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Home Publications Blogs Beat the Press The Washington Post Goes "Thuggish" on Social Security

The Washington Post Goes "Thuggish" on Social Security

Saturday, 05 November 2011 07:44

That's their word, not mine. The lead editorial in the Washington Post complains that AARP is taking out ads against cuts to Social Security. The first sentence tells readers that "the word 'thuggish' comes to mind."

It certainly does, although not in reference to the ads. The elite who manage the economy and deliberate on economic policy (a group that includes the Washington Post's editors) completely mismanaged the economy over the last decade, allowing a huge $8 trillion housing bubble to grow unchecked. This bubble burst, as bubbles always do, with devastating consequences for the economy.

One of the consequences was to turn the relatively modest budget deficits of the pre-crisis period (1-2 percent of GDP) into much larger deficits on the order of 8-10 percent of GDP. These deficits are of course necessary to sustain demand after the collapse of the housing bubble left the economy reeling.

Now the Post wants to use the deficits created by the mismanagement of its friends and associates as a pretext to take away a substantial chunk of Social Security benefits. (The preferred cut du jour is a 0.3 percent reduction in the annual cost of living adjustment. This would be cumulative so that a retiree would see their benefits fall by roughly 3 percent after 10 years, 6 percent after 20 years and 9 percent after 30 years. It would be a much larger hit to the income of the typical retiree than ending the Bush tax cuts would be to the typical person affected.) Given that most retirees and near retirees have just seen their wealth devastated by the collapse of the housing bubble, leaving them little other than their Social Security, this seems a particularly cruel one-two punch.

Comments (6)Add Comment
written by bmz, November 05, 2011 12:22
Moreover retirees who have to work to supplement their SS income pay the very highest marginal income taxes. I am 70 years of age, and am self-employed part time. My AGI is ~$54,000/yr. At that income, I must pay, in addition to my regular tax, a tax on 85% of my SS benefits( for every marginal dollar of income, I pay a tax on $1.85). My total marginal income tax rate is: 25%(regular rate) +21.3%(85% on SS) +12.4%(self-employment tax) +7.5%(state income tax) = 66.2% total marginal income tax rate. And no, I didn't make any errors in the above.
"this seems a particularly cruel one-two punch."
written by diesel, November 05, 2011 2:21
And, as any good boxer will tell you, the punch that knocks you out is the one that you didn't see coming.

Of course, comparing capitalism as practiced in the U.S. by "The elite who manage the economy and deliberate on economic policy" with boxing may be inappropriate because while one is a game that is governed by rules that are overseen by an impartial referee, the other is a street fight where bending the rules to one's advantage and undermining public respect for law through suborning those responsible for its enforcement by bribery and other inducements is the norm.
of course no one points out
written by joe, November 05, 2011 2:47
that the federal govt's deficit rendering SS cuts as necessary is a complete non-sequitur. Fed govt debt is private sector savings. It doesn't get 'paid back' in the same sense that a private individual has to pay back a loan. Private sect is deleveraging and with a capital account surplus the govt must run a deficit to keep things running, if anything the deficit is too small.

SS is a way of transferring a portion of current productivity to current retirees. It really has almost nothing to do with any current or past deficit.
Obscure Fraud
written by Union Member, November 05, 2011 2:57
If the editors of the Washington Post think AARP is "thuggish", they should see the Raging Grannies at Occupy Wall Street.
The One Percent have reason to fear when the Raging Grannies start singing.

And also, The word "bubble"(as in Housing Bubble) is itself a primary example of harmful misleading hyperbole. Doesn't Systemic Fraud (in the housing market) more accurately name the true nature of the problem?
And since deception is an intrinsic implement of fraud, the hyperbolically quaint term "bubble" provides broad cover for the immeasurable harm done by all the actors on Wall Street and in Washington.
written by ifthethunderdontgetya™³²®©, November 05, 2011 4:25
The conceit of Fred Hiatt and Jackson Diehl left me sputtering this morning.

It's "thuggish" for AARP to ask its members to use their votes to advance their interests?

This from a couple of well-to-do editors who helped lie the Bush-Cheney Administration lie us into Iraq (well forgetting about Afghanistan for 7 years). I believe Stieglitz has estimated that cost at $3 trillion.

They and their paper deserve to be shunned.
written by Steve, November 06, 2011 7:48
Seen it all before, the most recent example was the auto industry. It was the legacy costs, retirement and medical benefits that were killing GM, Chrysler, and Ford. Restructure the legacy costs and all will be fine. It is working again, this time entitlements is the bugaboo, social security and medicare, restructure them and all will be fine. Steve in Blackberry

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.