It was back in 2009 that the Tea Party first appeared to spring alive from out of nowhere. We know now that it didn’t, but at the time Democrats and liberals didn’t see it coming. They couldn’t understand it. But they knew two things: it was pissed off and it was stupid.
Who doesn’t remember the “get your government hands off my Medicare” moment? Everyone made fun of them. Comedians, journalists, even supposedly serious Economists like Paul Krugman made fun of them. I was a 16-year-old kid who didn’t even care and I’m sure I made fun of them. If you knew where Medicare comes from it was hard not to.
After Obama’s election, the Democrats had the Presidency, Congress, and the legal as well as historical precedent for a Post-Wall-Street-collapse reshaping of American society through massive economic intervention. The Democrats had the biggest wind that capitalism could muster at their back. They had all but the openly right wing media in awe of a new President who promised change and a new nation built on hope, one that was supposed to be as prosperous as the America his Democratic predecessors created the last time a collapse happened.
That America never came. Or if it did, it sucked. As Tea Party superstar Sarah Palin said it: “how’s that hopey, changey stuff working out for ya?”
The new President and his super-majority in Congress looked at the desperate bankers atop the gilded pyramid of American Society and decided that the thirty years of neglecting citizen’s economic concerns could continue with just a minor correction; in spite of the crumbling social economy most Americans experienced they polished its crown with the bailouts, plugged the foundation’s cracks with the loose rubble secured through a Stimulus bill nobody remembers, and let Government’s 30-year withdrawal from our social economy go on with the President’s tepid touch and emboldening speeches.
Obama caught the enemy once vanquished and tamed by his predecessor in a criminal act of incalculable scope and cruelty, hands bloody, pants down, and then he surrendered.
By the time the voting public realized this, the Democratic establishment and liberal pundits blamed everyone who bought this “hopey,changey stuff” for being duped into believing that the State had any power at all. For believing that they had the right to demand a return to the transformational political intervention into their own society that to this day defines the party. Eventually, on the left, the resentment became Occupy Wall Street but the well-financed and organized right was favored and thus catapulted by the media.
Keeping a lopsided and gilded pyramid from collapsing costs money, a lot of money. Money that had to go somewhere. The Federal the Debt was soaring. What that meant our media stars couldn’t say, but they knew it was bad.
The number of economic victims was growing. People who lost good jobs could turn on their TVs, that is look up at the shiny crown atop our pyramid, to see that bankers were throwing money at a President that our culture couldn’t stop lauding. They could see that their President, their congressman, and those bastard bankers were actually friends. We don’t know how to talk about class in the United States but even if they didn’t have the language to properly express it, everyone on the lower rungs of the American pyramid could sense that these people just filled different roles in what we now call the “establishment.”
It didn’t take long for someone- even a banker fanboy like CNBC’s Rick Santelli– to make a connection between debt, anxiety, and class, even if it was the wrong connection. The mantra became: There are people who deserve what they have, and then there are people who don’t. People who work hard and people who take. The two were at odds and those who earned their lifestyle were said to be suffering because of those who didn’t. The enemies that so-called conservative outlets jumped on were not the bankers Democrats had kept in power. It was the publicly announced base of the Democratic party – the unions, minorities, and feminists who are culturally associated with a Party that doesn’t exist anymore. The enemy became the people the President spoke about so sanguinely, but in reality did not represent.
Politicians from both parties, supposedly independent and rational economists, every trusted “Liberal News” outlet had been telling them that cuts were coming, that there was no choice because we can’t afford it because of “the Debt.”
It was to these moochers that our money was going to, so the tale went. The reason for the deficit. The undeserving, who with each tick upwards of the debt sapped you and your grandchildren’s grandchildren of the institutions that made a middle-class life possible. These are the people taking away your Medicare and the Government, you were told, was helping them.
People who just watched these mostly coastal elites, led by a Democratic President, save and refuse to punish a morally and functionally mutated financial sector while fancy economists told them that they not only couldn’t understand why we had to do it but that they had no right to question it, were being told that their lifelines were being threatened by a National Debt that kept skyrocketing. They were pissed and righteously so. Meanwhile, the only people running for office who seemed angry, and were given a platform to seem angry, were the people running as Republicans who wore tricornered hats.
