the Economy

The National Committee to Preserve Social Security and Medicare Foundation and the Economic Policy Institute today released a report, Down Payment on Economic Recovery,” that finds that the $250 lump-sum payments that went to recipients of Social Security and Supplemental Security (SSI) benefits were effective economic stimulus. The report’s authors, EPI researchers Josh Bivens and Kathryn Anne Edwards, argue that further job-creation efforts should include another such payment.  According to the report, lump-sum payments to Social Security and SSI recipients are an extremely effective job creator: 
            “While its share of the overall Recovery Act spending was very small, this lump-sum payment was one of the quickest-acting components of the overall package—the majority of payments were received just months after the Act was passed (by the end of May 2009). This Social Security and SSI payment by itself likely boosted GDP by roughly 0.5% in the second quarter of 2009, which would roughly translate to about 125,000 jobs created or saved due to these payments.”-- “Downpayment on Economic Recovery,” September 2010
2011 is expected to be the second year in a row in which Social Security beneficiaries will not receive a cost of living allowance (COLA).  However, despite a relatively low rate of general inflation, seniors' costs are going up.  Health care costs especially are rising rapidly, and the elderly on fixed incomes spend a significantly larger share of their income on health care. Ways and Means Social Security Subcommittee Chairman Earl Pomeroy (D-ND) and Senator Bernie Sanders (I-VT) have introduced legislation that would provide an additional one-time $250 payment if there is no inflation adjustment again next year.
“This report confirms that one-time payments to Social Security beneficiaries benefit more than just the individuals who receive them, they also provide real stimulus to our weakened economy. This type of stimulus is a win-win for our nation. It provides COLA relief for millions of seniors suffering in this economy who have already see a third of their Social Security eaten up by health care costs, while also boosting our economy and saving jobs.”  Barbara B. Kennelly, President/CEO, National Committee to Preserve Social Security and Medicare  
The full analysis, “Down-Payment on Economic Recovery,” is provided online here.

“Young Guns” Are Gunning for Your Social Security & Medicare

House Republican leaders have given Americans a glimpse of the GOP agenda to privatize Social Security and end Medicare as we know it.  The messengers for this campaign immodestly call themselves the “Young Guns”.  Unfortunately, what they’ve really taken aim at are the benefits working Americans have paid for throughout their lives. In an over-the-top video chock full of waving flags and slow motion walking shots, meant to evoke every American action hero since Superman, Republican Whip Eric Cantor, Deputy Whip Kevin McCarthy and Ranking Budget Committee member Paul Ryan attempt to sell their new book repackaging the same old anti-Social Security dogma that dates back to the days of Alf Landon.  Obviously, convincing Americans they don’t need Medicare and Social Security will be an especially tough sell these days, as Americans continue to suffer in this recession, so this time GOP leaders are wrapping their proposals in the best marketing PAC money can buy.  They claim privatization and ending Medicare are “innovative” and “energetic” proposals offered by a “new generation” of leaders.  Huh? Why would the “Young Guns” release a book and Hollywood style video rather than introducing a piece of legislation?  Here's an easy answer to that question:
… Ryan’s proposal, which looks to balance the budget through slimmer versions of Medicare, Medicaid, Social Security and the tax code, has vexed many Republicans who have attacked Democrats over the federal debt but who don’t want to say they would favor cutting entitlement programs. Roll Call, 8/30/10 The House Republican leadership has been reluctant to embrace, at least formally, Rep. Paul Ryan's (R-Wis.) "Roadmap for America's Future." That's not surprising -- Ryan's plan is both radical and ridiculous, and GOP leaders don't necessarily want to spend the next two months talking about it...but how long is this shell-game going to last? Can Eric Cantor, whose political action committee is chiefly responsible for this "Young Guns" book, credibly argue that he only agrees with certain chapters of his own book? The House Republican leadership's Whip and Deputy Whip are publishing a book touting a specific plan.  Must we maintain the pretense that the right-wing roadmap belongs solely to Paul Ryan? Washington Monthly, 8/31/10
The book won’t be released until later this month but here’s a preview from those who’ve gotten an advance look at how the GOP would handle programs serving America’s seniors, disabled and their families (even though they don’t really want to talk about that before November):
Just one section of the book, written by Ryan, spells out what Republicans might do if they are charge. The “road map” includes such ideas as converting Social Security for future retirees into private accounts that could be invested in the stock market. Medicare would become a voucher-type program where the government gives seniors money to buy health plans. “The problem, in a nutshell, is this: Medicare, Medicaid and Social Security, three giant entitlements, are out of control,” Ryan writes. Wall Street Journal, 8/31/10
In a new book to be released next month, three House Republican leaders include many of the policies and ideas that some in their party have promoted over the last year, as well as a controversial plan to drastically cut the country’s entitlement spending. Roll Call, 8/30/10
These “Young Guns” are shooting blanks if they really think slick marketing and super hero music will persuade Americans they don’t need Social Security and Medicare.

