Thursday, March 21, 2013

Is This the End of the Democratic Party Progressives? (We Are ALL So Screwed)

(If throwing a contribution Pottersville2's way won't break your budget in these difficult financial times, I really need it, and would wholeheartedly appreciate it. Anything you can afford will make a huge difference in this blog's lifetime.)

Many of us think that's a rhetorical question.

Especially Bobby Reich. (Don't miss the comments!)

Selling the Store

By Robert Reich, Reich's Blog

21 March 13

Prominent Democrats - including the President and House Minority Leader Nancy Pelosi - are openly suggesting that Medicare be means-tested and Social Security payments be reduced by applying a lower adjustment for inflation.

This is even before they've started budget negotiations with Republicans - who still refuse to raise taxes on the rich, close tax loopholes the rich depend on (such as hedge-fund and private-equity managers' "carried interest"), increase capital gains taxes on the wealthy, cap their tax deductions, or tax financial transactions.

It's not the first time Democrats have led with a compromise, but these particular pre-concessions are especially unwise.

For over thirty years Republicans have pitted the middle class against the poor, preying on the frustrations and racial biases of average working people who can't get ahead no matter how hard they try. In the Republican narrative, government takes from the hard-working middle and gives to the undeserving and dependent needy.

In reality, average working people have been stymied because almost all the economic gains of the last three decades have gone to the very top. The middle has lost bargaining power as unions have shriveled. American politics has been flooded with campaign contributions from corporations and the wealthy, which have used their clout to reduce marginal tax rates, widen loopholes, loosen regulations, gain subsidies, and obtain government bailouts when their bets turn sour.

Now five years after the worst downturn since the Great Depression and the biggest bailout in history, the stock market has recouped its losses and corporate profits constitute the largest share of the economy since 1929. Yet the real median wage continues to fall - wages now claim the lowest share of the economy on record - and inequality is still widening. All the economic gains since the trough of the recession have gone to the wealthiest 1 percent of Americans; the bottom 90 percent continue to lose ground.

What looks like the start of a more buoyant recovery is a sham because the vast majority of Americans have neither the pay nor access to credit that allows them to buy enough to boost the economy. Housing prices and starts are being fueled by investors with easy money rather than would-be home buyers with mortgages. The Fed's low interest rates have pushed other investors into stocks by default, creating an artificial bull market.

If there was ever a time for the Democratic Party to champion working Americans and reverse these troubling trends, it is now - forging an alliance between the frustrated middle and the working poor. This need not be "class warfare" because a healthy economy is in everyone's interest. The rich would do far better with a smaller share of a rapidly-growing economy than a ballooning share of one that's growing at a snail's pace and a stock market that's turning into a bubble.

But the modern Democratic Party can't bring itself to do this. It's too dependent on the short-term, insular demands of Wall Street, corporate executives, and the wealthy.

It was Bill Clinton, after all, who pushed for repeal of Glass-Steagall, championed the North American Free Trade Act and the World Trade Organization without adequate safeguards for American jobs, and rented out the Lincoln Bedroom to a steady stream of rich executives.

And it was Barack Obama who continued George W. Bush's Wall Street bailout with no strings attached; pushed a watered-down "Volcker Rule" (still delayed) rather than renew Glass-Steagall; failed to prosecute a single Wall Street executive or bank because, according to his Attorney General, Wall Street is just too big to jail; and permanently enshrined the Bush tax cuts for all but the top 2 percent.

Meanwhile, over the last several decades Democrats have allowed Social Security taxes to grow and its revenue stream to become almost as important a source of overall government funding as income taxes; turned their backs on organized labor and labor-law reforms that would have made it easier to form unions; and then, even as they bailed out Wall Street, neglected the burdens of middle-class homeowners who found themselves underwater and their homes worth less than what they paid for them because of the Street's excesses.

In fairness, it could have been worse. Clinton did stand up to Gingrich. Obama did get the Affordable Care Act. Congressional Democrats have scored tactical victories against social conservatives and Tea Party radicals. But Democrats haven't responded in any bold or meaningful way to the increasingly concentrated wealth and power, the steady demise of the middle class, and further impoverishment of the nation's poor. The Party failed to become a movement to reclaim the economy and our democracy.

And now come their pre-concessions on Social Security and Medicare.

Technically, a "chained CPI" might be justifiable if seniors routinely substitute lower-cost alternatives as prices rise, as most other Americans do. But in reality, seniors pay 20 to 40 percent of their incomes for healthcare, including pharmaceuticals - the prices of which are rising much faster than inflation. So there's no practical justification for reducing Social Security benefits on the assumption inflation isn't really eating away at those benefits as much as the current cost-of-living adjustment allows.

Likewise, although a case can be made for reducing the Medicare benefits of higher-income beneficiaries, as a practical matter their savings are almost as vulnerable to rising healthcare costs as are the more modest savings of middle-income retirees. "Means-testing" Medicare also runs the risk of transforming it into a program for the "less fortunate," which can undermine its political support.

In short, Medicare isn't the problem. The underlying problem is the sky-rocketing costs of health care. Because Medicare's administrative costs are a fraction of those of private health insurance, Medicare might be part of the solution. Medicare for all, or even a public option for Medicare, would give the program enough clout to demand health providers move from a fee-for-service system to one that paid instead for healthy outcomes.

With healthcare costs under better control, retirees wouldn't be paying a large and growing portion of their incomes for healthcare - which would alleviate pressure on Social Security. I'm still not convinced a "chained CPI" is necessary, though. A preferable alternative would be to raise the ceiling on the portion of income subject to Social Security taxes (now $113,600).

