Entitlement Reform a Hoax

Published on Monday, January 7, 2013 by RobertReich.org

The Hoax of 'Entitlement' Reform

by Robert Reich

It has become accepted economic wisdom, uttered with deadpan certainty by policy pundits and budget scolds on both sides of the aisle, that the only way to get control over America’s looming deficits is to “reform entitlements.”

But the accepted wisdom is wrong.

Start with the statistics Republicans trot out at the slightest provocation — federal budget data showing a huge spike in direct payments to individuals since the start of 2009, shooting up by almost $600 billion, a 32 percent increase.

And Census data showing 49 percent of Americans living in homes where at least one person is collecting a federal benefit – food stamps, unemployment insurance, worker’s compensation, or subsidized housing — up from 44 percent in 2008.

But these expenditures aren’t driving the federal budget deficit in future years. They’re temporary. The reason for the spike is Americans got clobbered in 2008 with the worst economic catastrophe since the Great Depression. They and their families have needed whatever helping hands they could get.

If anything, America’s safety nets have been too small and shot through with holes. That’s why the number and percentage of Americans in poverty has increased dramatically, including 22 percent of our children.

What about Social Security and Medicare (along with Medicare’s poor step-child, Medicaid)?

Social Security won’t contribute to future budget deficits. By law, it can only spend money from the Social Security trust fund.

That fund has been in surplus for the better part of two decades, as boomers contributed to it during their working lives. As boomers begin to retire, those current surpluses are disappearing.

But this only means the trust fund will be collecting from the rest of the federal government the IOUs on the surpluses it lent to the rest of the government.

This still leaves a problem for the trust fund about two decades from now.

Yet the way to deal with this isn’t to raise the eligibility age for receiving Social Security benefits, as many entitlement reformers are urging. That would put an unfair burden on most laboring people, whose bodies begin wearing out about the same age they did decades ago even though they live longer.

And it’s not to reduce cost-of-living adjustments for inflation, as even the White House seemed ready to propose in recent months. Benefits are already meager for most recipients. The median income of Americans over 65 is less than $20,000 a year. Nearly 70 percent of them depend on Social Security for more than half of this. The average Social Security benefit is less than $15,000 a year.

Besides, Social Security’s current inflation adjustment actually understates the true impact of inflation on elderly recipients — who spend far more than anyone else on health care, the costs of which have been rising faster than overall inflation.

That leaves two possibilities that “entitlement reformers” rarely if ever suggest, but are the only fair alternatives: raising the ceiling on income subject to Social Security taxes (in 2013 that ceiling is $113,700), and means-testing benefits so wealthy retirees receive less. Both should be considered.

What’s left to reform? Medicare and Medicaid costs are projected to soar. But here again, look closely and you’ll see neither is really the problem.

The underlying problem is the soaring costs of health care — as evidenced by soaring premiums, co-payments, and deductibles that all of us are bearing — combined with the aging of the boomer generation.

The solution isn’t to reduce Medicare benefits. It’s for the nation to contain overall healthcare costs and get more for its healthcare dollars.

We’re already spending nearly 18 percent of our entire economy on health care, compared to an average of 9.6 percent in all other rich countries.

Yet we’re no healthier than their citizens are. In fact, our life expectancy at birth (78.2 years) is shorter than theirs (averaging 79.5 years), and our infant mortality (6.5 deaths per 1000 live births) is higher (theirs is 4.4).

Why? Doctors and hospitals in the U.S. have every incentive to spend on unnecessary tests, drugs, and procedures.

For example, almost 95 percent of cases of lower back pain are best relieved by physical therapy. But American doctors and hospitals routinely do expensive MRI’s, and then refer patients to orthopedic surgeons who often do even more costly surgery. There’s not much money in physical therapy.

Another example: American doctors typically hospitalize people whose diabetes, asthma, or heart conditions act up. Twenty percent of these people are hospitalized again within a month. In other rich nations nurses make home visits to ensure that people with such problems are taking their medications. Nurses don’t make home visits to Americans with acute conditions because hospitals aren’t paid for such visits.

An estimated 30 percent of all healthcare spending in the United States is pure waste, according to the Institute of Medicine.

We keep patient records on computers that can’t share data, requiring that they be continuously rewritten on pieces of paper and then reentered on different computers, resulting in costly errors.

And our balkanized healthcare system spends huge sums collecting money from different pieces of itself: Doctors collect from hospitals and insurers, hospitals collect from insurers, insurers collect from companies or from policy holders.

