The cutback commission

November 17, 2010

Petrino DiLeo looks at the austerity schemes cooked up by the two chairs of the National Commission on Fiscal Responsibility and Reform.

YOU'VE BEEN living beyond your means with too-generous benefits from the government. Now, with the federal debt at $13.8 trillion and the government projecting annual deficits of more than $1 trillion in the years to come, it's time for you to cut back.

At least that's what President Barack Obama's bipartisan National Commission on Fiscal Responsibility and Reform is telling us.

The commission is due to deliver its recommendations in early December, but its co-chairs gave a preview November 10 of proposals that aim to trim $200 billion in federal spending per year. The painful recipe was delivered by Erskine Bowles, a former White House deputy chief of staff in the Clinton administration who now works as an investment banker, and former Sen. Alan Simpson of Wyoming, a Republican who's notorious for his stance in favor of gutting government programs.

What's most striking about the Bowles-Simpson outline for the commission's final deliberations is who is being asked to tighten their belts. The co-chairs call for sacrifices from workers, the elderly, college students and veterans--while corporations and the wealthy are promised lower taxes.

Deficit reduction commission co-chairs Erskine Bowles and Alan Simpson
Deficit reduction commission co-chairs Erskine Bowles and Alan Simpson

In short, it's a roadmap for how the working class will be asked to bear all the pain through cuts, cuts and more cuts, while the wealthy continue to make out like bandits. The Bowles-Simpson proposals amount to a preview for the next phase of attacks on the working class, as "austerity" becomes the common buzzword of the international ruling class in its attempts to resolve the ongoing crisis gripping global capitalism.

BOWLES AND Simpson tried to disguise their agenda by not calling only for cuts in social programs. Instead, the co-chairs recommend a reduction in the government's discretionary spending of about $100 billion a year--while another $100 billion, surprisingly, would come from reducing the Pentagon budget, something that's been sacrosanct in Washington politics for years.

But don't let that fool you. Simpson and Bowles' recommendations last week may bear no resemblance to what the full commission recommends for its December 1 deadline. Most commentators believe the co-chairs were throwing out every possible proposal, even those with no chance of winning approval from the rest of the commission--with the aim of scaring people with a draconian proposal so the proposals that are actually made seem less severe.

Moreover, it will ultimately be up to the Obama administration and Congress to enact the commission's recommendations--and it's hard to imagine Congress in its current state willingly cutting defense spending.

It's also worth putting this in perspective--even if the military spending cuts were somehow pushed through, the Pentagon budget would still be bigger than all its supposed rivals combined. It's a sign of the system's priorities that proposals to raise the retirement age or cut social programs are on the agenda while the U.S. continues to waste trillions to maintain occupations and launch drone attacks in Iraq, Afghanistan, Pakistan and Yemen.

Amazingly, Bowles and Simpson's announcement came on the same day that the Obama administration gave its strongest signal yet that it plans to extend the Bush-era tax cuts, including those for the wealthiest section of the population. That led to some incredible doubletalk as Obama spoke both about being "serious" about deficits while simultaneously considering an extension of tax cuts that will only make the problem worse.

Overall, the report illustrates the attacks and austerity that's on the way in the coming years as Democrats and Republicans agree to tighten the screws on working people.

The commission's recommendations will undoubtedly be a further step in the assault on Social Security--a program that had been considered sacrosanct for generations. Bowles and Simpson's preview calls for capping cost-of-living increases in Social Security payouts and increasing the retirement age to 68 by 2050 and 69 by 2075.

If Obama and his two co-chairs think they can sell cuts in Social Security, it's in part because the mainstream media has helped convey the idea that the program is on the verge of insolvency.

But as liberal economists such as Dean Baker have written, projections show that Social Security should be able to cover payments for decades with no changes at all--and simple tweaks would allow the program to run with no problems for even longer.

For example, the payroll tax that funds the Social Security program is only levied on income up to $106,800--as a result, working people have a much higher proportion of their wages taken out of their checks than those with six- and seven-figure incomes. Simply raising that cap would flood the program with plenty of funds.

By far the biggest single issue contributing to projections of increasing deficits over the long term is the rising cost of health care--which, year in and year out, outpaces the overall inflation rate by a good margin. Yet rather than talking about addressing costs at the source--the bloated private health care industry--Simpson and Bowles recommend cutting the government's Medicare and Medicaid health programs.

FOR PEOPLE who are supposed to be focused on cutting the government budget, Bowles and Simpson spent a lot of time on taxes. Instead of reducing the deficit by taxing the rich, however, the duo want to restructure the system so corporations and the wealthy pay lower taxes--while raising certain kinds of taxes, like one on gasoline, that disproportionately hurt working people and the poor.

Of course, higher taxes on the rich would increase government revenues and reduce or eliminate the need to cut social programs. But somehow, in Washington, the idea of raising taxes--or even simply letting the Bush tax cuts expire--has become a "radical" idea, while proposals to cut taxes on the rich are labeled "serious."

It's an indictment of how much a pliant media allows politicians to say whatever they want without being challenged that members of Congress can talk about cutting taxes in one breath and reducing the deficit in the next--and not be called out for how incompatible these two notions are.

On another note, Simpson and Bowles suggested at the press conference unveiling their outline that reducing the deficit--beginning in 2012--was essential for stimulating the economy.

But severe budgets cuts, especially at the state and local level, have had the exact opposite effect, and there's no reason to believe the ones Bowles and Simpson are pushing would do anything different. As Dean Baker wrote:

The large government deficits are the only factor sustaining demand [in the economy today]...If today's deficit were smaller, we would not be helping our children; we would just be putting their parents out of work.

Simpson and Bowles somehow think they have covered this concern by delaying their cuts until fiscal year 2012, about 11 months from now. Virtually all projections show the unemployment rate will still be over 9 percent at the point when the Simpson-Bowles cuts begin to slow the economy further. This leaves the economy like a plane with one engine already out, and Simpson-Bowles prepared to knock out the other engine as well.

It's also crazy that workers are being asked to pay for the deficit cuts while the government and the Federal Reserve continue to pump hundreds of billions into the banking system. It's an open secret that Wall Street banks are posting big profits largely through borrowing money from the Fed at 0 percent interest rates, and then buying long-term Treasury bills from the federal government at 3 percent interest. Also, the banks are using their ill-gotten funds to make money by playing the market--rather than making loans that would revive the economy.

It boils down to this: While a section of the ruling class whines about deficits and is using them to try to extract further concessions from our side, their own share of wealth and income is greater than in many decades. That's why we can be having a discussion about massive proposed cuts in spending at the same time Wall Street banks are planning to pay out an estimated $144 billion in bonuses--another new record--based on profits made possible entirely by government largesse.

No one should accept these attacks on social programs. The commission to reduce the deficit is the latest attempt to pay for the Great Recession on our backs. It is another aspect of the one-sided class war--making the poor pay while the rich do just fine.

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