Besides, Social Security and Medicare are the most popular programs ever devised by the federal government, which is why Republicans hate them so much. If average Americans have trusted the Democratic Party to do one thing it has been to guard these programs from the depredations of the GOP.

Putting these two programs "on the table" is also tantamount to accepting the most insidious and dishonest of all Republican claims: That for too long most Americans have been living beyond their means; that we are rapidly approaching a day of reckoning when we can no longer afford these generous "entitlements;" and that prudence and responsibility dictate that we must now begin to live within our means and cut back these projected expenditures, particularly if we are to have any money left to invest in the young and the disadvantaged.

The truth is the opposite: That for three decades the means of most Americans have been stagnant even though the overall economy has more than doubled in size; that because almost all the gains from growth have gone to the top, most Americans haven't been able to save enough for retirement or the rising costs of healthcare; and that because of this, Social Security and Medicare are barely adequate as is.

Paul Ryan's House Republican budget takes on Medicare, but leaves Social Security alone. Why should Democrats lead the charge on either?

The Republicans are already slashing help for the young and the disadvantaged. Democrats shouldn't succumb the lie that the elderly and young are in competition for a portion of a shrinking pie, when in fact the pie is larger than ever. It's just that those who have the largest and fastest-growing portions refuse to share it.

We are the richest nation in the history of the world - richer now than we've ever been. But an increasing share of that wealth is held by a smaller and smaller share of the population, who have, in effect, bribed legislators to reduce their taxes and provide loopholes so they pay even less.

The budget deficit "crisis" has been manufactured by them to distract our attention from this overriding fact, and to pit the rest of us against each other for a smaller and smaller share of what remains. Democrats should not conspire.

Needy children should be getting far more help, better pre-school care, better nutrition. Seniors need better healthcare coverage and more Social Security. All Americans need better schools and improved infrastructure.

The richest nation in the history of the world should be able to respond to the legitimate needs of all its citizens.

(Robert B. Reich, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers "Aftershock" and "The Work of Nations." His latest is an e-book, "Beyond Outrage." He is also a founding editor of the American Prospect magazine and chairman of Common Cause.)


+18#Abigail2013-03-21 08:35

All my working life deductions were made from my salary, whether I wanted or not, to pay for future social Security and Medicare benefits. The money in the Social Security fund is not the Government's, it is the workers'! Interest which was earned by this money was put into the general funds, so in effect, was stolen from the workers. Taking either of these "benefits" (which are really returns on the workers' investments is pure robbery), and not in keeping with the ideals of our Constitution.

+17#Don Thomann2013-03-21 08:38

What we need is a real progressive party!
The "Democratic Party" has been infiltrated a bunch of Republicans in "sheep's clothing" and they think no one is noticing!

+15#cordleycoit2013-03-21 08:42

The working class tried to trust the Democrat's and that didn't work they were sold out. So a lot of them tried the Tea Party only to be abandoned by the Repugs, Sold out by everyone and disowned we had best review all the options. One thing for sure we don't trust the suits.

+14#BradFromSalem2013-03-21 09:19

The Democrats giving away a slice of Social Security benefits and limiting access to Medicare does not do anything at all to deal with environmental issues, create jobs, or reduce income inequality.

There is nothing for anyone in America to gain from these ideas. Nobody. On the other hand everyone loses. Every one.

Which Democrat or Socialist in either the Senate or the House will stand up and say what I just wrote?

The Democrats and Socialist just need to lay down those three litmus test standards. Enviroment, Equality, Employment. Remember, both Boehner and Ryan have publicly admitted that the deficit (or is it the debt?) is a long term problem. C'mon Dems, they have handed you the gun to shoot down their plans, now use it.

-8#joedeane2013-03-21 09:21

I become highly irritated at Reich for pretending the Democrats might do something sensible about the vile economic situation that they helped so much to create. That is a sham and he must know it. Reich is no dummy.

+3#Billsy2013-03-21 09:44

What do you expect Reich to do? Appeal to republicans for progressive ideas? He's part of the solution, not the problem, so please direct your anger and frustration elsewhere. Want a thriving progressive party? Start building it locally. I've been supporting independent candidates for years now. Only a matter of time before they start gaining traction, or our empire crumbles.

+1#jon2013-03-21 09:47

"As Dean Baker, chief economist at CEPR, predictor of the housing bubble collapse, Fannie Mae bankruptcy, and subsequent financial disaster, has widely stated, a social security problem doesn't really exist. "According to the Social Security trustees' report, if we did absolutely nothing the program could pay every penny of scheduled benefits through the year 2036." Cutting the contributions (as has been proposed) would be disaster, though. The best solution (if we want a long-term approach) would be to tax all income for social security, not merely the 1rst $100,000.00, which unfairly singles out the working and middle class."

+1#rjf7r2013-03-21 09:58

"Chained CPI" is a rich person's fantasy idea that the poor and those of modest means are careless with their expenditures and could easily replace a more expensive thing with a less expensive thing. (The reality of course is that those of modest means already have to be far more careful with their expenditures than are the rich, and thus really don't have this fantasy option.)

0#mgwmgw2013-03-21 09:59

I am not certain how much having government try to take care of poor people is a good idea, but those who find the Democrats to be insufficiently interested in that goal might consider the Green Rainbow Party

There would be nothing like watching their poll numbers go down to get the Democrats' attention. Getting elected is every politician's first priority.

I am in favor of stronger alternatives to the Democrats and Republicans, because then more problems and solutions may get discussed, even if the smaller parties do not win major elections.

I sometimes think that the Democrats and Republicans have been bought by the same buyers, which is why the practical end results of both parties look so similar to each other in some respects.

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