First, Do No Harm

Barack Obama delivered a lyrical State of the Union message on Jan. 25, with words of conciliation and promise and appeals to a bipartisan solution to the challenges that face our nation. He called for investment in biomedical research, information technology and clean energy as well as much-needed rebuilding of our nation’s schools, bridges and highways.

Obama noted that South Korean homes now have greater Internet access than we do. Europe and Russia invest more in their roads and railways than we do. China is building faster trains and newer airports. The American Society of Civil Engineers has given US infrastructure a “D” grade.

We have a lot of catching up to do. Unfortunately, Obama also bought into the GOP talking point about the crushing national debt that makes such investments unlikely to clear the Republican House.

Obama also endorsed trade agreements that “keep faith with American workers, and promote American jobs.” He is submitting a trade deal with South Korea and his trade rep is working on agreements with Panama and Colombia.

After the speech, AFL-CIO President Richard Trumka said the labor federation supports Obama’s vision on infrastructure improvements to create good jobs and succeed in a global economy. “But he must also understand that last-century trade deals that reward and encourage corporations that outsource American jobs will do little to generate net new jobs in the United States or raise living standards here or abroad. Working people will continue to urge the President and his administration to stick to his campaign promises of reforming trade deals, so they do more than boost profits for multi-national corporations.”

Scott Paul of the Alliance for American Manufacturing said after the address, “We welcome the President’s focus on innovation, infrastructure, and education, as well as his commitment to win the jobs of the future,” but he added, “Our challenge today is as much about rebuilding as it is about innovating. ... We look forward to working with the Administration and Congress to pass a ‘Made in America’ plan that will secure good manufacturing jobs now and in the future.”

We would have preferred that Obama took a harder line on trade and jobs and called Republicans on their dogmatic belief that cutting government spending is the way to improve the economy during a recession, but he faces a hard reality in the new GOP House, where progressive initiatives are not going to get very far.

That reality is personified by Rep. Paul Ryan (R-Wis.), budget czar for the Hope Crushers. In his response to Obama’s speech, the bean counter dismissed the economic stimulus of 2009-2010, which prevented unemployment from growing into double figures, as a failure. Ryan called for repeal of health care reform, lower taxes, unspecified spending cuts and fewer regulations on business. He had not a word of encouragement for the 14.5 million unemployed Americans who have waited in vain for economic recovery to translate into a job. Instead, Ryan said if government growth is left unchecked, “we will transform our social safety net into a hammock, which lulls able-bodied people into lives of complacency and dependency.”

Ryan continued with the GOP Big Lie that the new health care reform is an open-ended entitlement that will drive up health costs, cause millions of people to lose their coverage and stifle job creation.

Ryan proposes to cut Social Security benefits, increase the retirement age to 70 and privatize Social Security as well as Medicare. His plan has been endorsed by senior Republicans on House and Senate budget committees as well as the leaders of President Obama’s bipartisan Fiscal Commission.

At least Obama distanced himself from the Social Security wreckers. He told Congress, “we should also find a bipartisan solution to strengthen Social Security for future generations. And we must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans’ guaranteed retirement income to the whims of the stock market.”

Ryan had little to say about Social Security in his State of the Union response, other than, “If we act soon, and if we act responsibly, people in and near retirement will be protected.” Presumably, people under 55 are on their own.

In fact, Social Security does not contribute to the national debt. The Social Security Trust Fund has a surplus of more than $2.6 trillion, which has been loaned to the federal government like other Treasury notes that are backed by the “full faith and credit of the United States.” And the Social Security trust fund surplus will continue to grow to $4.5 trillion in 2025.

The current level of benefits are fully funded at least through 2037 and Social Security could pay at least 75% of promised benefits after that with no changes, Social Security Trustees reported last year. But Congress someday will have to increase taxes to pay back Social Security for the money it borrowed.

Ryan also ignores the easy fix to the possible Social Security shortfall that is 27 years in the future: Eliminating the cap on taxable income, which is now $106,800, would generate enough revenue to fund Social Security at current benefit levels for the next 75 years, the Congressional Research Service reported.

A poll conducted by Public Policy Polling for DailyKos.com (Jan. 20-23) found that registered voters across the board overwhelmingly prefer an increase in the taxable wage cap instead of cutting benefits and increasing the retirement age.

As DailyKos founder Markos Moulitsas noted, “The largest proponents of cutting benefits are Tea Party folks, and just 20% of them opt for the austerity solution. Even among those most affected — people making over $100,000 a year — only 18% opt for benefit cuts rather than raising the payroll tax cap. And for those least affected — the youngest cohort (aged 18 to 29) — the poll couldn’t pick up any support for cutting benefits.”

He added, “Democrats could be scoring mad political points by going on the offensive, vowing to defend Social Security against all enemies, and fighting to equalize the program’s tax burden. ... But no, raising the cap is off limits, and the entire political establishment is focused on delivering more pain to seniors.

“There’s no better illustration of how D.C. is broken than this.”

Obama said he would like to reduce health care costs, including Medicare and Medicaid, “which are the single biggest contributor to our long-term deficit.”

But cost savings expected from the Affordable Care Act have greatly improved the financial status of Medicare, which is now projected to remain solvent through 2029 — an improvement of 12 years compared with projections before passage of the law, the Center on Budget and Policy Priorities noted.

The best way to stabilize Medicare in the long term is to expand it to cover younger (and healthier) Americans, with a corresponding transfer of revenue from inefficient private insurance companies to the Medicare trust fund.

Lawmakers looking for revenue to lower the Social Security retirement age and/or expand Medicare could start by re-establishing a Wall Street speculation tax on transfers of credit swaps, derivatives, stocks, currencies and other financial instruments. A tax of 0.5% would generate $353.8 billion in annual revenue, the Center for Economic and Policy Research estimated. (The US had a stock transfer tax from 1914 to 1966. Britain imposes a stock transfer tax of 0.25%.) The tax would be negligible on 401(k) accounts and other personal retirement plans, but it would discourage speculation, stock churning and other unproductive activities by high-rolling financiers.

See. it’s not that difficult to address alleged entitlement funding problems. But in the absence of new taxes, probably the best we can hope from Obama and Senate Democrats is that they will prevent the new House from doing harm. Well, at least there were no hecklers at this year’s State of the Union. Let’s see how long the new civility lasts into budget negotiations. — JMC

From The Progressive Populist, February 15, 2011


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