CT Blue

In yesterday’s Times, Stanley Greenberg, who is supposed to be on our side, gives his prescription for the Obama battle plan against the Republicans after the Democrats hand them big victories in November:

The president will send up four big initiatives that have to be taken up on a bipartisan basis — or not at all. A Deficit Reduction Act that endorses his deficit commission’s proposed spending freeze, entitlement reforms, the purging of corporate loopholes and tax increases.

So do our betters blithely toss us overboard in pursuit of a political score-in this case by demanding that the Republicans help destroy Social Security.

For the deficit commission is not the Obama Deficit Commission, it is the Pete Peterson Social Security/Medicare Destruction Commission. Make no mistake, the only recommendations of substance that Commission will make will be aimed at Social Security and Medicare.

As economist Jamie Galbraith establishes here, Social Security has nothing to do with the deficit, yet Peterson’s commission has focused like a laser beam on Social Security.

Social Security is a transfer system. Part of the money earned by today’s workers is transferred to retired people, with the express promise that the workers of tomorrow will do likewise for the workers of today. Any excess in current payments, and currently there is plenty, is parked in government bonds until it is needed. As Galbreath puts it:

Social Security is a transfer program. It is not a spending program. A dollar “spent” on Social Security does not directly increase GDP. It merely reallocates a dollar from one potential final consumer (a taxpayer) to another (a retiree, a disabled person or a survivor). It also reallocates resources within both communities (taxpayers and beneficiaries). Specifically, benefits flow to the elderly and to survivors who do not have families that might otherwise support them, and costs are imposed on working people and other taxpayers who do not have dependents in their own families. Both types of transfer are fair and effective, greatly increasing security and reducing poverty — which is why Social Security and Medicare are such successful programs.

Transfers of this kind are also indefinitely sustainable — in fact there can intrinsically be no problem of sustainability with transfer programs. Apart from their effect on individual security, a true transfer program uses (by definition) no net economic resources. The only potential macroeconomic danger from “excessive” transfers is that the transfer function may be badly managed, leading to excessive total demand and to inflation. But there is no risk of this so long as the financial crisis remains uncured. Under present conditions Social Security and Medicare are bulwarks for stabilizing a total demand that would otherwise be highly deficient.

But, purely as a matter of ideology, folks like Peterson will refuse to see this basic truth, just as they somehow never see that the obvious solution to any long term problems Social Security itself might have is a rise in the level of income subject to the payroll tax, rather than a cut in benefits (raising the retirement age and/or changing the way benefits are calculated to make them lower). No, hard times demand hard choices, which always have a habit of requiring additional hardship on the poor or, in this case, middle class dupes. When, after all, was the last time you heard of a politician making a “hard choice” that involved imposing any inconvenience on the rich?

But there is a deficit related reason why it would be extremely handy for our aristocracy to cut social security benefits or, and this is the Holy Grail, destroy the program altogether. As I noted before, we working stiffs have been socking away excess social security payments for years, and during the past nine years the government, has been busily transferring that money to the rich in the form of the Bush tax cuts, which have been financed by government borrowing, including borrowing our collective pittances, which add up to a rather large amount when you put them all together. Peterson and his crew don’t want to give that money back. They prefer to steal from the poor to give to the rich and if we don’t watch out Obama and the Democrats will help them in order to score some debating points next year.