Obama’s “Fiscal Responsibility Summit” and the Week Ahead

FDR signing the Social Security Act

It’s going to be a big week for the Obamagharchy. In order to short-circuit the coming Obamageddon, our Dear Leader is making “fiscal responsibility” the focus of his week. On Monday, President Obama will meet with lots of “experts” and think tank denizens to discuss the future of what is left of the social safety net: Social Security, Medicare, and Medicaid. The meeting will take place on Monday from 1-4:30PM in the State Dining Room of the White House. According to Politico, the event will open with

addresses by President Obama and Vice President Biden. It’s set to include members of both houses of Congress from both parties.

The opening session will be followed by “breakout” sessions of five topics: health, tax policy, Social Security, contracting and procurement, and the budget, each led by senior officials.

The budget director, Peter Orszag, will be leading the health breakout — a policy area on which he’s long focused, and one expected to be front and center in the budget.

Christina Romer and Larry Summers will lead the Social Security session…

One hundred and thirty guests, reportedly including forty-four blue dog Democrats and a number of Republicans, have been invited to participate. Some of the invitees from Congress whose names have been published are House Speaker Nancy Pelosi, D-Calif., House Republican Leader John Boehner, R-Ohio, Sen. Judd Gregg, R-New Hampshire, Sen. Kent Conrad, D-North Dakota, Rep. Darrell Issa, R-Calif., Jim Matheson, D-Utah, Stephanie Herseth Sandlin, D-South Dakota, and Dave Camp, R-MI (ranking member of the Ways and Means Committee). CIA Director Leon Panetta will also attend because of his experience working on the federal budget in the Clinton Administration.

Also invited to attend are “leaders” of the Peter G. Peterson Foundation, an organization begun by billionaire Peterson to push for “reform” (read elimination) of Social Security and other “entitlement” programs. William Greider wrote about Peterson’s project in a column entitled “Looting Social Security” in The Nation last week.

Governing elites in Washington and Wall Street have devised a fiendishly clever “grand bargain” they want President Obama to embrace in the name of “fiscal responsibility.” The government, they argue, having spent billions on bailing out the banks, can recover its costs by looting the Social Security system. They are also targeting Medicare and Medicaid. The pitch sounds preposterous to millions of ordinary working people anxious about their economic security and worried about their retirement years. But an impressive armada is lined up to push the idea–Washington’s leading think tanks, the prestige media, tax-exempt foundations, skillful propagandists posing as economic experts and a self-righteous billionaire [Pete Peterson] spending his fortune to save the nation from the elderly.

These players are promoting a tricky way to whack Social Security benefits, but to do it behind closed doors so the public cannot see what’s happening or figure out which politicians to blame. The essential transaction would amount to misappropriating the trillions in Social Security taxes that workers have paid to finance their retirement benefits. This swindle is portrayed as “fiscal reform.” In fact, it’s the political equivalent of bait-and-switch fraud.

Greider’s Koolaid high hasn’t quite worn off yet: he thinks that Obama is being duped by a bunch of slick con men:

Will Obama take the bait? Surely not. The new president has been clear and consistent about Social Security, as a candidate and since his election. The program’s financing is basically sound, he has explained, and can be assured far into the future by making only modest adjustments.

But Greider is starting to see the writing on the wall:

But Obama is also playing footsie with the conservative advocates of “entitlement reform” (their euphemism for cutting benefits). The president wants the corporate establishment’s support on many other important matters, and he recently promised to hold a “fiscal responsibility summit” to examine the long-term costs of entitlements. That forum could set the trap for a “bipartisan compromise” that may become difficult for Obama to resist, given the burgeoning deficit.

Despite his excuse-making for Dear Leader, Greider’s piece is must reading, particularly because he shines a light on the long-term efforts of wealthy elites to destroy the New Deal programs. In 1981, Reagan won huge tax cuts for the rich and corporations and he made up the losses in 1983 by increasing the FICA (social security) payroll taxes on working people and employers, supposedly to prepare for the retirement of the massive baby boomer generation. In reality, Greider writes,

the government has already spent their money. Every year the Treasury has borrowed the surplus revenue collected by Social Security and spent the money on other purposes–whatever presidents and Congress decide, including more tax cuts for monied interests. The Social Security surplus thus makes the federal deficits seem smaller than they are–around $200 billion a year smaller. Each time the government dipped into the Social Security trust fund this way, it issued a legal obligation to pay back the money with interest whenever Social Security needed it to pay benefits.

That moment of reckoning is approaching. Uncle Sam owes these trillions to Social Security retirees and has to pay it back or look like just another deadbeat. That risk is the only “crisis” facing Social Security. It is the real reason powerful interests are so anxious to cut benefits. Social Security is not broke–not even close. It can sustain its obligations for roughly forty years, according to the Congressional Budget Office, even if nothing is changed. Even reports by the system’s conservative trustees say it has no problem until 2041 (that report is signed by former Treasury Secretary Henry Paulson, the guy who bailed out the bankers). During the coming decade, however, the system will need to start drawing on its reserve surpluses to pay for benefits as boomers retire in greater numbers

[….]

Follow the bouncing ball: Washington first cuts taxes on the well-to-do, then offsets the revenue loss by raising taxes on the working class and tells folks it is saving their money for future retirement. But Washington spends the money on other stuff, so when workers need it for their retirement, they are told, Sorry, we can’t afford it.