That no government that issues its own currency can go bankrupt in its own currency was ever mentioned in the press. That the evidence was entirely on the side of those lonely voices crowded out by both right-wing and liberal elites was never mentioned.
In all the confusion only the vicious were given a platform to attack the establishment. Culturally the establishment looks familiar: those whose ideas are taken as true because they went to the right schools or have a fancy title, and look like they belong on CNN. The growing pissed off scrabble that felt the evidence of the lie was given a megaphone by a Tea Party that ignored sanity. While those who had evidence, or even the audacity to recall what is still living memory, were denied both public space and legitimacy.
It was the Democratic Establishment that narrowed the debate by perpetuating the lies about debt and deficit to pave over their inaction.
We did, after all, decide that deficits are no reason not to fight the Second World War, even when they reached well over 20% of GDP; it was during the Great Depression that we implemented the New Deal, not the Roaring 20’s, and decided that deficits were not frightening enough to stop us from implementing Social Security or planting a billion trees through the CCC, or employing over 8 million people with the WPA.
“We wanted to help but we are out of money,” was supposed to calm people who just lost their life savings. They didn’t even try.
The fight on television, in Newspapers, and in the blossoming Social Media was between Democrats who believed in cutting New Deal protections like Social Security to “save” it and Republicans who believed in cutting Government to “save” the constitution.
Were people like the woman who sent a letter to former President Obama saying that “‘I don’t want government-run health care. I don’t want socialized medicine. And don’t touch my Medicare’” suckers that in the end fell for lies by hacks, political opportunists, and the big money funding this supposedly “grass roots” Tea Party? Yes. But unlike liberal politicians she does have her priorities straight: she wants her Medicare and she sees it as a right that comes with being a human being, even if she doesn’t seem to know where the money to pay for it comes from.
Clearly among the desperate and duped were countless racists and misogynists or people who are at least willing to vote for candidates with such views. There were the standard Republicans. These are the people who just voted in Donald Trump. Even if they are a minority, they are certainly not silent and they are sizable.
But throughout the country, particularly in Rust Belt states like Michigan and Wisconsin – where Clinton was not supposed to lose – there were enough people suffering and legitimately angry- like the lady who doesn’t know where Medicare comes from- that decided they couldn’t vote for anyone and skipped the top of the ticket. Or, maybe, even for the first time, they decided to vote for a third party. Some of them even voted for Trump after voting for Obama twice. Half the country just didn’t vote.
These are people who had to watch as Wall Street blew up the world, then stand by while those in power opened up the States endless spigot of money to bail out bankers and then let those bankers take their homes.
Who then watched as the same power elite- and the democrats had both the Presidency and congress at the beginning of this- promise change and then close that spigot when it came to helping their sorry asses.
In 2016, Clinton, we were endlessly told, was the best manager of this. She had the best resume for managing a government that ensured, both directly and through neglect, that the lives people in America’s de-industrialized wastelands had to suffer through got no better. Worse by countering Make America Great Again with America Is already great, Clinton and the Democratic elites told these people that if they had not benefited from our apparently great society it must have been their fault. She and the entire Democratic establishment took the republican bootstraps bullshit and threw it at them in sentiment. Worse, if they didn’t vote for her – and remember that half the country didn’t vote – they must be sexists or racists. If they voted for a third party they must be sexist or racist. It couldn’t have been her fault.
Those of us in the upper middle classes, especially those of us on the coasts who dominate media culture, who made fun of the inland losers while their lives got worse- even while our own lives got worse- because the public discussion was closed off to those who acknowledged the suffering and recognized from both history and contemporary evidence that we can solve our problems, made sure that only the most vile voices speaking to their betrayal were given a microphone. The pissed off, racist, left behind and disillusioned all looked at a Liberal elite that constantly deferred the stable middle-class life that was once the American Dream and told them to fuck off.
