Debt Deal
The compromise debt deal plan currently being discussed is unacceptable. It doesn’t resolve the debt limit issue. We will be back to dealing with the politics of this before the next election. Republicans have maintained that revenue increases are a poison pill in these negotiations. It appears that the Democrats may have acceded to these demands. If tax cuts are a poison pill, then spending cuts might as well be a poison pill, especially on health care and social security. While there may have been some merit in using the debt ceiling as a budget negotiation, any benefit to that approach has evaporated.
There are two decent paths going forward. Both paths involve Obama vetoing this compromise. One path is for the House and Senate to authorize raising the debt ceiling on its own. Or for that matter Obama could declare he has authority by virtue of the 14th Amendment to raise debt. The other path is for Obama to move to a pay-as-you-go system until a budget compromise is reached. This would mean delaying social security payments, federal employee payments, state aid, and all other spending until cash is available. This would initially result in payment delays of weeks. Were it to persist, you could see Social Security payments delayed upwards of 6 months given present budget conditions. While this certainly would cause pain, hopefully such pain would be short lived.
Update: Can’t argue with Bernie Sanders here:
The Republicans have been absolutely determined to make certain that the rich and large corporations not contribute one penny for deficit reduction, and that all of the sacrifice comes from the middle class and working families in terms of cuts in Social Security, Medicare, Medicaid, LIHEAP, community health centers, education, Head Start, nutrition, MILC, affordable housing and many other vitally important programs.
I cannot support legislation like the Reid proposal which balances the budget on the backs of struggling Americans while not requiring one penny of sacrifice from the wealthiest people in our country. That is not only grotesquely immoral, it is bad economic policy.
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Delaying Social Security payments six months is absolutely unacceptable! There are people living on that income! How would you feel about having YOUR income delayed for six months? When that happens to most people, unemployment insurance or some other assistance is available. But Social Security is already the last recourse for many, many older Americans, disabled Americans, widows and children. ThAmericans pay into this plan as a security net for their old age. Now you want to “delay” that security until a bunch of politicians in Washington can feel better about raising taxes? That’s just….awful. I hope and pray that none of those elected
to Congress, not even tea party types, really think this way in their heart of hearts. I need to believe that somehow they wouldn’t really be able to stomach “delaying” the pittance grandma lives on just so that they don’t have to raise taxes. Good grief. I’ve lived over half a century in this country, and I’ve never, ever heard such selfish, short-sighted, thoughtless drivel coming out of Washington as we hear now. When revenue gets low, you raise revenue, on those who can afford it if you’re smart, but on everybody if you have to. You just never, ever “delay” necessary services to people — ANY people, but especially not to the old and the sick. What are you thinking?
One thing that is interesting to me about social security discussion, is how everyone assumes that those on SS are poor. I happen to know quite a few wealthy older folks who choose not to tap their private $ before they first use their social security. It seems to me that there should be a threshold for it.
Republican politicians seem to know a lot of old folks who have private reserves they don’t tap into because of their bountiful SS checks. But those experiences don’t jibe with how most older Americans live. By a long shot!
Before Social Security, the vast majority of old people in the US lived in poverty. Today, according to the US Census Bureau, HALF of all people 65 and older receive income of less than $18,337 a year FROM ALL SOURCES, including SS. The average SS check is $14,050, less than the yearly income for a full-time employee earning minimum wage, and 26% of SS recipients live entirely on their Social Security income. Seven out of 10 SS recipients depend on Social Security for most of their income. In other words, most people living on Social Security are very close to poor. Without Social Security, the vast majority would very poor: One out of four would have NO INCOME AT ALL.
I should have added those stats came from a number of sources, including the US Census Bureau, an Economic Policy Institute analysis of the Federal Reserve survey of consumer finances public data and the US Social Security Administration.
It should also be remembered that other groups of Americans receive Social Security assistance, including the handicapped, disabled workers, widows and orphans.
Many of the cuts being discussed would hurt the non-elderly impoverished. Our elderly are among the most well off in history. This doesn’t mean that there aren’t impoverished elderly or that many more couldn’t become impoverished. I would be elated if everyone in this country supported the idea that no one should live in poverty. If we were to not add debt, I don’t believe we should be adding carve outs for the elderly just because they are a significant voting demographic.
Obama can’t and won’t veto this compromise; it was much too hard-won. My immediate reaction on hearing that a deal had been struck was relief, but without knowing the content of it I am torn between that relief that the world won’t fall apart tomorrow and concerns about what kind of cuts it might entail and who will be affected.
You are correct. I wrote before Obama’s press conference. I think the only hope is that the House votes it down. Hopefully a lot of democrats put their districts before their leadership’s wishes.
Obama could declare he has authority by virtue of the 14th Amendment to raise debt.
Or by virtue of the 3rd Amendment (either argument would have about as much legal merit).
Who’s going to enforce any legal action anyway? The Supreme Court would be extremely likely to claim Separation of Powers. That would leave Congress to impeach, and that isn’t going to get through the Senate.
