Friday, August 27, 2004

Anatomy Of A Murder

It has been the stated and unstated goal of conservatives in America to undo the legacies of the liberal policies enacted under the rubric of Franklin Delano Roosevelt's visionary New Deal and Lyndon Johnson's bold Great Society. The elimination of these programs is a central tenet of the goal to shrink the size of the federal government, to "starve the beast" and usher in an era of truly small government. The two most prominent survivors of this siege, Social Security and Medicare, have been the nemeses of conservative lawmakers, almost since their inception, even displaying the resilience to withstand the power of Reagan's overwhelming legislative mandate. They represent the last vestige of the American voters' refusal to vote against their interest.

Through the
sleight of hand emphasis on cultural and social issues, so aptly described by Thomas Frank in his book What's The Matter With Kansas? How Conservatives Won the Heart of America, conservatives, bolstered by the electoral support of the lower and middle classes, have been able to achieve much of their agenda of dismantling the New Deal and Great Society, which has, ironically, undermined the interests of those same lower and middle class voters who unwittingly supported them under the guise of "important" issues like abortion, flag burning, homosexual rights, religion, values, etc.

These economic policies skew heavily in favor of big agribusiness at the expense of family farmers, de-regulation and anti-union measures which hurt wage earners, in favor of big business over small business, slashing to non-existence social programs like head start, unemployment benefits, and Section 8 housing which benefit those on the lower income scale, supporting the removal of environmental protections, the removal of worker protection laws and, especially under Bush, supporting large scale tax relief for the wealthiest taxpayers, while shifting that burden to lower and middle class taxpayers.

Along the scorched Earth economic march of the conservatives, the buck, so to speak, has stopped with Social Security and Medicare. The electorate has remained steadfast in their support of these programs, no matter what cultural issue is invoked. These programs have been, and remain, the political third rail. Touch them, and you're fried.

A frontal assault on Medicare and Social Security has proven impossible to mount, and certain political suicide for those that try. But perhaps there is another way - a back door of sorts. The trick lies in the plundering of the budget surpluses created by the Clinton/Gore fiscal discipline during the economically prosperous decade of the 1990's. To do this, Bush would need to pass enormous tax cuts, while at the same time increase spending. He would need to turn the bountiful surpluses into dangerously out of control deficits. Although enormous deficits and big spending initiatives seem counterintuitive to an overall policy goal of shrinking the federal government, therein lies the brilliance of the subterfuge. But first, the history.

Anticipating the strains that would be put on Social Security, lawmakers raised the payroll tax in the 1980's (a disproportionate amount of which is paid by the lower and middle classes) and created a Trust Fund into which surpluses would be placed and saved in order to keep the system solvent during the lean years of the baby boomer retirements. In order to sink Social Security, conservatives would need to plunder the surplus and break the bank of the trust fund.

Gore, anticipating his opponents' flanking maneuver, gave much air play during the 2000 campaign to the infamous "lockbox" in which he would place the Social Security Trust Fund, to insure that the government would not use those funds for other purposes. Instead of taking his prescient proposal seriously, Gore's somewhat incessant repetition of this phrase was the subject of ridicule in the media from Hardball to Saturday Night Live. Bush for his part vowed to leave the Social Security surpluses untouched.

Of course Bush lied or flip-flopped, or whatever you want to call it. He began raiding the trust fund and the surpluses in his first months in office, and hasn't stopped since. According to the Historical Budget Data put out by the Congressional Office of Management and Budget in early 2004, to cover the cost of his tax cuts, Bush will have to spend the entire projected Social Security surplus of $2.4 trillion from 2005 through 2014. The lockbox will be completely looted, just as an avalanche of baby boomers are set to retire. While the Trust Fund is looted, and the baby boomers' retirement looms in the distance, the national budget shows little capacity to make up the difference, or reinforce the effort. This of course, was part of the plan.

