Some voters think the election is about punishing Democrats who borrowed money to save jobs. Others are registering their unhappiness that there is an "African-born, Socialist, Muslim" in the White House, and they "want to take their country back." Some old folks are so confused they see Democrats and Health Care Reform as a greater threat to their Medicare than what the Republicans could eventually do.
Social Security and Entitlements must be put on a sustainable basis very soon, and this election is about who has the greatest say in what is done.
There was a time when few really worried about deficits; as Dick Cheney said, "deficits don't matter." Recent 4events in Iceland, Ireland, Greece, Spain, and Portugal have transformed most Americans into deficit hawks. The ratio between our own national debt and GDP is too high, as is tha ratio between the annual deficit and the GDP. We have the advantage of being the world's largest economy and having the amin reserve currency, but even those advantages cannot forever cover a multitude of sins.
Congress has spent the Social Security Trust Fund, and other entitlements are too costly. The recent Health cAre reform bought more time for Medicare, but few will give the Democrats credit for this.
Declining FICA revenue means we have less time to fix Social Security.
Democrts propose raising the limit on FICA taxes, but that will only raise so much money. For several years, Republicans have been talking about privatizing Social Security, allowing people to put part of their payment into the stock market. This is the essence of the Ryan Plan , which is the only GOP proposal on the table. Representative John Boehner has said this is the GOP plan.
The problem with fixing Social Security is in find ways to raise more revenue. Here, the GOP has a strong interst in seeing that defense spending is not cut. A second high priority is prreserving as much of the Bush tax cut for the rich as possible. In the last ten years, it cost the tax payers $2.4 trillion. To Republicans like Mitch McConnell, it is more important than deficicit reduction.
In the bargaining that will occur in the next two years, it is likely that the side with the most votes in both houses prevail. At this moment, we are looking at the possibility of a Republican House of Representatives. The Democrats might keep narrow control of the Senate, but defectors in their ranks will give effective control to Mitch McConnell.
This will probably mean deep cuts in Social Security, a slight increase in what income is subject to Social SEcurity taxes, and robust mechanism to reduce annual cost of living increases. Of course, retirement ages will continue. The Democrats will probably get some reduction in the tax cuts for the wealthy, but the GOP will come off well here.
All these calculations are based on the assumption that the new Tea Bag senators and representatives have little influence. We have heard their diatribes against Social SEcurity and entitlements. If they have any influence, look for more painful cuts.
To make Medicare and Medicaid more sustainable, Democrats would slash subsidies to insurance companies and permit medicare providers to bargain for pharmaceuticals. The only other solution is service cuts.
Some have said that President Barack Obama and the Democrats have been unjust in raising the question of Republican cuts to entitlements. One answer is to remind people that Republicans across the nation have now raised the issue of slashing benefits for public employees, those retired and those still working. Tea Baggers have been demonizing them.
We are coming to crunch time, when borrowing must be reigned in and priorities set. The Republicans will likely be in a strong position to
reign in spending on the unemployed, prevent borrowing to create jobs, and defend tax benefits for the wealthy. A powerful military is necessary to enforce the will of their coprorate masters.
Some Republican hierarchs understand that the United States must retain enough borrowing capacity to continue to bail out Wall Street.
Since Reagan's Brady Bonds, this has been happening under Republicans. Banks and traders learned they could enter any kind of irresponsible but personally profitable deal, because the United States government could not let huge banking houses go under. At first, they made unsustainable loans abroad. Then they got into all sorts of hedge and derivativers trading that yielded bit up-front bonuses.
Often, it has been enough for the Treasury or Fed to just guarantee certain bond issues. But the point is that the Federal Reserve and Treasury must remain strong enough to back stop Wall Street gambles. The present financial reform bill says no more federal money will be used for bail-outs, but it provides few curbs on reckless behavior. When the next crash comes, the federal government will have to bail out Wall Street. That is an open secret and explains why the big banks are paying larger bonuses than ever and gambling still more than before the Bush melt-down.
While many nice but confused folks are sure they will "take back" their country in November, the fact is that they will be giving the GOP so many bargaining chips that their Social SEcurity and entitlements--or those of their children and grandchildren-- will be dramatically reduced. And the country will feel the even tighter grip of corporate America.