A major occupational category at most hospitals is “billing clerk.” A third of nursing hours are devoted to documenting what’s happened so insurers have proof.

Cutting or limiting Medicare and Medicaid costs, as entitlement reformers want to do, won’t reform any of this. It would just result in less care.

In fact, we’d do better to open Medicare to everyone. Medicare’s administrative costs are in the range of 3 percent.

That’s well below the 5 to 10 percent costs borne by large companies that self-insure. It’s even further below the administrative costs of companies in the small-group market (amounting to 25 to 27 percent of premiums). And it’s way, way lower than the administrative costs of individual insurance (40 percent). It’s even far below the 11 percent costs of private plans under Medicare Advantage, the current private-insurance option under Medicare.

Healthcare costs would be further contained if Medicare and Medicaid could use their huge bargaining leverage over healthcare providers to shift away from a “fee-for-the-most-costly-service” system to a system focused on achieving healthy outcomes.

Medicare isn’t the problem. It may be the solution.

“Entitlement reform” sounds like a noble endeavor. But it has little or nothing to do with reducing future budget deficits.

Taming future deficits requires three steps having nothing to do with entitlements: Limiting the growth of overall healthcare costs, cutting our bloated military, and ending corporate welfare (tax breaks and subsidies targeted to particular firms and industries).

Obsessing about “entitlement reform” only serves to distract us from these more important endeavors.

This work is licensed under a Creative Commons License

Robert Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, Aftershock: The Next Economy and America’s Future; The Work of Nations; Locked in the Cabinet; Supercapitalism; and his newest, Beyond Outrage. His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org.

more Robert Reich

Source URL: http://www.commondreams.org/view/2013/01/07-3

 

Exploiting Your Mother

Exploiting your mother?  No, not you.  But Republican legislators and candidates, who are trotting out their moms in campaign ads, to support their sons in claiming that they would never, never, never do anything to hurt Social Security or Medicare.  At least, not for their mothers.  And other seniors.  And maybe other people over 55.  If their mothers trust their sons, then the voters sure can.  So now Paul Ryan is taking his mother with him on his tour around Florida today.   I guess that is insurance against anyone hurling brickbats at him, as they have been doing.  Presumably attendees will be too respectful of his mother to dissent.  But I truly feel sorry for her if they do.

Note 1:  Of course if Social Security and Medicare are for current seniors was short-changed, these wealthy Republican legislators’ mothers would be taken care of.  Imagine the pensions that some of them probably already receive in addition to their entitlements.  I am not even in their class.

Note 2:  Of course, in fact, Conservative plans would affect SS and Medicare of current seniors.

·         They are trying to change the COLA structure so that annual increases would be less.  That would take effect sooner rather than later.

·         If they repeal ACA, seniors would lose some benefits they have started receiving under ACA the last few years, such as free preventative health care, annual screenings, no annual or lifetime caps, no pre-existing conditions (in the case of their private supplemental plans), savings on donut hole of Medicare Part D, and others.

 Note 3:  I do not understand how they can talk of raising the eligible age to receive Social Security and Medicare.  In this time when unemployment rate is high, and particularly devastating to older citizens who will either never find work again, or find work only at much lower wages than they received before.  Many are already filing for Social Security early, and consequently reducing their lifetime payments.  But still are not eligible for Medicare, cannot afford private insurance, and may not qualify for Medicaid.  They ought to, rather, LOWER the age to apply for Social Security and Medicare benefits, without a reduction in payments.  To age 62 or even 60, in order to free up the job market for younger people.  It probably won’t cost that much more than for someone to be on unemployment insurance, food stamps, and Medicaid.

What do you think?

[Note:  I may be mistaken on some of these details, but I have tried to keep up with the politics and economics of Social Security and Medicare.  Please feel free to question, correct or modify this item.]

Gramma Windy

The Ryan Pick--Don't be Complacent

I don't usually post a whole item from the web, but this one bears reading in its entirety, in the light of Democrats gloating over Romney's choice of VP.

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AlterNet [1] / By Don Hazen [2]

9 Reasons Romney's Choice of Paul Ryan for Veep Is Smarter Than You Think

Continued from previous page

August 12, 2012 |

When Republican presidential candidate Mitt Romney tapped Paul Ryan, the 42-year-old Wisconsin congressman, to be his running mate, progressives went on a happy-thon. That Romney chose the House Budget Committee chairman known as the architect of draconian budgets that would make huge cuts in every aspect of the safety net -- not to mention his quest to turn Medicare into a voucher program -- just seemed like major blunder. My colleague, Joshua Holland, called it Romney's biggest mistake. Many were gleeful and shocked that Romney would seemingly play right into the Obama message on how the Romney agenda harms the middle class.