Turns out a dream deferred is a nightmare and who knows what new demons and monsters are about to haunt us – Trump is actually President. But the fear, anger, and ignorance that inspired the moment of stupid that titles this article has never left us. It was based on the same economic lies that Democrats used to defer a New deal after the 2008 crash and now, as it always has, it threatens Social Security.
The threat to Social Security made national headlines on January 4th when Senator Bernie Sanders took to the floor of the Senate with a large printout of a pre-presidential Trump tweet asserting that he was the only genuine Republican candidate who would not make cuts to Social Security, Medicare, or Medicaid.
Despite professions to the Twitterverse, President Trump nominated several individuals to his Cabinet who have either supported legislation to privatize Social Security, cut the program, or have promoted such actions through their work and remarks while outside of government.
There is, of course, no way to tell what the President actually thinks. However, we can take a look at those who will be running the many tendrils of his Executive branch to see where our future lies, particularly since Donald Trump has written that he himself is “not an operator.”
For example, on February 16th Mick Mulvaney was confirmed in a 51 to 49 vote as the Director of the Office of Management and Budget. The only Republican to dissent was Senator John McCain whose opposition stemmed from Mulvaney’s “support for firm spending limits on the Defense Department.”
As director of the OMB, Mulvaney will be primarily responsible for administering the President’s annual budget requests to congress. He is a Fiscal Hawk who while in congress co-sponsored a Balanced Budget Amendment which would automatically limit the Federal Governments capacity to fund all programs and has supported multiple bills which would directly cut Social Security and Medicare throughout his tenure in the House or Representatives.
For the post of Secretary of Health and Human Services Donald Trump successfully nominated Tom Price, a man whose prior occupation was serving as Chairman of the House Budget Committee where he put forward a Budget Process Reform the day after Trump’s election which would remove “ the assumption that entitlement payments continue at current levels even if trust funds are insolvent.”
On Valentine’s day, the Senate confirmed Linda McMahon as the Administrator of the Small business administration. McMahon previously made headlines during a 2012 Town Hall where she proposed attaching a Sunset Provision to Social Security legislation which would last 10 to 15 years. If such a measure is ever passed it would cause Social Security to disappear, entirely, at a designated future date should congress fail to pass an extension, or to be cut, depending on how the Sunset Provision is written.
Finally, there is the too racist to be a Federal Judge, but just racist enough to be Attorney General, Jeff Sessions who has voted to privatize social security and “vigorously supports the Balanced Budget Amendment.
Outside of the Cabinet, there is the possibility of John Allison becoming Daniel Tarullo’s replacement as Vice Chair of Federal Reserve, an institution that Mr. Allison has openly called to be abolished.
From 2010 to 2015 John Allison served as the President and CEO of the Koch-funded Cato Institute which has long maintained that there is a “financial crisis” in Social Security, and which regularly publishes proposals to cut and privatize the program by shifting the allocation of Payroll taxes to personal accounts, a transition that Allison has also personally advocated for.
The benefits, according to the Cato Institute, of privatizing Social Security is that it “could produce a large net increase in national savings,” and “would increase investment, productivity, wages, and jobs.” These benefits are derived from economic models based on fixed exchange rates, which we do not have. Models, by the way, that mainstream Democrats, Republicans, and their respective economists refer to when justifying their macroeconomic policy.
“’National savings’ is a term applicable fixed exchange rate policies, like the gold standard, but is inapplicable and devoid of meaning with today’s floating exchange rate policy.” According to the Economist Warren Mosler, who responded to questions via email.
The idea put forward by the Cato Institute and others is that the capital stock of the country would go up because of the increase in available money from the private accounts, but “the proposals I’ve seen only allow ‘investments’ of existing large cap equities. That means those stocks change hands from today’s holders to the new buyers. So all that happens is that portfolios shift within the economy, with no new investment.”
The point of Privatization schemes is not to benefit recipients or even the economy as a whole. The interest of the Cato Institute is to discredit all government, regardless of efficacy. Social Security is bad because it is a government program. That’s it.
Mosler is one of the founders of a growing school of economics known as Modern Money Theory, whose proponents include Stephanie Kelton, the former chief economist appointed by Bernie Sanders on the Senate Budget Committee, and economic advisor during his campaign for president.