What Really Matters in the Social Security Debate

Dean Baker, co-director of the Center for Economic and Policy Research, reminds us of some key points we must all remember as Washington's fiscal hawks try to persuade us America can't afford Social Security-- Points which are all too often ignored in the crusade to cut a program which hasn't added one penny to our national debt.  This TruthOut piece is well worth your time and deserves this month's Networthy Award:

Senator Simpson's Quick Budget Quiz

Monday 30 August 2010 by: Dean Baker, t r u t h o u t | Op-Ed President Obama is apparently content to have an abrasive and abusive senator's son sit as co-chairman of his deficit commission. We can assume that these traits were a direct result of Sen. Alan Simpson's privileged upbringing and he is not going to change now that he is in his late 70s. However, even if the senator is not prepared to embrace norms of civility, it is reasonable to expect that he will do his homework. In order to help him in this process, here is a quick list of study questions on Social Security for Simpson as he carries through his assignment to co-chair President Obama's deficit commission. Reporters and editors at major news outlets may also want to review these questions, since it seems that they could also use some additional background knowledge on the program. 1) How much higher are real wages projected to be in 2040 than today? In other words, how much richer do we expect the average worker to be 30 years from now? 2) How did the 2010 Trustees Report change the projections for 2040 wages compared with the 2009 report? 3) If we solve the projected shortfall in Social Security entirely by raising the payroll tax, what percent of the gain in real wages over the next 30 years would have to go to pay the tax? 4) What percent of real wage gains over the last 30 years was absorbed by the increase in Social Security payroll taxes? 5) What percent of the projected long-term budget shortfall is due to the inefficiencies of the US health care system? 6) How much wealth should we expect near retirees to have to support themselves in retirement? 7) What percent of older workers have jobs in which they can reasonably be expected to work at into their late 60s? Certainly anyone on the deficit commission should be able to answer these questions off the top of their heads, as should any of the people reporting on Social Security or deficits in the media. But for those readers who do not fit these descriptions, here are the answers. 1) According to the Social Security Trustees Report, the average real wage is projected to be 48.7 percent higher in 2040 than it is today. In other words, if our kids work 30-hour weeks on average, they would take home about 10 percent more than we do today working 40-hour weeks. Senator Simpson has been known to quip about how our children and grandchildren will be living in chicken coops, but he's just kidding, right? As a practical matter, most workers have not seen much in the way of wage gains over the last three decades because such a large portion of wage growth has gone to those at the top: people like Senator Simpson and his co-chairman Erskine Bowles. This upward redistribution of income of this period, and the possibility that it could continue, is the reason that most people who are concerned about the well-being of future generations focus on the distribution of income. The impact of any potential increases in Social Security taxes on the typical worker's income is trivial compared to the impact of a continued upward redistribution of income. 2) The 2010 Trustees Report had good news on the wage front. It assumed that health care reform would slow the rate of growth of employer provided health care benefits. This means that wages are now projected to grow more rapidly since Social Security money will be diverted to cover rising health care costs. In 2009, the trustees projected that the average wages would only rise by 37.2 percent between 2010 and 2040. This means that the changes between the 2009 and 2010 Trustees Report imply that wages will be nearly 10 percent higher in 2040 than we previously believed. Everyone saw or heard the lead item in The Washington Post and on National Public Radio: "New Trustees Report Shows Our Children Will be Much Richer." O.K., maybe they managed to overlook this part of the story, but Senator Simpson knows it. 3) Number 3 is somewhat of a trick question, since it depends on exactly the formula we use. The Trustees Report tells us that if we raise the tax tomorrow by 0.96 percentage points on both the employee and employer (1.92 percent in total), then the program will be fully solvent through its 75-year projection period. If we went this route, then it would mean that the tax increase would take up 5.9 percent of the projected wage growth over the next three decades. But we may not want to impose a tax increase like this tomorrow. There is a huge amount of uncertainty about these projections, and the program faces no imminent shortfall. Suppose we raised both side of the payroll tax by 0.07 percentage points annually beginning in 2020 and continuing at least to 2040. Then by 2040, the rate would have risen by 1.47 percentage points on both the worker and employer. This would take up 12.0 percent of the projected wage growth over this period, leaving our children on an after-tax basis just 42.8 percent richer than we are. This doesn't quite sound like Senator Simpson's story about our kids living in chicken coops. 4) The Social Security tax increases of the last 30 years took 6.8 percent of average wage growth. This is in the same range as the portion of projected future wage growth that may have to go to higher Social Security taxes. The big problem in the story is that people have been living longer through time. If we want to enjoy a growing portion of our lives in retirement, then it will cost somewhat more money. This means that after-tax wages will grow Social Security more rapidly than would otherwise be the case. It is worth noting that the gains in life expectancy also have not been distributed evenly. Most of the gains went to those in the top two quintiles of the income distribution. 5) The United States has by far the most inefficient health care system on the planet. We pay more than twice as much per person as people in other wealthy countries with very little to show for it in terms of health outcomes. If we had the same per-person health care costs as any other country in the world, the long-term budget projections would show huge surpluses rather than deficit. 6) Senator Simpson has repeatedly held up the image of affluent elderly getting Social Security checks. He talks of seniors driving up to their gated communities in their Lexuses. While this may describe Senator Simpson's friends, it is not an accurate description of the vast majority of seniors, most of whom rely on Social Security for the majority of their income. This is likely to be even more true of the baby boom generation that is at the edge of retirement. Few have traditional defined benefit pensions. They have seen much of the wealth they were able to accumulate destroyed by the collapse of the housing bubble and the subsequent plunge in the stock market. 7) Senator Simpson is still working into his late 70s as is, no doubt, the case with many of his friends also. These leads many deficit hawk types to think all workers should be expected to work until 70 or even older. However, this is not likely to be as easy for most workers as it is for Senator Simpson. Forty-five percent of workers over age 58 work at jobs that are physically demanding or have difficult work conditions. So, there you have it: seven key facts about Social Security, the budget and the well-being of workers and retirees. Senator Simpson should know this information inside out. But does he? Try asking him. If he can restrain his curses and insults long enough, maybe we can find out if he is qualified for the position he holds. At this point, we only know that he has a poor understanding of the anatomy of barnyard animals.



   

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