But I wasn't so happy. The Romney decision signals several things about the future, and none of them good -- rather scary and ugly, as a matter of fact. My gut told me that, for the Republican vice presidential candidate, I would much rather have a non-entity like Portman or Pawlenty as the Republican than a right-wing rock star. Any day.

Progressives are right when they say Ryan represents everything that shows how out of touch the Republicans are with the needs of the country. But they are not looking at Romney's Ryan decision for what it is -- a hugely dangerous step toward getting the Koch brothers' hand-picked star right to the verge of the presidency, which, if it should it come to pass, could dramatically transform the nature of American politics for our lifetimes. Whether Romney wins or loses, the Ryan pick poses a threat to the well-being of the nation.

If Romney wins, then Ryan occupies the Number Two spot with a money base and huge constituency of his own, far more than any vice president has ever enjoyed. With his own leadership PAC and a close relationship to the Koch-funded Americans For Prosperity astroturf group, it is hard to imagine how Ryan doesn't immediately become a co-president or, at least, the most powerful VP in history. And, and this is a win-win for Charles and David Koch, the right-wing billionaire brothers: If Romney loses, then Paul Ryan is sitting pretty to be the nominee in 2016, when there is no incumbent....a far easier race to win after eight years of President Barack Obama, the Democrat, presiding over a difficult economy whose recovery Republicans have done everything they can to obstruct. I have always felt that many conservatives intent on taking over this country, known for their long vision and patience, have this strategy.

And on the ugly side, the choice of Ryan says this Romney campaign, in contrast to even the McCain campaign, will be a no-holds-barred, vicious personal attack on Obama and everything associated with the Democrats -- scapegoating unions, public employees, poor people, immigrants, people characterized by Ryan as the "takers, not the makers [3]." This is the way the conservatives know how to win campaigns, and they are going all out to rip the Dems to shreds. If it doesn't quite work in in this year's presidential race, they could very well control of both houses of Congress come January.

Here are nine reasons that Romney pulled the trigger on Ryan, and why they make a lot of sense:

1. Romney was in danger of losing badly, so a gamble was worth the risk.

The polls and trends were going in the wrong direction as Obama was ahead by 9 percent among all voters and 11 percent among independents. As Michael Goodwin writes in the New York Post [4]:

Romney was on course to lose the election...perhaps by a landslide...Independents, despite being unhappy with Obama, were even more unhappy with Romney. And too many Republicans remain unenthusiastic about their party's nominee.

So Romney had to do something to energize the campaign, or he was dead in the water. Pick Ryan.

2. Romney is now seen as bold. By picking a controversial choice, a young, mediagenic, so-called brainy numbers guy, and one loved by the conservative base, Romney passed up the gaggle of more boring white guys who populated the pundits' predictions, to pick the radical one. But here, in fact, Romney has it both ways. Ryan is not a Palin or a Rubio -- a wild card -- but rather a well-positioned Republican with major mainstream and corporate credibility, whom the media often has gone ga-ga over. And Ryan is an insider -- Erskine Bowles (the co-chair of the Bowles-Simpson Deficit Commission, and rumored to be the next Secretary of the Treasury), has lavished lots of praise on to Ryan, who served on the commission, as have many others.

3. Did I mention Ryan is Catholic? We hear how the conservative Catholic bishops are trying to push Catholic voters to Romney, who has obviously come late to his anti-abortion stance. And among Catholic voters, Romney's Mormonism isn't exactly a plus. Still any anti-abortion politician is better than Obama in the bishops' minds. For the bishops, their task became easier with Ryan (even if they have a problem or two with his budget proposal), who is as conservative as they come, being against abortion even in cases of rape and incest. Those Catholics who are inclined to vote conservative are now very excited. And, in fact, it's not just far-right Catholics to whom Ryan appeals. A lot of voters in this country, for some reason, really like candidates who stick to rigid principles, even if those principles contradict their own. Ryan will get some of those voters.

4. Romney now has even more money. Romney has been doing fine, raising hundreds of millions from investment bankers and other pots of big wealth from the 1/10th of the top 1 percent. Still the Ryan choice is a huge motivator to the group of rabid right-wing billionaires around Charles and David Koch, the billionaire brothers who fund and raise money for right-wing candidates, and an array of right-wing groups. Ryan has been a Koch favorite for years, supported and featured in myriad ways. The Kochs have promised, with Karl Rove, to raise $400 million for the so-called "independent superPACs". Now, with all those billionaires jazzed over Ryan, the sky may be the limit. There is talk of the superPACs and the Romney campaign raising and spending $1.2 billion -- and now maybe even more.

