New Ideas About Deficit Reduction

by John M. Curtis
(310) 204-8700

Copyright November 10, 2010
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           When President Barack Obama appointed former President Bill Clinton’s chief of Staff Erskine Bowles and former Sen. Alan Simpson (R-Wy.) to his National Deficit Reduction Commission Feb. 18, 2010, he hoped for constructive bipartisan answers.  Bowles and Simpson were slated to cut fat out of the bloated Social Security and Medicare programs, hoping to help offset the recession’s devastating loss of government tax revenues.  Cutting fat out of a blubbery system is never easy because no one wants the pain of the budget scalpel.  With wars in Iraq and Afghanistan usurping the budget, Bowles and Simpson targeted the nation’s biggest entitlement programs.  Social Security and Medicare stick out like sore thumbs, easy deficit reduction targets for ambitious budget slashers.  Picking on Social Security and Medicare only kicks the can down the road for real budget reform.

            Given today’s $1 trillion-plus budget deficit, Bowles and Simpson urged Congress to recalculate the cost-of-living formula for Social Security beneficiaries, raising the retirement ceiling to 68, from its current 62.  Myopic doesn’t begin to describe the misguided recommendations, highlighting the failure of the U.S. economic system to provide for its aging workforce.  France rioted last month about proposed increased in retirement age from 60 to 62, making a joke out of the U.S.  Answers to the U.S. deficit situation get down to basics and common sense.  Working toward reducing the current 9.6% unemployment rate would have far greater impact on the budget deficit than punishing Social Security and Medicare beneficiaries.  Bowles and Simpson were commissioned with reducing the current budget deficit, now running at about 12% of GDP, down to 3%.

            Social Security and Medicare can be easily fixed to legislating a means test, where the nation’s most wealthy citizens no longer draw benefits.  Allowing millionaires and billionaires, in Congress on both sides of the aisle, to cash social security checks and receive free Medicare benefits insults everyone’s intelligence.  Installing an appropriate means test for Social Security and Medicare places both systems in actuarial balance, no longer dependent on the amount of workers and expected retirees.  While much has been said about the constitutionality of Barack’s health care reform, neither Social Security nor Medicare is voluntary.  Had Sen. Joe Lieberman (I-Conn,) not vetoed Democrats’ Medicare-for-all plan, there’d be no discussion about the government’s right to impose health care on its citizens.  Medicare-for-all would have ended the debate on national health care.

            Legislating a means test would save both Social Security and Medicare, generating billion from Medicare revenue.  It wouldn’t be difficult at all to schedule premiums for affluent Americans who would be required to pony up for government health care.  Opponents to Obama’s health care plan rant about government run health care, despite approving and using Medicare:  The government’s single-payer health plan for seniors and disabled.  Lieberman’s threatened filibuster sent the appropriate Medicare-for-all plan into oblivion, leaving Obama’s second-rate health insurance-for-all substitute plan.  “This is not a proposal I could support,” said panel member Rep. Jan Schkowsky (D-Ill), weighing out the pros and cons of Bowles and Simpson’s deficit reduction plan.  Punishing Social Security and Medicare beneficiaries is no fix to the nation’s deficit problems.

            Increasing the federal gas tax by 15%, freezing pay increases to federal employees, cutting the federal work force by 10% and eliminating federal pet projects or earmarks, does nothing to deal with the real deficit problems.  Today’s deficit problems stems from the high rates of unemployment and anemic prospects for private sector jobs growth.  Republicans’ emphasis on private sector jobs growth by extending Bush’s tax cuts doesn’t go far enough.  Treasury Secretary Tim Geithner must work more closely with Wall Street to assure that short-sellers in unregulated hedge and private equity funds industries no longer interfere with the stock market’s long-term growth.  Only by sustained long-term stock market growth can private industry generate the capital needed to expand payrolls and provide the needed tax base to reduce today’s whopping federal budget deficits.

            Obama’s well-intentioned National Deficit Reduction panel must go back to the drawing board and gain consensus for a means test for Social Security and Medicare benefits.  Minor changes to cost-of-living adjustments and pushing up the retirement age is like rearranging the deck chairs on the Titanic.  No matter how entitled or what the original intent was of Social Security and Medicare, no millionaire or billionaire should ever take one dime of taxpayer money.  Instead of picking on Social Security and Medicare beneficiaries, the Obama administration should be pulling out all the stops to stabilize long-term growth in the stock market and stimulate private jobs growth.  Only by reducing unemployment can the government expect the tax revenues needed to fund costly defense and entitlement programs.  Common sense dictates that unnecessary and costly foreign wars should end.

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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