[THS] The Folks Who Missed the Bubble Want Your Social Security

[Peter Webster]

http://www.truthout.org/the-folks-who-missed-bubble-want-your-social-security56930

The Folks Who Missed the Bubble Want Your Social Security

Tuesday 16 February 2010

by: Dean Baker, t r u t h o u t | Op-Ed

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(Image: Jared Rodriguez / t r u t h o u t; Adapted: hickoryhollow113, Joe Higgins.eu)

If you fail disastrously at most jobs, you get sent packing. But, there are different
rules for Washington policy wonks. The same crew who could not see the $8 trillion
housing bubble that wrecked the economy are convening in Washington this week to
hatch new schemes to take away people's Social Security and Medicare in the name
of "fiscal responsibility."

You might think there would be a little bit of humility here. After all, it was the job of
these policy wonks to prevent the sort of economic collapse that the country is now
experiencing. The basic story really was very simple. Nationwide house prices
diverged from a 100-year trend; eventually rising by more than 70 percent above
their trend levels.

There was no remotely plausible explanation for this run-up based on the
fundamentals of either the supply or demand side of the housing market.
Furthermore, there was no remotely corresponding increase in prices in the rental
market, which continued to track its long-term trend. This situation should have
screamed "bubble," but the highly educated Washington policy wonks either couldn't
see the bubble or thought the bubble was cute.

Of course an $8 trillion housing bubble is not cute. When a bubble this size collapses,
it gives us the sort of economic nightmare that we are now seeing. But, no one lost
their job for failing to prevent this debacle. Instead the policy wonks tell us not to
play the "blame game" as they run around saying, "who could have known?"

This isn't just a question of holding to account those responsible for the Great
Recession; the point is to stop them before they do even more harm to tens of
millions of ordinary workers and their families. This crew is now devising schemes to
cut Social Security and Medicare, arguing that the country cannot afford these core
elements of the social safety net.

Of course, the budget deficit has exploded in the last two years, but this is a direct
result of the economic collapse, not profligate spending as our policy wonks claim.
Furthermore, this deficit is directly supporting the economy - it is creating jobs. The
people who complain about current budget deficits want to throw people out of work
and make it so that parents can't support their children. Those who care about the
economy and care about our children should be pushing for larger deficits right now,
not smaller ones.

Over the longer term it will be necessary to take steps to bring the budget in line.
First and foremost, this will require fixing our health care system. The huge deficits
highlighted by the deficit hawks are almost entirely attributable to projections of
exploding private sector health care costs. If our per-person health care costs were
comparable to those in Germany, Canada, or any other wealthy country with a longer
life expectancy than the United States, then we would be looking at enormous
budget surpluses in the long-term future.

But the deficit hawks aren't interested in going after the pharmaceutical industry, the
insurance industry, the highly paid medical specialists, and others responsible for out-
of-control health care costs. They want to take away the Social Security benefits that
workers have already paid for and cut their Medicare. Apparently, it was not enough
to take away people's jobs and the equity they accumulated in their homes.

Fortunately, we can turn this budget debate around. The best way to reduce the
deficit in the near-term would be a modest tax on Wall Street financial speculation.
Versions of this tax have been put forward by Rep. Peter DeFazio in the House and
Tom Harkin in the Senate. Such a tax could easily raise more than $100 billion a year,
while leaving the vast majority of ordinary investors largely unaffected. It is a great
way of making the Wall Street crew that caused the damage pay for the mess they
have created.

A financial speculation tax probably will not be on the agenda at the deficit conclaves
taking place around Washington this week, but that can be changed. The public can
insist that instead of talking about cutting Social Security and Medicare, we start
talking about seriously taxing Wall Street.