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Tobacco Lobbyists Join Wall Streeters On Debt Crusade

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Dean Baker
Truthout, December 21, 2009

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Millions of people around the country have been treated to the anti-debt ads run by one-time tobacco industry lobbyist Richard Berman. Mr. Berman, who has also worked to thwart minimum wage increases and managed to get on the opposite side of Mothers Against Drunk Driving, is now working alongside the Wall Street types who wrecked the economy.

Wall Streeters, like billionaire fund manager Peter Peterson, want to use the government debt burden created by the collapse of their credit bubble as an excuse to slash Social Security and Medicare. Therefore television viewers are being treated to an expensive ad campaign telling us that “debt stinks.”

While the ad seems to imply that we should reduce or dispose of our debt by just writing off an entry on the government’s accounting ledgers, in reality getting rid of debt means cutting important programs like Social Security and Medicare. These programs are more important than ever for our seniors, now that the wreckage caused by the Wall Street crew has taken away much of the wealth they had accumulated in their homes or in the stock market.

We can also start to work down the debt by cutting back funding for the education of children, like the cute ones in the commercial. That will be great for future generations.

Of course it is not just education that we provide to future generations; we give them a whole physical and social infrastructure. The quality of the society we pass on to our children is what determines their well being; not the government debt.

The generation that grew up in the decades after World War II was subjected to the largest debt burden in the history of the country. Yet they also enjoyed three decades of extraordinarily rapid growth. There is no reason that the debt burdens being projected at present should depress the living standards of our children and grandchildren.

In fact, the best way to limit the burden of the government debt on the economy is to support policies that promote growth. The federal government’s debt burden shrank from more than 110 percent of GDP immediately following World War II to less than 30 percent of GDP in 1980. This happened in spite of the fact that the government ran a deficit in all but three years over this period. The debt burden shrank because the economy outgrew the debt.

In short, the key to keeping our debt at a sustainable level is running sound economic policies that foster growth. We also need to contain health care costs. Our broken health care system is threatening to wreck our economy. It will also lead to impossible debt burdens if it is not fixed. But as every economist knows, the issue here is fixing the health care system, not whining about government debt.

But, the Wall Street crew’s agenda is not really about debt and deficits; it is about gutting Social Security and Medicare. They know that they cannot do this through normal congressional procedures, after all Congress is answerable to the people who depend on these programs. Instead, the Peter Peterson crew wants to do an end run around congressional procedure. They want to set up a special commission that will come up with recommendations to cut Social Security and Medicare.

Under this scheme, the commission’s report would be fast-tracked. There would be limited opportunity for debate, no amendments, and the vote would be taken by a lame duck Congress, after the November 2010 elections. That may not sound fair, but what else should we expect from the tobacco lobbyist/Wall Street gang?

So watch carefully for these folks. They have lots of money and they are prepared to use it to buy influence in Congress. They will use any conceivable tactic to achieve their goal of cutting Social Security and Medicare. (The commercial even tries to exploit nationalist sentiment by whining that half of the debt is owned by foreigners. The foreign debt is the result of the trade deficit and the over-valued dollar; it is not caused by the government debt.)

The people who depend on Social Security and Medicare (i.e. just about everyone) must realize that there is nothing benign about the Wall Streeters’ deficit commission. This is an end run around the normal congressional process to accomplish in backrooms what could never be done in full public view. If the public knew what is going on here then “commission” would be a four-letter word. 

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy. He also has a blog on the American Prospect, "Beat the Press," where he discusses the media's coverage of economic issues.