The Economic Illiterates Step Up the Attack on Social
Security and Medicare

By Dean Baker 
Truthout | Op-Ed 
August 8, 2011

http://www.truth-out.org/economic-illiterates-step-attack-social-security-and-medicare/1312813525

Standard & Poor's (S&P) downgrade of US debt should be seen
as the joke it is. The rating agency, which gave investment
grade ratings to hundreds of billions of dollars of subprime
mortgage-backed securities, made an accounting error of $2
trillion [6] in doing its assessment of the US financial
situation.

However, when this error was called to S&P's attention, it
still went ahead with the downgrade. Just like the war in
Iraq, the policy was decided in advance of the evidence.

The nonsense with the S&P downgrade is yet another
distraction - after four months of haggling over the debt
ceiling idiocy - from the real problem facing the country: a
downturn that has left 25 million people unemployed,
underemployed or out of the labor force altogether. Tens of
millions of people are seeing their career hopes and family
lives wrecked by the prospect of long-term unemployment.

The incredible part of this story is that the people who are
responsible are all doing just fine, and most of them are
still making policy. Furthermore, they are using their own
incompetence as a weapon to argue that we have to take even
more money from the poor and middle class, this time in the
form of Social Security, Medicare and Medicaid benefits.

The basic story is that the economy needs demand. The housing
bubble generated more than $1.4 trillion in annual demand
through the construction and consumption that it spurred. Now
that this demand is gone, there is nothing to replace it.
President Obama's stimulus was replaced by some of the lost
demand, but it was nowhere near large enough. We tried to
fill a $1.4 trillion hole in annual demand with around $300
billion in annual stimulus in 2009 and 2010. In 2011, most of
this boost has been exhausted and the economy is coming to a
near standstill.

If we had serious people in Washington, they would be talking
about jobs programs, about rebuilding the infrastructure,
about work sharing, and any other measure that could get
people back to work quickly. However, instead of talking
about ways to re-employ people, the fixation in Washington is
reducing the deficit.

This concern with the deficit is absurd on its face (if the
markets were panicked about the deficit, the US government
would not be able to issue long-term debt at less than 3.0
percent interest), but it has the backing of powerful forces.
Wall Street investment banker Peter Peterson is doing a full-
court press, paying any budget analyst he can find to say how
terrible the deficit problem is. The Washington Post and
National Public Radio are also doing the full court press,
abandoning any pretext of objectivity as they highlight all
the deficit news all the time - using a healthy dose of
Peterson funded experts to make the case.

The real goal of this hysteria is the dismantling, or at
least scaling back, of the core social programs that working
people depend upon: Social Security, Medicare and Medicaid.
It is important to realize that this is not a traditional
left-right battle. Polls consistently show that people across
the political spectrum overwhelmingly support these programs
and do not want to see them cut. Even the vast majority of
Tea Party Republicans support these programs [7].

Rather than being a left-right split, this is a top- bottom
split. There is a bipartisan consensus among the elites that
these programs should be cut. The guiding philosophy of this
drive is that public money that goes to programs for middle
income and poor people is money that could be in the pockets
of the wealthy. For this reason, Social Security, Medicare
and Medicaid are an offense to their sensibilities. They are
programs that help ordinary working people, not the rich,
therefore these programs conflict directly with their
philosophy of government.

The remarkable part of this story is that elites are
effectively using their incompetence in managing the economy
as the core of their argument for cutting these social
programs. After all, no one was talking about cutting these
programs until the deficit exploded, and the reason the
deficit exploded was that the collapse of the housing bubble
wrecked the economy.

If these elites had a clue about the economy, they never
would have allowed the bubble to grow to such dangerous
levels. The economy would not have collapsed, the deficit
would be manageable and no one would be discussing cuts to
Social Security and the other programs.

In other lines of work, incompetence on the job gets you
fired. In policymaking in Washington, incompetence means more
responsibility and power.

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