Fortunately, these nominees are working through the executive branch of Government whereas the power of the purse is designated to Congress and Congress alone.
Unfortunately, the Speaker of the House – who has the power to select which legislation gets a vote on the House floor- is Paul Ryan. A man who is an avid and longstanding supporter of both privatization and a Balanced Budget Amendment.
The possibility of a Balanced Budget Amendment has never been higher, the Republican Party is only one state legislature away from having the two-thirds majority necessary to call a constitutional convention. In which case, there is no telling how the United States may be re-written.
Currently, as the sole issuer of the US Dollar, the Federal Government of the United States can never run out of Dollars. That is not to say that it can spend money without consequence. The consequences are real but they can be either positive or negative depending on how resources are applied and whether or not they exist to be utilized. If our congress were so inclined it could vote for the necessary measures to deliver full employment of workers and resources and if it spent passed that point we would get inflation. Seeing as the Federal Reserve has been trying to cause inflation for nearly a decade and has failed, getting to that point is more difficult than is commonly imagined.
Should Balanced Budget Amendment pass, the Federal Government’s ability to finance at current capacity programs like Social Security or even Republican (and Democratic) favorites such as the Military ad infinitum would be wiped out.
“Having to make spending cuts or increase taxes to achieve ‘balance will most likely mean cutting those programs,” said Mosler. But that is just the beginning, “the spending cuts and tax increases will reduce GDP growth causing revenues to fall short and transfer payments to rise, meaning more cuts and more tax hikes will be required, with no end to the ‘unvirtuous cycle,” wrote Mosler.
We would go from being able but unwilling to preserve and expand social programs and promote economic growth to actually being Greece: condemned to Depression forever.
This was the second time since the election of Donald Trump that the topic of Social Security preservation became major news. The first came when Congressman Sam Johnson Proposed the Social Security Reform act of 2016 last December.
Considering the support for “reform” held by Speaker Ryan and the Cabinet officials who will be advising (and governing for) the President, the bill is worth going through as an example of the vindictive legislation we are already accustomed to, which both ignores the financial constraints faced by a sovereign currency issuing government and makes dubious claims about benefits for recipients.
Johnson starts with the claim that Social Security is “running out of money – fast.” While the Trust Fund is facing a shortfall in funds by 2034, there is no reason why that shortfall cannot be covered by general revenues. All that is required to plug the hole is for Congress to pass a bill authorizing the spending. The decision not to guarantee full payment to recipients is a political choice made by Congress, not a financial constraint on the government’s ability to make these payments. There is no support for the claim that the Federal Government faces “the prospect of drastically cutting benefits for all,” as the congressman claims.
The trustees report is explicit about this when discussing the lack of crisis for Medicare part B and D. Since payments for these programs are paid out of general revenues: “for Supplementary Medical Insurance (SMI), the Trustees project that both Part B (which pays doctors’ bills and other outpatient expenses) and Part D (which pays for prescription drug coverage) will remain adequately financed into the indefinite future because current law provides financing from general revenues and beneficiary premiums each year to meet the next year’s expected costs.” (emphasis mine)
The call for “reforms” serve only to restrict public discourse on the national social and economic direction we want our government to take, which means to restrict the government from enacting policies that are favored by a majority of the people. The need to achieve and maintain financial balance is something that is of serious concern for state and local governments, even more so for individual firms and citizens. We are users of the dollar, we must earn or tax before we can spend. The federal Government must issue – that is, spend into existence – those very same dollars before they can be earned by workers or “taxed away” by state and local governments.
Since the Federal Government can always afford to make payments to social security recipients, the relevant question is whether or not proper investments are being made today to ensure these payments can be used to buy goods and services in the future. This was actually explained to Speaker Paul Ryan in March 2005 by then Chairman of the Federal reserve Alan Greenspan. The video is below:
We do actually face problems with an aging society but they are just variations and exaggerations of currently existing problems. Problems such as: will there be enough resources in the future to equitably distribute so that workers and their retired parents can maintain secure and meaningful lives?