The Bush administration has succeeded in greatly diminishing the revenue stream through far reaching and, if they get their way, permanent tax cuts which many economists have described as making the deficit recovery proof because of the breaks given on the taxation of passive income. He accomplished this while encumbering the government with the enormous spending obligations required to fight the wars in Iraq and Afghanistan. There is a reason that no government in the history of the United States, or the world for that matter, has cut taxes while at war. The deficits become unmanageable, and the resources of the government scarce. But Bush didn't stop there. He also passed the staggeringly expensive prescription drug benefit, even though he had to conceal the true cost from Congress and threaten to fire Richard Foster, the Medicare actuary, if he revealed the real estimates. This was a two-fold success in that he further drove up the deficit, while at the same time making Medicare even more expensive and ultimately unwieldly, an argument that will be used in the future to justify its "unfortunate" demise.

Which takes us up to the present. We are on the verge of the baby boomer retirement rush which would have put a strain on Social Security and Medicare had the surpluses been left intact inside a "lockbox." Instead they have been plundered, and if Bush's tax cuts are made permanent, they will remain bankrupt in perpetuity. The budget is hamstrung with intransigent obligations that are exceeding the paltry revenue trickling in as a result of widespread tax cuts that, according to the non-partisan
Congressional Budget Office, overwhelmingly favor the wealthiest Americans, with millionaires receiving $72 to every non-millionaires' $1. There is no room in the budget to bail out Social Security and Medicare, but a crisis is looming.

As I
predicted here, we have entered the era of tough decisions, mandated by the dire economic climate, even on seemingly sacrosanct programs such as Social Security and Medicare. As reported today in the Washington Post, Federal Reserve Chairman Alan Greenspan fired the first volley. He said:

The country will face "abrupt and painful" choices if Congress does not move quickly to trim the Social Security and Medicare benefits that have been promised to the baby boom generation.

"If we have promised more than our economy has the ability to deliver, as I fear we may have, we must recalibrate our public programs so that pending retirees have time to adjust through other channels," Greenspan said. "If we delay, the adjustments could be abrupt and painful."
His proposed solutions are to begin reducing benefits, and to raise the retirement age (which is already being increased from 65 to 67). He has rejected, unequivocally, the repeal of Bush's tax cuts as a solution to the crisis. Leave those giveaways to the wealthiest Americans in place, he says, but cut the already modest benefits for retirees and increase the retirement age even further. This is only the initial foray, however, made to soften the resistance and introduce the concept to the populace.

Make no mistake, with Iraq continuing to hemorrhage money, and the President intent on making his reckless tax cuts permanent, the arguments of fiscal necessity are coming and they will threaten the prolonged life of Social Security and Medicare, especially with the imminent retirement of the baby boomers. Grover Norquist's long sought after starve-the-beast showdown is on the horizon, and it will be carried out under the guise of the circumstances being beyond the control of the politicians. In fact they will blame the entitlements themselves for being unsustainable. Social Security and Medicare will be dismissed as unrealistic, impractical, liberal pipe dreams, too expensive to maintain. Fast on their heels will follow other liberal fantasies such as EPA, OSHA, public education, etc. Grover Norquist and his accolytes will at last get their pared down version of government.

Will the media remind the public of the road taken to the fiscal crisis? Will the Republicans in Congress and the White House soon be allowed to plead, with impunity, that in relation to gutting Social Security and Medicare, the circumstances made them do it? Will the American people allow the same politicians whose policies raided the trust fund, ran up the deficits, and shrank the revenues necessary to pay them down, claim that the deficits are to blame for the impending massive cuts to entitlements, and not their own fiscal strategy?

There is a saying that if you drop a frog into boiling water, it will leap out immediately feeling the shock to its nervous system. But if you place that same frog in tepid water and bring it to a boil slowly, the frog won't react to the gradual change in temperature and remain in the water until fully cooked. In the fiscal sense, and in relation to these entitlement programs, we are in the midst of a slow boil.

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