Attack Wall Street, Not Social Security

Suppose our top generals
described the growing threat from a hostile Middle East power. The
country has tens of billions of oil dollars, a growing army, chemical
and biological weapons, and is in the process of developing nuclear
weapons. After carefully describing the risks posed by this country,
our generals suggested an immediate attack on Canada. They explain that
combating this Middle East country would be difficult, but defeating
Canada is easy.

This is essentially the story of the latest attack on social security. Everyone who looks at the projections agrees; the scary budget stories
being hyped in the media and by the Wall Street crew are driven almost
entirely by projections of exploding healthcare costs. But instead of
proposing ways to fix the healthcare system, these deficit hawks want
to attack social security. They tell us that fixing healthcare is hard.
By contrast they think that cutting money from social security will be
relatively easy.

The facts on this are straightforward and known by everyone involved in the budget debate. The US healthcare system is broken. We pay more than twice as much per person as the average for other wealthy countries.

And
it is projected to get worse. In three or four decades we are projected
to pay three or four times as much per person for healthcare as people
in countries like Germany and Canada. Since more than half of our
healthcare is paid through public sector programmes like Medicare and
Medicaid, this explosion in healthcare costs will bankrupt the
government if it actually occurs. Of course it will also devastate the
private sector.

On the other hand, it is easy to show that if we
contain healthcare costs then our budget problems are relatively minor.
In fact, the current projections of enormous budget deficits two or
three decades out would flip over to projections of enormous budget
surpluses if our healthcare costs were comparable to those of any other wealthy country.

Logic
would dictate that our top priority should be getting our healthcare
costs under control. But fixing healthcare is difficult because, as we
saw in the healthcare debate, this means confronting the health
insurance industry, the pharmaceutical industry, the medical supply
industry, highly paid medical specialists and other powerful lobbies.

The
deficit hawks don't want to fight this fight. Defeating these powerful
interest groups would be a hard fight. And for the deficit hawks it
would likely be an especially painful fight since these are their
friends.

By contrast, the Wall Street deficit hawks don't have
friends who depend on social security for their income. Wall Street
investment bankers like Peter Peterson and Robert Rubin are unlikely to associate with such people. This is why they see attacking social security as easy.

Of
course attacking social security makes as much sense as our generals'
plan to attack Canada. The Congressional Budget Office's projections
show that the programme can pay full benefits until the year 2044 with
no changes whatsoever. Even after that date the programme would always
pay a higher benefit than what current retirees receive, even though
somewhat less than the full scheduled benefits.

The long-term
problem is not that anything improper has been done with the programme;
the reason that social security is projected to eventually face a
shortfall is that future generations are projected to live longer than
we do. This raises costs since our children and grandchildren are
projected to enjoy longer retirements than we do. In short, there is no
story of generational inequity here, contrary to what the Wall Street
deficit hawks say.

If our deficit hawk generals are too scared to
take on the healthcare industry then we also have to also make them too
scared to take on social security. If we need to reduce the deficit the
best place to start is a financial speculation tax. A modest set of
financial transactions taxes, like the 0.5% tax on stock trades in the
United Kingdom, can easily raise $150bn a year. This would go a long
way toward addressing future budget shortfalls and it would raise money
from people who can afford it: the Wall Street crew whose financial
shenanigans led to the meltdown.

Federal Reserve board chairman Ben Bernanke recently suggested cutting social security because: "that's where the money is". That's not true, the real money is on Wall Street. Let's go get it.