5. Romney gets the full Koch election infrastructure. Solidifying the alliance with the Kochs is even more about infrastructure than campaign dollars, which will be plentiful. As my colleague Adele Stan, who covers the Kochs and conservative election field operations, explains:

The Kochs, via Americans for Prosperity and Faith and Freedom Coalition, own the infrastructure for the ground game in the swing states. They've been building it for years. That's not something any amount of money can build in the three months leading up to the election. Romney really, really needs Koch buy-in.

5. Ryan seals the deal for a base-motivating campaign in the worst tradition of the Republicans. Republicans win when they run to their base, and play the "us versus them" card for their anxious constituencies. Voter suppression tactics of all sorts are in play, especially in Florida and Pennsylvania. Taken together, Ryan's earnest demeanor and brutal budgets act as an a elixir for grassroots conservatives; the base will now be super-motivated.

Bush won two terms without winning the majority of the popular vote because the GOP wanted the win more than the Democrats -- and Republicans cheat more. As Thomas Schaller writes at Salon [5]:

By picking [Ryan], Romney provides a powerful signal that he is willing to counter Obama's failed attempt to unite America with an unapologetic attempt to win via econo-demographic divide and conquer politics.

6. The Romney campaign will now be the most brutal, race-tinged, fact-absent, expensive, technologically sophisticated campaign ever run. This presidential race is increasingly polarized. Polling shows that Obama has lost most of the non-college-educated white male voters he was able to capture in 2008. As Charles Blow points out [6] in the New York Times:

A staggering 90 percent of Romney supporters are white. Only 4 percent are Hispanic, less than 1 percent are black and another 4 percent are another race.

And of uncommitted "swing" voters, Blow writes:

Nearly three out of four are white. The rest are roughly 8 percent blacks Hispanics and another race.

Schaller adds: "Don't be surprised in the Romney-Ryan ticket engages in the sort of racially tinged, generationally loaded entitlement politics practiced by the Tea Party..."

7. While the VP pick isn't going to change the mind of many independent or hard-core party voters, it is a move to bring all elements of the party in sync. Progressive pundits, just a few days ago, were saying: Oh, the VP pick doesn't make much difference...maybe, at best, a 2 percent swing. Today is apparently a new day, and progressives are pouncing on this choice as being a huge plus for Obama. Well, ya can't have it both ways. Republican wins are always about turning out the base to the polls. Ryan probably won't make that much difference on the large scale, but he becomes the thunderbolt to rouse the base, which appears to love him, even if he is a media-created fraud. In fact, Ryan may be the most effective political phony in America.

8. Repeat: Paul Ryan is the most effective phony in American politics today. When Romney picked Ryan, he was grabbing one of the great teflon politicians of all time. Ryan has a tremendous ability to appear earnest while lying through his teeth, as he did recently when he repeated Romney's lie about Obama and welfare work requirements. Ryan represents what Salon's Joan Walsh calls [7]the "fakery at the heart of the Republican project today." She adds:

[Ryan,] the man who who wants to make the world safe for swashbuckling, risk-taking capitalists hasn't spent a day at economic risk in his life.

Guys like Ryan "somehow become the political face of the white working class when they never spent a day in that class in their life," writes Walsh. He has, she says, a "remarkable ability to tap into the economic anxiety of working class whites and steer it toward paranoia that their troubles are the fault of other people -- the slackers and the moochers, Ayn Rand;'s famous 'parasites' ..."

9. The Conservative tribe is now ready to fight all of its enemies. The conservatives and Republicans know what team they are on -- and that tribal identity is more important to them than any idea of hegemonic cultural identity could possibly be to liberals. For one, the conservative team is almost totally white, and far more homogenous, while more than 43 percent of Obama's supporters are people of color. Add in that conservative brand of resentment -- the "makers versus the takers" -- and it becomes clear who represents the conservative notion of a "maker." With Ryan as the standard-bearer for the self-described "makers," the team has its galvanizer.

The social psychologist Jonathan Haight and his researchers have compiled a catalog [8] of "six fundamental ideas that commonly undergird moral systems: care, fairness, liberty, loyalty, authority and sanctity."

