How Occupy Stopped the Supercommittee

    Since the supercommittee's real agenda was to
    bypass Congress and cut social security, let's
    give thanks for the 99%

By Dean Baker 
Guardian (UK) 
November 23, 2011

http://www.guardian.co.uk/commentisfree/cifamerica/2011/nov/23/how-occupy-stopped-supercommittee

Congress gave us a wonderful Thanksgiving present when
we got word that the supercommittee "superheroes" were
hanging up their capes. While many in the media were
pushing the story of a dysfunctional Congress that
could not get anything done, the exact opposite was
true. The supercommittee was about finding a backdoor
way to cut social security and Medicare, and create
enough cover that Congress could get away with it.

It is important to remember the basic facts about the
budget and the economy. Contrary to the conventional
wisdom in Washington, it is easy to show (by looking at
the website of the Congressional Budget Office) that we
do not have a chronic deficit problem. In 2007, prior
to the collapse of the housing bubble and the resulting
economic downturn, the deficit was just 1.2% of GDP.

The deficit was projected to remain near this level for
the immediate future, even if the Bush tax cuts did not
expire, as originally scheduled in 2011. If the tax
cuts were allowed to expire, then the budget was
projected to turn to surplus.

All this changed when the collapse of the housing
bubble wrecked the economy. The story is simple, the
housing bubble generated over $1tn in annual demand by
stimulating record levels of construction and causing a
home equity-driven consumption boom. This demand
disappeared when the bubble burst. This is what created
the large deficits that we are now seeing.

The $1tn-plus deficits are replacing lost private-
sector demand. Those who want lower deficits now also
want higher unemployment. They may not know this, but
that is the reality - since employers are not going to
hire people because the government has cut its spending
or fired government employees. The world does not work
that way.

While this is the reality, the supercommittee was about
turning reality on its head. Instead of the problem
being a Congress that is too corrupt and/or incompetent
to rein in the sort of Wall Street excesses that
wrecked the economy, we were told that the problem was
a Congress that could not deal with the budget deficit.

To address this invented problem, the supercommittee
created an end-run around the normal congressional
process. This was a long-held dream of the people
financed by investment banker Peter Peterson. Their
strategy was derived from the conclusion that it would
not be possible to make major cuts to social security
and Medicare through the normal congressional process
because these programs are too popular.

Both programs enjoy enormous support across the
political spectrum. Even large majorities of self-
identified conservatives and Republicans are opposed to
cuts in social security and Medicare. For this reason,
they have wanted to set up a special process that could
insulate members of Congress from political pressure.
The hope was that both parties would sign on to cuts in
these programs, so that voters would have nowhere to
go.

However, this effort went down in flames this week.
Much of the credit goes to the Occupy Wall Street (OWS)
movement: OWS and the response it has drawn from around
the country has hugely altered the political debate. It
has put inequality and the incredible upward
redistribution of income over the last three decades at
the center of the national debate. In this context, it
became impossible for Congress to back a package that
had cuts to social security and Medicare at its center,
while actually lowering taxes for the richest 1%, as
the Republican members of the supercommittee were
demanding.

Now that the supercommittee is dead, Congress must be
forced to address the real crisis facing the country:
the 26 million people who are unemployed,
underemployed, or out of the labor force altogether.
This would not be difficult if we had a functional
Congress.

The teenage unemployment rate is 25%; the unemployment
rate for African American teenagers is 45%. A youth
employment program simply putting people to work
cleaning up parks and abandoned buildings could put
many of these people to work. If we got adequate
funding to state and local governments, they would not
be paying off 30,000 workers a month.

We have a serious need for rebuilding our
infrastructure. Major projects take time - but
unfortunately, time we have: no projections show the
economy recovering until at least 2016 or 2017. In
these circumstances, we can promote work-sharing, which
would encourage employers to keep workers on the job
instead of putting them on the unemployment rolls.

These are the sorts of things that Congress should be
debating right now. As the financial markets keep
telling us, the budget deficit is not a problem -
otherwise, the interest rate on 10-year Treasury bonds
would not be 2%.

There is a long-term issue with the deficit, but as
every budget analyst knows, this is a healthcare story.
If the United States fixes its healthcare system, then
the deficit will not be a major problem. If we don't,
then our broken healthcare system will wreck the
economy regardless of what we do with Medicare,
Medicaid and other public sector healthcare programs.

So, everyone should enjoy their Thanksgiving, grateful
that the supercommittee turkey is dead. If the 99% can
keep up the pressure, Congress will return to reality
after the holiday

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