At least one friend of Social Security will also be at the “Summit meeting” on Monday. Dean Baker, co-director of the Center for Economic and Policy Research has argued that health care is the real emergency and that cutting Social Security benefits would be disastrous, especially in the context of the ongoing financial crisis. Baker published a post at Talking Points Memo last week warning of our Dear Leader’s plans for Social Security:

Word has it that President Obama intends to appoint a task force the week after next which will be charged with “reforming” Social Security. According to inside gossip, the task force will be led entirely by economists who were not able to see the $8 trillion housing bubble, the collapse of which is giving the country its sharpest downturn since the Great Depression.

This effort is bizarre for several reasons. First, the economy is sinking rapidly. While President Obama’s stimulus package is a good first step towards counteracting the decline, there is probably not a single economists in the country who believes that is adequate to the task. President Obama would be advised to focus his attention on getting the economy back in order instead of attacking the country’s most important social program.

The second reason why this task force is strange is that Social Security doesn’t need reforming. According to the Congressional Budget Office, it can pay all scheduled benefits for the next 40 years with no changes whatsoever.

The third reason that this effort is pernicious is that this talk of reform is occurring with the baby boomers just as the cusp of retirement. Due to the reckless policies of the Rubin-Greenspan-Bush clique, this cohort has just seen their housing equity wiped out with the collapse of the housing bubble.

A few members of blogosphere 1.0 have also been roused from their stupor, and the realization that Obama is not what they thought has finally started to break through the koolaid-induced haze. At Open Left Chris Bowers and the always terrific Paul Rosenberg have addressed the Social Security issue (actually, Rosenberg has always been a bit of an agnostic about Obama, even though he stuck it out with the Obots at Open Left). Jane Hamsher at Firedoglake is also starting to get a little worried. I don’t know why she couldn’t see this coming a year ago, when Obama began mouthing right-wing talking points and praising Ronald Reagan, but better late than never.

Hamsher provides a summary of the Diamond-Orzag plan (Orzag is now Obama’s budget director) here. Basically, the plan calls for increasing the retirement age and cutting benefits for people under 55. Benefits won’t change if you are over 55, but of course the plan will serve to encourage generational resentment and eventual elimination of Social Security. If you want to read the whole thing here it is. In an excellent post, Campskunk at Allegre’s Corner has this to say about the Diamond-Orzag plan:

It’s all there: reduction in benefits, increase in premiums, and lots of monkeying around with the cap and how taxed income above the cap will be treated differently than money from us regular working folks. And that’s what is going to kill Social Security. You see, right now, everyone who puts in money gets benefits roughly in proportion to their contribution. Me and Warren Buffet will get pretty much the same check, and we’ve contributed roughly the same amount. Well, Warren probably put in more than I did, because I’m pretty sure he made at least $100k for a few years when I was a bit shy of that amount, but you get the idea.

Orszag’s plan will shift this fundamentally fair system to one where the rich will be subsidizing the poor. And that will open the door to the argument that, “Well, us rich folks are paying for those poor folks to get their checks, so why can’t we cut it back? What did they do to earn that check, anyway?” It changes Social Security from an insurance program to a welfare program, and undermines the claim that you’re getting benefits that you deserve based on your own contributions to the fund. Once that unassailable fact is altered, Social Security, which has survived 70 years of efforts to dismantle it, won’t last long.

The AP tells us in their usual adoring fashion about the rest of our Dear Leader’s plans for the coming week.

After focusing his first month on the economic mess he inherited, President Barack Obama now starts rolling out his own far-reaching agenda with a summit on fiscal policy, his first speech to Congress and the unveiling of his budget for 2010.

This coming week will mark a turning point from what Obama felt compelled to do, to what he wants to do. It also may test how much spending, change and ambition the American people and their elected officials can stomach in a short time.

On Monday, Obama will try to snap Washington’s collective mind-set back to fiscal restraint, just days after signing a record-breaking spending plan to stimulate the moribund economy. His afternoon-long “fiscal responsibility summit” at the White House is bound to set off sparks.

Come Thursday, he will send Congress highlights of his budget request. One administration official says it will disclose that Obama plans to cut the federal deficit in half by the end of his first term, mostly by scaling back Iraq war spending, raising taxes on the wealthiest and streamlining government.

Whew! He’s going to scale back on war spending and still send nearly 20,000 troops into Afghanistan? Why do I get the feeling Obama plans to cut the deficit by raiding the Social Security trust fund and throwing a bunch of poor people off Medicaid? I know, I’m just a bitter old woman who can’t see that our Dear Leader knows best and will make sure it all comes out okay in the end.

The AP says lots of people are thinking maybe Obama is trying to accomplish too much too quickly, but

Ken Baer, a spokesman for the White House Office of Budget and Management, defended the series of initiatives.

“When the house is on fire,” he said, “you can’t say ‘I want to take a long coffee break.'”

Wait a minute. Didn’t the President just spend a long weekend in Chicago before he got around to signing the “emergency” stimulus bill? Whatever. I guess this week, he’s back to rush, rush, rush. So we have the Fiscal summit on Monday afternoon, then on Tuesday night Obama will give a speech before a joint session of Congress. The on Thursday, he’ll present his budget. Then maybe he’ll take that long coffee break–or a week in Hawaii? I don’t think he’s ever worked this hard before, but he’s got to pay back all those Wall Streeters who got him elected and paid for his Inauguration bash.

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