Among them, he finds that group loyalty and identification is important among conservatives, but not among liberals. As William Saletan describes Haidt's thesis [8] in the New York Times Book Review:

Social conservatives see welfare and feminism as threats to responsibility and family stability. The Tea Party [9] hates redistribution because it interferes with letting people reap what they earn. Faith, patriotism, valor, chastity, law and order — these Republican themes touch all six moral foundations, whereas Democrats, in Haidt’s analysis, focus almost entirely on care and fighting oppression.

Come election time, that array of values makes the Republican project more formidable. It is why, when conservative ideas are not popular, when significant majorities of Americans disagree with conservatives, they still have enormous capacity to exercise outsized influence, controlling much of the public debate -- and are on the doorstep of winning control of all three branches of government. Despite their minority status, the tribal thing still leverages far more power than is fair or many thought possible.

In the end, it doesn't really matter whether Romney picked Ryan out of desperation, or may have had to take Ryan as a deal for support from the Kochs, or may have felt Ryan was actually the best man for the job. Whatever the reason, the Ryan pick does a whole lot for the Romney campaign --conferring money, authority, media attention, change of tone, and more. Probably the most overarching plus, though, is that by adding Ryan, Romney has brought the whole Republican-conservative tribal deal together, which, from my vantage point only increases -- not decreases -- the chance of the Republicans defeating Obama in November.

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Source URL: http://www.alternet.org/election-2012/9-reasons-romneys-choice-paul-ryan-veep-smarter-you-think

SENSE AND SENSIBILITY INDEED

SENSE AND SENSIBILITY INDEED

Sense and/or Sensibility—Not/Neither

You may be familiar with Jane Austen’s Sense and Sensibility, in which an estate is entailed to the son, who is married and has a son of his own, whereas the stepmother and her three daughters are left with a small legacy, from which they will be expected to live on the annual income, and turned out from the estate to live in a small cottage.   The father’s dying request was that his son do something to provide for his stepmother and his sisters.  John Dashwood wishes to do the right thing by his daughters, but his wife, Fanny, is reluctant, and, as we can see, dissuades him from doing more than is meet.  As I was watching the movie, and then rereading the relevant passage in the book, I was struck with how prescient Austen was.   The following is the Dashwoods’ conversation, interspersed with imaginary conversation btween today’s Democrats and Republicans, the Democrats echoing John Dashwood, in trying to do the right thing, and the Republicans echoing Fanny Dashwood, who pretends her  selfishness if really pragmatism .

JD  says “It was my father’s last request that I should assist his widow and daughters.”

You know what our founding fathers says in the Preamble to the Constitution, that we should  “promote the general welfare.”

FD: “He did not know what he was talking of…ten to one he was light-headed at the time.”        

You know that the founding fathers weren’t thinking about providing for those who are too lazy to look out for themselves.  I am sure they meant nothing so extreme as providing unemployment insurance and cutting payroll taxes and other forms of welfare.

JD thought that he could spare the sum of 3000 pounds, from this they could secure an income of 500 pounds a year, in addition to the 500 pounds they would get anyway.

But FD thought that Mr D would not have expected JD to give away “half your fortune from your own child.”

Just think how our grandchildren will suffer if there is any debt from the government having helped their grandparents.

JD asserted that he had made a promise, he couldn’t neglect his sisters; he must do something for them.

FD says “Indeed…[but that money] will be gone forever…and could never be restored to our poor little boy. “

                That money will increase our debt by millions; it can never be restored for our grandchildren.

JD “…to be sure…the time may come when Harry will regret that so large a sum was parted with.”  He thought perhaps he should reduce the sum by half.

FD agreed tentatively…why should he do so much for his sisters, they weren’t even his real sisters…only “half-blood.”

After all, a lot of these people are not important to us, they are minorities, lazy and shiftless, who won’t look out for themselves. 

JD:  “…they can hardly expect more.”
FD:  Who cares what they would expect?...indeed…they will be sure of doing well…they can all live very comfortably together on the interest…

                It is not our responsibility to look out for the poor, they have enough to iive on.

JD:  “Perhaps I should give something of the annuity kind just to their mother, say, 100 pounds a year.”

                We should be sure their social security is protected, they could live very well on that.

FD:  “…but then, if she should live 15 years, we should all be taken in.”

                But think how much we have to pay out if s/he lives for 15 years or more.

JD:  “…her life cannot be worth half that…”

Right, what use are they to society after they reach retirement age?  We should raise the retirement age, that would reduce the payout.

FD:  “…and after all you have no thanks for it.  They think themselves secure, you do no more than what is expected, and it raises no gratitude at all.”