Whether or not living standards are maintained has to do with the productivity of our future workforce and how we structure our institutions to cope with a population which has a larger cohort or older people. If public investment in our citizens, productive capacity, and public infrastructure is inadequate today, then a shortage of resources will manifest itself as a lower standard of living and financially as inflation- a shortage of resources relative to the amount of money in the system- not Government bankruptcy. Life will suck worse but the balance sheet of the State will be just fine.
Making sure that such resources are in place could mean providing lifelong job opportunities to young people in the care sectors by funding much-needed improvements in housing, nursing homes, ensuring access to local culture, and community programs such as providing healthy meals. Such a departure from current austerity would only require the passage of laws by Congress and the signature of a willing President.
Likewise, it is a political choice to gentrify neighborhoods in order to build luxury apartments while deliberately neglecting elderly and/or poor citizens who live in rat-infested public housing in a country as rich in resources as the United States, not an economic necessity.
Unfortunately, Johnson’s proposal continues: Social Security is “relying on higher taxes on workers and job creators in order to stay afloat,” noting that the original payroll tax was “was only 2 percent on the first $3,000 in wages,” around $50,000 after adjusting for inflation, but today “the payroll tax is a staggering 12.4 percent and applies to the first $118, 500 in wages,” and “for many low-income workers, this is the biggest tax they pay” and yet are “not enough to keep Social Security solvent.”
Surprisingly, this is not entirely false. While as discussed above it is not true that there is a crisis in terms of Social Security payments to recipients, the tax on working individuals to bolster the fund is quite high in an economic climate where growth is anemic at best and incomes for the majority of working people are too low.
It is actually possible to go back to that previous rate as a permanent Payroll tax holiday. Think about it. If there is nothing to stop the government from issuing the money to keep payments at current levels then what is to stop it from reducing the taxes it imposes, ostensibly for the same purpose?
Something like this was temporarily passed Congress and signed by then President Obama in 2010 as a means to increase take-home pay for working families during the depths of the Great Recession. Temporarily returning to the original tax rate of 2 percent, or permanently doing so would immediately increase the take-home pay of every working individual in the United States and lower the cost of hiring employees for businesses. Capitalism runs on sales and a Payroll tax holiday would increase the money with which Americans are able to purchase the stuff Capitalism produces.
Among the flimsiest claims made in Johnson’s proposal, even by conventional wisdom, is the need to decrease benefits to higher income earners in order to provide the funds to increase payments to lower income earners because the program fails to “help many low-wage workers stay out of poverty in retirement.” Social Security, in conjunction with Medicare, is the most successful anti-poverty program for seniors in American history. According to Center on Budget and Policy Priorities, Social Security currently keeps 22 million people out of poverty, including over 1 million children and 15 million senior citizens.
Not to mention that means testing by looking at lifetime earnings opens ups a hornet’s nest of potential problems for retirees. It blatantly ignores recent history, as a financial crisis like 2008 can wipe out someone’s lifetime savings over the course of a few weeks and it doesn’t take into account that those who live in different regions of the country have very different costs of living. For example, someone who lives in San Francisco may have earned more in dollar terms than someone who lives in Buffalo, but that does not mean that their quality of life, or ability to save was greater because costs in the two cities are drastically different.
The purpose of programs like Social Security is to guarantee a minimal level of decency for the lives of the elderly. If the money recipients receive is not enough to keep them out of poverty it is up to congress to legislate either an increase in their nominal payments or to ensure that public resources are applied to lower their costs of living through targeted programs such as the provision of low-cost housing. Congress is the only National entity empowered by the constitution to do this and its failure to do so, when there are people willing to work and resources available to be provisioned, is only because Congressional leaders do not want to, or their constituents do not force them to do so. Affordability is not a valid concern when you create the necessary money by passing legislation.
Finally, Johnson’s Bill proposes a backdoor cut to future recipients by switching the way benefit increases are calculated from the current CPI-W to the Chained CPI.
Former Chief Economist on the U.S. Senate Budget Committee Stephanie Kelton calculated in 2005 paper, when George W. Bush attempted to ‘defend’ Social Security using the same method, that the loss of an average worker would be “a reduction of $8,184 in her annual benefit (0.628 x $22,000), which translates into a $170,000 reduction over the course of her lifetime!”
