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Derailing the Wall Street Attack on Social Security

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Dean Baker
Truthout, May 10, 2010

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Emboldened by the fact that none of them have gone to jail for their role in the financial crisis, the Wall Street gang is now gunning for Social Security and Medicare, the country’s most important safety net programs. Led by investment banker Pete Peterson, this crew is spending more than a billion dollars to convince the public that slashing these programs is the only way to protect our children and grandchildren from poverty.

Peterson has so much money to spend on this crusade that he can’t even use it all up in the normal practice of buying think tank studies that support his position. Therefore he has sought out other mechanisms to support his attack. For example, he has funded a nationwide propaganda push called “America Speaks,” which is designed to get ordinary citizens to agree with his Social Security slashing plans by giving them such a limited range of options to deal with scary deficit projections that they have no alternative.

Peterson is also funding a high school curriculum in the hopes of indoctrinating the nation’s young with his quest. He has even created a news service called the “Fiscal Times." The Fiscal Times intends to plant deficit scare stories in newspapers that are desperate for copy now that they have downsized their news staffs. Peterson’s son assembled the staff from the large group of journalists displaced by the collapse of the newspaper industry.

Peterson even funded the creation of a game called “budget ball” to convince young people that taking away grandma and grandpa’s Social Security and Medicare can be fun. Of course we haven’t said a word about all the politicians of both political parties that this crew owns.

When kids get scared watching a horror flick, we tell them to repeat: “It’s only a movie.” As the Peterson gang ramps up its anti-Social Security and Medicare crusade, it is important to remember: “It’s just Wall Street propaganda.”

They have lots of ways to make the deficits and debt look really really scary. Remember, these are professionals, just like the folks that make those Hollywood horror flicks. But, knowledge of some basic facts will protect you and your children.

First, there are no remotely plausible projections that do not show that our children and grandchildren will be far wealthier on average than we are today. The standard projections from the Congressional Budget Office show that real wages will be more than 50 percent higher in 2040 (after adjusting for inflation) than they are today. This means that even if our children faced a huge 5 percentage point increase in taxes, they would still be left with 40 percent more income on average than do workers today.

Insofar as our children face a threat of declining living standards it is from the growing inequality, which is redistributing most income gains upward. If the trend towards increasing inequality continues then many young people will have lower standards of living than their parents. However, intra-generational inequality gets little attention from Pete Peterson and his Wall Street gang. 

The near-term (next 10 years) budget projections show deficits that will be comparable to what we had in the 80s and early 90s, once the economy recovers from the collapse of the housing bubble. The deficits projected for late in this decade are largely attributable to the wars in Afghanistan and Iraq and the extra interest burden created by borrowing for these wars and the Bush tax cuts, as well as the deficits needed to boost the economy out of recession. The story of profligate spending – apart from on these wars – is an invention of the Wall Street gang.

Finally, the really big deficit horror stories coming from this crew are derived from projections that our broken health care system just keeps getting worse. The United States already spends more than twice as much per person on health care as the average for other wealthy countries. This gap is projected to grow ever larger over coming decades.

More than half of all health care spending is paid for through government programs such as Medicare and Medicaid, therefore if these health care projections prove accurate, we will have very serious budget problems. Of course, we will also have enormous economic problems since no one will have any money left over after paying for their health care.

This situation should emphasize the urgency of fixing the health care system, but the Peterson Wall Street gang instead sees it as a reason to yelp about the budget deficit. Fixing the health care system would mean hurting the insurance industry, the pharmaceutical industry and other powerful interest groups aligned with the Wall Street gang. It is easy to design policies that would substantially reduce costs.  However, the Peterson Wall Street gang would rather take away Medicare and Social Security benefits from retired workers than take away profits from the insurance and pharmaceutical industries.

As we get further into the year, the Wall Street crew is planning to escalate their propaganda. But don’t let them scare you – the problem is that too much money is going to people like them, not Medicare, Social Security and other key programs that support the public.

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.