Sunday, May 10, 2009

It's the season

Oh, lord, here we go again. We've been talking about federal budgets and programs and deficits, so it's time for all our Serious, Reasonable, Realistic, Only-Interested-in-the-Good-of-the-Nation pundits to start bloviating about "entitlement reform." The other day, for example, David Broder droned on about how "the nation" will have "missed an opportunity" if we don't establish a "commission" on the matter toot sweet.

Since according to the Chinese proverb, "the beginning of wisdom is to call things by their right names," let's seek some wisdom right at the start: "Entitlements" means Medicare, Medicaid, and Social Security. "Reform" means cutting benefits.

Cutting benefits. That's always the answer in their minds. Just the excuses vary.

The economy is undermined by a class of slick-talking, con artist greedheads who of course we have to bail out (without, of course, actually exercising any control over or ownership of those enterprises - that would be "meddling in the private sector" and terribly Unserious) and which of course is going to cost upteen trillion dollars while allowing said greedheads to continue to live in the manner to which they have become accustomed, and what is the answer our chattering class offers to this financial conundrum? Cut Social Security!

The economy has been shamblized. Even as some signs emerge that we may be hitting the bottom, the "official" unemployment rate has climbed to 8.9% (up from 4.8% a year ago) and is expected to continue to climb well into 2010. (Your confidence even in that prediction may be shaken by the fact that six months ago, the "experts" were predicting unemployment could go as high as - oh, my - 8.5% by the end of 2009.) The real unemployment rate is already 15.8% (and for black males, it's 17.2%). One in five homeowners is under water - in a house worth less than their mortgage balance.

And even some of the "good" news may be bad news. The results of the bank "stress tests" were supposed to be a relief, showing the banks were not as bad off as had been thought. Except for one detail: The results were rigged.
The Wall Street Journal is reporting that that the smaller-than-expected deficit number came about because the Federal Reserve applied a "different measurement of bank-capital levels than analysts and investors had been expecting, resulting in much smaller capital deficits."
That happened because the banks got to negotiate over what the stress test would say and what standards would be used to make the judgments.

What's more, there's what Dollars & Sense magazine calls a "credit card time bomb" in the results. The official results, the NY Times said,
suggested that the nation’s 19 biggest banks could expect nearly $82.4 billion in credit card losses by the end of 2010 under what federal regulators called a “worst case” economic situation.
Except it wasn't a worst case scenario: It didn't allow for higher unemployment and it didn't include credit card balances that had been packaged into bonds and so held off the banks' balance sheets.
According to estimates by Oliver Wyman, a management consulting firm, card losses at the nation’s biggest banks could reach $141.5 billion by 2010 if the regulators’ loss rate was applied to their entire credit card business. It could top $186 billion for the entire credit card industry. ...

[And u]nlike in prior recessions, cardholders who recently lost their jobs are unlikely to be able to extract equity from their homes or draw down retirement accounts to help pay off their debts.
All of which means that the recession, instead of having the classic "V" shape where the economy declines, hits a bottom, and climbs back up again, could have a "U" shape where it declines, hits bottom, and stays there for some time before improving again. Indeed, unless things work out just right, including no time bombs going off that could cause a complete collapse of consumer credit, this recession could look less like a "U" and more like an "L."

And what is the answer proposed by Broder, et. al.?

Cut Social Security!

End the mad, pointless, vile, wasteful wars in Iraq and Afghanistan, saving hundreds of billions a year? We don't hear them saying that. Set up a "commission" to find ways to slash the Pentagon war budget? Crickets. Raise taxes on the rich even more than has been proposed, maybe even bringing back the old top marginal rates of the 1950s? Even the crickets go silent.

What's more, not only are Medicare and Social Security not in any crisis, but the SS Trust Fund still shows a yearly surplus and is projected to do so until 2017 - which means that unless the pundits are proposing an immediate cut in current benefits, cutting Social Security would have no impact on reducing the deficit! (The longer run is in good shape, too: With no changes at all, the system can pay out 100% of projected benefits through 2041, say the system's trustees; until 2047, according to the Congressional Budget Office. And even then, again with no changes, the system could still pay out 78% of currently-projected benefits through 2084, which is as far out as the projections go.)

So I have to ask again what I asked the other day: Who the hell are you people?

But why ask? We know who they are: They are people who think cuts in Medicare, in Medicaid, in Social Security, won't affect them. They don't worry about being cold or hungry in their retirement, they don't worry about affording health care, and they sure as hell don't worry about being poor enough to qualify for Medicaid. As much as they claim to be speaking for "ordinary people," the fact of the matter is that the world they inhabit, the circles in which they move, are so far removed from the everyday concerns of most of us that those "ordinary people" are to them nothing but abstractions, symbols, bumper stickers for their political slogans, stands for their favorite hobbyhorses. They have nothing to say to us. And never did.

Footnote Ah-One: Yes, yes, I know that Medicaid is a separate issue and I didn't address it. The best solution for Medicaid is large-scale health care reform ("reform" in this case taking up its true meaning of "change for the purpose of improvement" rather than "cut! cut!") and particularly a national health care system. (Which is another topic I should address very shortly, since the more that comes out about this proposed "public option," the less sense it makes and the less use it is.) I'm sure there are administrative savings that could be found in Medicaid, but cutting benefits makes sense only if you don't care about the health of the less-well off.

Footnote Ah-Two: Before anyone jumps, no, there is no contradiction between calling for deep cuts in military spending and stimulating the economy. Just like in the case of cutting Social Security, the argument - in this case, "Don't cut the military!" - is always the same even as the excuses very. In flush times, the excuse is "building up our defenses," which somehow never seem to be built up enough. In fair times, it's "keeping us safe," although often precisely how and from precisely what is unclear. In bad times, like now, it's "Jobs! Jobs! Jobs!"

That was the first argument dragged out by Robert Kagan in the Washington Post as to why now is "No Time To Cut Defense." He also brought out the usual stable of reasons - it would "unnerve" allies and "embolden" adversaries such as Iran, "embolden" being a word I swear owes its very continued existence the the War on Terror(c)(reg.)(pat.pend.) - which together beg the question when is a time to cut defense, but "Jobs!" was the first reason given.

However, it has been known for a long time that military spending is an incredibly inefficient way to generate employment or economic stimulus and that almost any other form of public spending - or even an equivalent tax cut - is better for the economy. What's more, employment claims made for weapons systems are often inflated. So, no - there is no contradiction between calling for deep cuts in military spending and stimulating the economy.

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