It’s actually mind blowing that those in power, or anyone at all, views living longer as a bad thing. But this is what every proposal to cut Social Security is effectively saying. We live in a society so rich that there is nothing stopping us from making investments in our young and in our infrastructure to build caring communities that would both take care of the elderly and allow them to continue contributing to society, yet we find ourselves viewing the fact that they keep breathing as a cost.
As horrible as such Republican proposals are the Democrats haven’t shown that they are likely to put up much of a fight. Yes, they will oppose Trump. Yes, they will call out Republican leaders like Paul Ryan. But those that make up the Democratic Party Establishment agree with Congressmen like Sam Johnson on policy. And they agree with Paul Ryan. They just don’t want to be seen agreeing with them and most of all they don’t want to be seen agreeing with Trump.
Not only haven’t Democrats seriously expanded Social Programs since President Lyndon Johnson signed the 1965 Medicare Amendment to the Social Security Act- or even seriously tried- the current establishment has been at the forefront of rolling back the safety net while coasting on their predecessor’s image as the working man’s only political defender.
As I covered above it was this duplicity that helped fuel what gave us the Tea Party, Donald Trump, and which might kill both the New Deal and Great Society before the decade is out. While Obama’s pretentious ambivalence to the plight of non-professional class Americans wasn’t as bad as Clinton’s vicious attacks- Clinton ended welfare “as we know it,” doubled the prison and pumped cyanide into the weak heart of Labor with NAFTA – enough people felt his neglect that it only took two years for Democrats to lose congress. Rather than moving to the left in response to the rising Tea Party we saw Barack Obama double down on austerity and try to strike a Grand Bargain with Republicans which would have cut Social Security, along with just about everything else.
He failed and we ended up with the Budget Control Act (BAC) or the Sequester, an act that was conveyed as so atrocious, so damaging to the public, that it was only passed as an incentive for congress to make slightly less crippling cuts to federal expenditure.
Any sane person would question the logic of this. Our government pulled the equivalent of holding a gun to its head to make sure that it amputated a perfectly healthy left hand. It was an idiotic plan that predictably backfired seemingly proving that the loony vanguard of the country’s richest Republicans could defeat the President while both wearing funny hats and believing what they were saying.
And the response by elected Democrats was to commit ahead of time to harming other people! Think about it, we stole money from Aid for Women, Infants, and Children by an act of congress because the Tea Party pointed to a clock on West 44th Street in Manhattan and used a big number to scare people and the Democrats big move was to roll over and negotiate which slab of our hide was going to be sliced off.
Democrats get away with this because evidence-based economics- economics that takes into account history as well as where money comes from and what it is- does not reach the average citizen. Instead they stoke the fear of large numbers, what was once just a Republican strategy, while they play a sadistic- and taking food away from children in any national context is sadistic- game with the programs that keep America from falling back into developing nation status even during times of economic prosperity.
At the Presidential level this goes back at least to Bill Clinton. As Historian Thomas Frank notes in his new Book Listen Liberal, President Bill Clinton was secretly cavorting with Newt Gingrich to cut and privatize Social Security, even initiated the agreed upon process during a state of the union address, before a stroke of luck distracted the Republicans from passing the required legislation i.e. Monika Lewinsky happened.
This is the Democratic Establishment that is supposed to protect the Party’s greatest legislative achievements during a time of economic insecurity? When the white house is in the hands of an Insane Clown President who judges the veracity of the press depending on whether or not they like him, whose Chief Strategist is a former Goldman Squid that stepped into his newly created post after running Breitbart, a President who cut off his sick newborn nephew’s health insurance to negotiate the divvying up of his father’s Will, Chuck Schumer is supposed to save us?
Paul Ryan was right to say after the election that this is a historic moment. Because now he’s got his greedy government hands wrapped around Social Security with only Trump’s whims and penmanship preventing him from legislating it away. The Neoliberal, anti-democratic dream of destroying the New Deal is about to come true. Labor unions are mostly dead, next up is Social Security and this Democratic party won’t protect us. Who knows, we may be forced to make our own luck.