M.Z.,
If you’re right, then it wouldn’t matter if Obama invoked the 3rd Amendment as opposed to the 14th. My suspicion, though, is that in either case such a move would make bond holders very antsy, which is probably why Obama isn’t considering it.
…I am torn between that relief that the world won’t fall apart tomorrow and concerns about what kind of cuts it might entail and who will be affected.
Except that this “deal” is, in reality, smoke and mirrors. There are no actual cuts. Thanks to baseline budgeting, there are only decreases in the rate of spending growth.
And, of course, this deal in no way binds future Congresses – the so-called cuts in the “out years” are chimerical.
So no worries, the checks will keep coming. Of course, the ruling class will expect us not to notice that those checks will have ever-shrinking purchasing power, as they debase the currency in order to pay for always expanding government largesse.
Fr. Rob – the ruling class lives on Wall Street, not in Washington. Washington has just been corrupted by them. Lots of the “Horrible Government Programs” are actually things that weaken the power of Wall Street money on the system, and make citizens somewhat less servile to it. That’s why the ruling class has always hated them. Social Security (e.g.) dilutes their power.
Matt:
“The ruling class lives on Wall Street, not in Washington”? That’s touchingly naive. Wall Street, the Washington power brokers, etc. – they’re all the same people. Look at who Obama puts in his cabinet and as his advisors. Observe who is at his “birthday celebration” in Chicago, ponying up the big checks.
Anthony Codevilla pretty well spelled it out last year:
http://spectator.org/archives/2010/07/16/americas-ruling-class-and-the#
And how does making millions of Americans dependent on a check from Washington (Social Security, numerous other transfer programs) dilute the power of the ruling class? Those millions in the dependent class are virtually assured votes for whoever promises to keep the checks coming, or even make them bigger. They are a political army that the ruling class can whip up almost at will with a little demagoguery against whoever is targeted for the current two-minute hate: corporate executives, “private jet owners”, entrepreneurs, doctors, etc. And the programs that those dependents rely on, strangely enough, seem to have the unavoidable effect of keeping those people dependent. It’s almost as if they were designed to do that.
The ruling class battens on the miseries and exploitation of the dependent class in a way that the greediest cartoon capitalist could only dream of.
Father, a couple of questions. First, does your response here amount to your own version of the Two Minutes’ Hate? Second, who exactly comprises the “dependent class?” Does it include your aunt on Social Security? Your uncle on Medicare? Have you encouraged friends, family, and parishioners to detach themselves from the government teat? Have you personally made provision to financially underwrite their independence? Do defense corporations who eagerly await their monthly or semi-annual government payments constitute part of the “dependent class?” What about their employees, who have spent their lives as de facto government employees, and are now retired on publicly funded pensions? Third, assuming you could liberate the “dependent class” from state exploitation today, would you simply abandon them to the tender mercies of the “free market,” even if it meant penury for the old and destitution for the sick? After all, Social Security and Medicare were erected in response to conspicuous and widespread social needs. You may say that the churches and families should provide. But they didn’t, and neither did the “free market.” Are you confident they would today? Would you be happy to live with the result if it meant that the sick, the poor, and the old were merely no longer “dependent?”
It certainly is true that social security and welfare were designed as palliatives to the working classes. The bourgeois thought that better than having the working class forcefully taking that which was properly theirs.
Matt,
I’d like to second Father Rob’s question. How does Social Security dilute the power of Wall Street?
Blackadder – if Social Security were eliminated entirely tomorrow, how would future generations attempt to provide for their retirement?
Matt,
This is actually a controversial question. One possibility is that Social Security benefits function as substitute for private savings (this is a view associated with the conservative economist Marty Feldstein). If this view is right, then eliminating Social Security would cause people to save more. On the other hand, if Social Security does not function as a substitute for private savings, then repealing it would not affect the private savings rate, and instead people would retire later, there would be more poverty among the elderly, etc. From what I can tell there is no clear answer to this question empirically. The data is ambiguous. Even if Feldstein is right, though, it’s not clear that we are talking about a large enough amount of money to noticeably change the power of Wall Street. At the very least it seems like an oddly roundabout way of doing so.
Blackadder – that’s one of those replies that sounds responsive, but is anything but.
The obvious answer to my question is: They would invest their money, and hope for the best. If the stock market tanked and stayed down for 5 years when investors were about to retire, they would either die at work or, if they were unable to work, would move in with family members, or, absent family connections, would live under a bridge someplace. Wall Street wouldn’t care a whit about that: their job isn’t caring about investors, it is about Making As Much Money As Possible For Capitalists. If investor’s accounts are wiped out due to, say, some wall street bubble bursting, well then that’s their tough luck.
Social Security is a social insurance program. The benefits are 1. old people don’t eat Alpo and live in cardboard boxes any more; 2. The income they get when they retire helps sustain economic activity and lessens the severity of recessions; 3. Workers’ retirement isn’t thrown to the tender mercies of Wall Street.
Blackadder, you strike me as a hustling young lawyer, a little too convinced of his own cleverness. I remember being very much like you (minus the law degree), when I was a Reagan Republican back in the eighties. Think about whose interests you’re representing here. Hint: it ain’t the little guy.