17 April 2011

Why I agree with Paul Krugman on "fiscal issues:" Core Democratic Principles are a MORAL issue

My e-mail to a friend who wrote to say I shouldn't accept Paul Krugman's ideas as a "final answer" to our fiscal problems (and incidentally accusing him of "name-calling"):
You seem to be saying that you think I'm under some sort of sway of Paul Krugman. Well, I challenge that. And I have given a great deal of thought and read a lot about so-called "fiscal issues," wherein I believe the President and the Democrats have made a huge mistake in accepting the Republican framing of the issue. You notice they never talked about the public debt when it was their guy spending like there was no tomorrow. But, anyway, even if you accept that in a time of 9% unemployment, it even makes sense to cut spending (Roosevelt tried that in 1937 and the Depression came roaring back; it wasn't till WWII that it finally ended)... the ideas of the Republicans and Democrats like Erskine Bowles, Alice Rivlin, and others who have bought into the notion that spending on social services is the main culprit are flat wrong, in my view.

I don't look at Krugman as a final answer, but I don't agree with the Gang of Six either. See today's Huffington Post [here] for where their thinking is going. There is a myth abroad in our country that our long term debt problem is necessarily only or even primarily a spending problem, when it's a simple fact that it was caused primarily by unwarranted reductions in taxes on the very wealthy and corporations. 50% of the existing debt was created under Reagan + Bush I, during which era there was a great deal of deficit spending. And another 1/3 under Bush II, who cut taxes on the rich while spending like there was no tomorrow, on two unfunded wars, almost a trillion creating the Homeland Security state, [the 700 billion dollar TARP bailout, which Rightist propaganda has made most people think was passed under Obama], and an unfunded Medicare "Gift to Big Pharma" Rx benefit. The problem is not spending, but unfunded spending. Which, in times of Republicans in the White House, has been their specialty. Why the beltway media lets them get away with pretending to be the party of fiscal conservatism is just beyond me.

But Social Security, in particular, is not unfunded. Since the early 80s, it took in more than it paid out, and the Social Security Trust Fund holds bonds for that debt. That is owed to future recipients, in just the same way as any other Federal debt is owed. And Social Security would not become insolvent until the 2030s, even if nothing were done. So any Democrat who favors cutting Social Security simply isn't worthy of the name. Every other 1st world country, including the ones who are currently trying out "Austerity" programs, does more for its citizens than Social Security, Medicare, Medicaid, and HCR combined. I do agree with the president that there are major cost savings to be achieved in all the health care programs, which will go a long way to reducing future deficits. But cutting essential services should be off the table.

The reality is that when it comes to Medicare and Medicaid, the Republicans are bound and determined to destroy them. Had they been in power, we never would have had them in the first place, nor would we have HCR. That's just fact. Democrats who want to be complicit in that destruction, again: not worthy of the name.

There is simply no way around it. There must be a significant revenue side solution, in large measure, to our fiscal problems, combined with cuts in so-called mandatory spending, primarily in the military budget (Cold War weapons systems, unnecessary overseas bases, oversize military systems that are larger than all other militaries in the World combined). [Update: Cliff Schecter, of Libertas, LLC, who was a major player in Clinton's re-election campaign, has said that the ~$900 billion military budget could realistically be cut by one-third; it is twice the size it was in 2001 and larger, in constant dollars, than at any time since WWII.]
It simply isn't true that our nation is broke; there has been a huge shift in wealth, AND in overall tax burden, from the wealthiest and corporations to the middle class. Even with the flight of manufacturing, the wealth per capita right now is higher than it's ever been. The financial meltdown showed how transparent all that is: it was the largest transfer of private debt to public debt in the history of the world, and everyone said we have to do it to avoid a collapse (which was true, but it was still blackmail).

Social Security, it's been calculated in a report I cited to you, [post;
link to report] could be made permanently in surplus, by the simple expedient of a major raise in the income cap subject to payroll tax. Nothing else.

So, no, I think for myself, but, in the main, I agree with Paul Krugman. We must raise taxes on the rich, and the moderately well off... if we were to restore the 1961 tax code, David Cay Johnston has calculated, we would almost eliminate the Federal debt (not deficit, debt) in one decade. (And the simple expedient of Single Payer Medicare for All, and elimination of the profit motive from all health care, would almost eliminate the debt even without that revenue, it's been separately calculated). Neither of those is probably politically feasible right now, but we certainly need to make the case to the American people that there is no free lunch, and, in particular, that it is the very rich, the top 2%, and corporations offshoring assets instead of paying their fair share in taxes, who are primarily getting a free ride. Changes in the whole paradigm of free trade, towards retaining American jobs and disallowing transfer of assets to tax havens, are also needed. But, fundamentally, there does need to be some increase in the taxes of even the  moderately well off, including, for example, me. We as a nation are not overtaxed. Especially the wealthiest citizens and biggest corporations are seriously undertaxed.

Democrats must stand for the proposition that society does not turn its back on the poor, seniors, and the jobless, because it is our shared prosperity that leads to a better life for everyone. Creating demand creates more wealth than hoarding. It's not rocket science.  Somehow, after the Depression and WWII we understood that, but since the election of Reagan in 1980 we've moved further and further from that simple understanding.

So no, I don't worship Paul Krugman. But I do agree with him.

Once before, you accused Krugman of name-calling, but you didn't cite any examples, and I notice you still haven't. In any case, name calling isn't admirable, but it's not as bad, in my book, as advocating policies that cause harm to our country, of, which, for example, I accuse Paul Ryan.  (Who accused the unflappable Pres. Obama of being "emotional" and of "distorting" his program, which was laughable: what the president said about the "cause not a budget" was perfectly accurate). I don't accuse Ryan based on his personality or his background, but based on a what I think are simple facts: that his numbers don't add up, his projections are ridiculous, and his assumptions, that cutting taxes further for the rich will somehow magically cause "prosperity"... are not only preposterous, and repeatedly proven wrong by recent history, but deeply suspect. The interests of the super-rich are all too apparent in every stroke of the pen in these mean spirited policies. Republicans, and, sadly, some Democrats, are much too beholden to crass economic interests of corporations and the Wall Street super-rich, and they use propaganda and deception to sway people to vote against their own interests with not just impunity but gusto. And to the extent that Democrats depart from traditional Democratic principles and embrace any part of it... they lose my support.

I think if the Wisconsin Wave means anything it means that people are getting fed up with having to carry the whole burden on their backs. Household debt is more important than the national debt, but no one talks about that. The people are mad as hell; some are tricked into following the Tea Party, but more just want a fair shake: they want public investment to create jobs, and they want the basic public services that other people in the developed countries take for granted. And the day will be coming soon when they won't take this anymore... from Republicans or fellow-traveler Democrats.

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