                They will just complain that you don’t do more, and won’t even vote for you anyway.

JD:  “…you are right…they would only enlarge their style of living, and would not be the richer for it at the end of the year.”

And after all, they are not so poor.  I have heard that 97% of them even have refrigerators.  If you give them more money, they just start living high on the hog, and still have no more left at the end of the year.

FD:  They (the mother and sisters) can “move to a comfortable small house…five hundred a year?  What on earth can four women want for more than that?—they will live so cheap!   Their housekeeping will be nothing at all.  They will have no carriage, no horses, and hardly any servants; they will keep no company, and can have no expenses of any kind.  Only conceive how comfortable they will be!  Five hundred a year!  I am sure I cannot imagine how they will spend half of it…”  It should be more than enough [for us] to send them “presents of fish and game…in season.”

When they no longer own their home, they can rent an apartment; they can then live so cheaply, they can use public transportation, they won’t even need a car.  Their worries will be diminished, they will live so comfortably and conveniently.  They don’t need a large income, it should be enough that they can go to the food pantry.

U.S. Debt--Biggest Lies About

It just baffles me that in all this talk about the debt crisis, scarcely a word is said about three events that contributed the most to the deficit:

• Two major wars--don't even mention cutting the Pentagon budget
• Tax cuts of 2001 & 2003--off the table
• Prescription Drug Plan Medicare part D--huh? 

This is a long article, but seems to me to do a better job of explaining the "debt crisis" than just about anything I have read.

Gramma Windy

The 6 Biggest Lies About the U.S. Debt By Arun Gupta, AlterNet Posted on July 28, 2011, Printed on July 30, 2011 http://www.alternet.org/story/151827/the_6_biggest_lies_about_the_u.s._debt Editor's Note: This article has been corrected to reflect more accurate calculations. There is one simple truth about the discussion of the looming U.S. debt crisis: it is largely a compendium of half-truths, distortions, myths and outright lies. For example, is it true that the U.S. debt is unsustainable, which is spurring the budget-cutting fever? Far from it. While U.S. debt is at one of its highest levels ever in terms of gross domestic product, the estimated interest payments for all of 2011 on the $14.3 trillion public debt will be a mere $430 billion. This is only 18 percent more than the $364 billion paid way back in 1998, while the U.S. economy has grown nearly 30 percent since then. Rock-bottom interest rates on U.S. government debt account for the low payments today, but the practical effect is that servicing the debt as a percentage of GDP is near the lowest it’s been in decades. Or what about hysterical headlines like “U.S. Debt Default Looms” (courtesy of NPR) unless Democrats and Republicans agree to raise the debt ceiling? They are completely untrue. Richard Wolff, professor of economics emeritus at the University of Massachusetts, Amherst, says, if there is no agreement by Aug. 2 to allow the U.S. Treasury to borrow more funds, then “the government instead would choose among cutbacks on various expenditures such as state and local aid, medical aid, for war, for infrastructure. It would extraordinarily unusual for a government in such a situation to attack its creditors.” If no deal on the debt ceiling is reached this sucks for the rest of us, such as the millions depending on their portion of the $23 billion in Social Security payments scheduled for Aug. 3. A short delay would do no serious harm, but a longer delay, perhaps just a week or two, would be devastating. For one, removing income support payments would have a major ripple effect in our consumer-based economy. Spending would drop precipitously on items like food, medicine, transportation, clothing and household goods. Peter Bratsis, a professor of Political Theory at the University of Salaford in England and a Greek-American, says his home country is a cautionary tale. Speaking from Greece, Bratsis said since the debt crisis hit last summer many people’s income have dropped up to 25 percent as wages, pensions and social welfare have been sacrificed to please the banks. As a result “Greece is in an economic depression. In Athens, on every block, you have shuttered bakeries, cafes, shoe stores, plumbers and other small businesses that are closed because either people don’t have the money to spend or are afraid to spend.” Second, says Wolff, “The U.S. Government is one of the largest buyers, if not the largest purchaser of commodities in the world of oil, of computers, of weapons. In an already shaky global economy, the biggest buyer of goods would be making cutbacks. This would be stupefyingly dumb.” He adds that by playing chicken with the national debt, Washington has already irreparably wounded the economy. “The world depends on the U.S. economy running smoothly. A default would lead governments and companies to rethink their relation to the United States, and this has already happened.” The point is while the dangers are rife in a delay in raising the debt ceiling the doomsday scenario of a government default on debt is not going to occur. The creditors will be kept happy and there will be no default because that is how government works in a capitalist economy. And even if the impasse dragged on, the Fed could dip into its $550 billion in reserves, including more than $400 billion in gold at current prices, to keep making debt payments. One blatant lie is that Republicans and Democrats, the Congress and the White House are serious about reining in budget deficits to reduce the long-term debt. They are not. The Congressional Budget Office calculates that the deficit from 2011 to 2013 will be $3.5 trillion. Over the decade it will be $8.5 trillion. Now, lots of numbers are being thrown about on spending cuts over a 10-year period, but they keep dropping – the Senate Democrats are proposing $2.2 trillion in cuts and costs savings while the Republicans weigh in at $915 billion. Cutting one or two hundred billion dollars a year is meaningless. Wolff says, “Even if you cut the debt $300 billion, you are left with an enormous annual deficit that adds hugely to the national debt they all claim to care so much about. It gives lie to the idea that the Republicans and Democrats are interested in trying to cut the national debt.” If you really believe shrinking the debt is an imperative, then there are easier ways to do it then stealing grandma’s meds. The Bush wars and tax cuts – which are still going – cost $3.3 trillion from 2002 to 2009. Cutting the trillion-dollar war budget in half, ending the Bush tax cuts (which Obama could have done with no sweat when he was bursting with political capital in early 2009 or by calling the GOP bluff before or after the 2010 midterm elections) and raising tax rates on corporations would pretty much wipe out the deficit over the next decade. In the case of corporate taxes, during the last decade it averaged only 10.7 percent of federal revenues – and since 2008 it’s shrunk to barely 5 percent – versus 29.8 percent in the 1950s. Of course, the stand-off is based on another lie: that Congress and Obama administration can enforce cuts over a 10-year period. The budget process is an annual exercise. There is no provision whatsoever to make cuts permanent because they can always be undone by Congress, and taxes can always be lowered or costly new wars started, both of which always seem to happen, widening the deficit once more. There is no end to the falsehoods and fantasies from the chattering classes. “We are in recovery.” So says Ben Bernanke – since 2009 no less. Obama has been saying the same since 2010, while hedging that it is “painfully slow.” Really? Tell that to the 25 million Americans who are unemployed, underemployed or have dropped out of the labor force. This amounts to an unemployment rate of16.2 percent, but the real rate is probably closer to 20 percent after factoring in youth unable to enter the workforce or those who have taken early retirement. Or try telling the 100 million Americans who are effectively caught in poverty (using far more realistic measures than the government does) or the 6.5 million households with mortgages that are delinquent or in foreclosure that we are in recovery. The notion we are in recovery is based on believing the downturn was “the Great Recession,” a distortion the New York Times helped spread. Paul Krugman is one of the few mainstream commentators saying that not only is there no end in sight to the four-year-long slump, let’s give it a more accurate label such as, “the Lesser Depression.” Suppose the corporate media had been saying “Depression” for the last few years. It would have bolstered support for extraordinary measures to dig out of an extraordinary crisis, such as policies that did work during the last depression: jobs programs, infrastructure, social welfare, stronger labor rights and aid to local governments. But this would mean redistribution of wealth downwards instead of upwards. Therefore, saying recession makes it sound part of the normal boom-and-bust cycle, one we will overcome through the magic of the market as we have so many times before. We can then move on to the recovery phase, which means getting our economic house in order by reducing the debt, a lie told by Serious People whether pundits, politicians or experts. We are being led to think the wisest course is repeating the major mistake of the Great Depression – enforcing austerity in a deep economic funk. When the New York Times backs huge cuts to social spending, you can be sure the rest of the media assumes squeezing the poor and middle class harder is the tonic for economic health. Sure, the Times may sniffle that Obama’s stunning offer to hack $650 billion from Medicare, Medicaid and Social Security was “overly generous” to Republicans but that is just code for “we in the liberal penthouse support it with mild reservations.” On the other side of the media aisle, the Wall Street Journal endorsed the Republican sadism, saying that none of the critics on the right offer “anything nearly as fiscally or politically beneficial as Mr. Boehner’s plan.” This is what passes for the range of opinion in the two most esteemed newspapers in the country. That’s because we are still in thrall of the biggest lie of all – market fundamentalism. An eternity ago, in 2009, Newsweek declared, “We Are All Socialists Now.” They were right, but only in the way America has always been socialists: we socialize the rich when they lose money, and then we socialize their ability to profit. (The esteemed economic historian Karl Polanyi argued “laissez-faire was planned.” By that, he meant profit-making depends on government regulation of land, labor, finance and the environment. On top of that, there are outright transfers of wealth that occur during wars, infrastructure building and as part of social reforms, such as the railways, the Cold War, Medicare, the internet, and the bank bailouts.) Thus, the debate is about differing Democratic and Republican visions on which parts of the welfare state should be sent to the glue factory. “We all must sacrifice,” is the mantra. Never mind that the effect on the national debt will be laughably small. Slashing $650 billion from entitlements – Obama’s burnt offering – will nick a miniscule 3 percent off the national debt by 2020, while the suffering will be enormous. But we must do it to appease the markets. Pleasing the markets means pleasing the credit rating agencies – Standard & Poor’s, Moody’s and Fitch – an example of cult-like devotion in which the elite command us to drink the Kool-Aid. Like a death watch, the media turn anxiously to the rating agencies to ask the condition of U.S. government debt. Are they going to downgrade it, which would mean higher interest rates and an even bigger debt problem? This is one more big lie as Japan’s huge debt – more than twice the size of U.S. debt as a percentage of GDP – was downgraded in January and “there was no negative impact at all,” according to one analyst. But first let’s go to the tape and review how the big three credit rating agencies inflated the mortgage bubble. The bubble was driven by the banking industry’s insatiable appetite for debt, the repackaging of dicey mortgages into profitable securities. The agencies, especially Moody’s and S&P, gave investment-grade ratings to almost any sack of residential mortgage backed securities (RMBS) and collateralized debt obligations (CDO) that passed across their desks. By law, banks, pension funds, insurance companies and other institutional investors need investment-grade ratings on these securities to hold them. Since the rating agencies were paid by the issuers, they were raking in the cash by gold-plating shit. Moody’s revenue on these securities quadrupled from over $61 million in 2002 to over $260 million by 2006. For S&P, it went from $64 million to $265 million for CDOs in the same four years and from $184 million in 2002 to $561 million in 2007 for RMBSs. Don’t think they didn’t know exactly what they were doing. At S&P, one manager emailed a co-worker in December 2006, “Let's hope we are all retired and wealthy before this house of cards falters.” Then, according to a U.S. Senate report, the ratings firm triggered the financial collapse by downgrading huge amounts of these securities from AAA to junk. In one day, on Jan. 30, 2008, S&P downgraded an astonishing 6,300 ratings. In 18 months the two firms downgraded more securities than they had done in their entire 90-year histories. Once the securities turned to junk, the big players could no longer hold them, which burst the bubble as they were sold in a panic and losses began mounting on the bank’s balance sheets. We know the rest of the story – the financial collapse, the trillions in bailouts and credit lines, the lack of punishment for executives at any of these firms, the return to obscene profits a year later, the de-fanging of any credible reform. But now, we are being told, the rating agencies word on debt is the word of God. This time, S&P is not so much looking for a fast buck as nakedly pushing an agenda. In a blatant lie, S&P President Deven Sharma, who was summoned to testify before a House subcommittee on financial oversight on July 27, said his firm was “misquoted” in demanding $4 trillion in cuts and unctuously preached that ratings should be free of politics. What happened is two weeks earlier, on July 14, S&P issued a detailed statement, explaining that it was placing both long-term and short-term U.S. debt “on CreditWatch with negative implications.” It explained that “there is an increasing risk of a substantial policy stalemate enduring beyond any near-term agreement to raise the debt ceiling.” It did offer a safe passage. S&P said that if “an agreement would be enacted and maintained throughout the decade” to realize “budget savings of $4 trillion,” then “other things unchanged” it could affirm the stellar ratings on both short- and long-term U.S. debt. But, it warned, any “credible” agreement “would require support from leaders of both political parties.” S&P knew exactly what it was saying. The only budget number it mentioned (three times) was $4 trillion. By saying both parties needed to sign on to an agreement to be credible, it knew the Republican agenda of strangling the last of social welfare would triumph. And by issuing the statement in the heat of negotiations, it threw its lot in with the Tea Party mob. S&P was telling Capitol Hill to drive a stake through the heart of the welfare state. To let us peasants know we must till the corporate fields until the day we die. Otherwise, the credit rating deities will rain downgrades upon our heads, blighting the land for future generations. We must pay now and forever. That is the truth, a truth so crude and cartoonish it seems comical. Which is why we need so many lies. Arun Gupta is a founding editor of The Indypendent newspaper. He is writing a book on the decline of American Empire for Haymarket Books. © 2011 Independent Media Institute. All rights reserved. View this story online at: http://www.alternet.org/story/151827/

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