So, I've noted here before about being a reformed whore - I don't want to belabor it, and it's getting to the point where it feels that way - still, some introduction is called for.
As others have noted on this site and elsewhere, David Broder of the WaPo has increasingly appeared to be a 'friend of the neo-cons.' I'm not really sure the economic interests of the Republican party are really ruled by the neo-cons - a bunch more interested in foreign policy. However, of late, even as the evidence of Bush's incompetence at governing, on a whole host of policies, Broder, a formerly 'moderate' voice, has continued to be increasingly critical of Democrats. Today's column no less so. More below the fold...
Broder called for Democrats to come forward with serious proposals for 'entitlement reform' in the face of the mounting fiscal crisis. He suggests these are structural issues which need to be dealt with first, before asking for significant tax reform. I think he gets it completely backwards - it's Bush's tax cuts and profligate war spending that are driving the huge deficit increases - there has been no sudden bubble of new seniors entering the system over the past five years and driving the government into the red with SSI and Medicare payments.
So, I wrote him a letter - I doubt much he'll read it, but it does follow the same basis thesis my first one does. I figured after expending that effort, I might cross post it. I think it's important for people who've successfully wiped their eyes and deprogrammed themselves to share...call it liberal proselytizing, after all, if the Religious Right (tm) can do it, why not us?
Here's the scold of the reformed whore...enjoy!
Mr. Broder,
I'm a long-time reader of yours - since I first became a regular
newspaper reader as a high school student in the early eighties - and
generally a fan of your consistent pragmatism and sensibility. However,
that's less and less true these days, although I can't say whether
that's because I've shifted or you have (Heisenberg at work). In any
case, I'm sorry I bothered to read today's column ("Will Anyone Pay the
Bills") at all, and will be far less likely to read future columns.
In any event: I am just plain put off by your silly, patronizing call
for Democrats to follow "the thinking branch" of the party and to look
to entitlement reform as the solution to the fiscal wreck the Laffer
Curve boys have put us in. The cash the Republicans have allowed to be
raided from the treasury - the incredible increases in so-called 'War on
Terrorism' style spending - including the vast sums being pumped into
the military-industrial complex - and then retained by the stakeholders
in that complex thanks to huge tax cuts - has neither 'trickled down' to
workers nor really stimulated the economy in any meaningful way so as to
'trickle back' into government coffers due to increased economic
activity. The economy has treaded water, at best, for the past five
years.
Under Clinton & Rubin's very sensible management, the decreasing
government debt ensured there were vast sums of capital looking for a
place to be invested - capital which had heretofore been busy financing
Reagan-induced deficits (much like LBJs before him) - that capital
fueled growth in this country since, in a very simple way, it made
borrowing cheap. This may mean the investor class had to actually
engage in their much-vaunted entrepreneurial risk-taking instead of
relying on US bonds as a safe place to park their money.
As a number of people pointed out during Bush's attack on Social
Security earlier this year, the entitlement problem can be handled
almost entirely by engaging in some simple tax reform - just as SSI is
indexed to wage inflation, so should be the tax formulas which pay into
it. The 90,000 cap on wage income hasn't been raised in years, while
inflation has driven increases in SSI payments. Moreover, the old
distinction between 'investment income' and 'wage income' has been
substantially blurred in this sense: more and more of the better-off
section of our society derives their work-related income from investment
income.
This is no great surprise - when the government began giving
preferential treatment to capital gains income, it was only natural that
employers began to alter their compensation packages. This trend is by
no means reserved to CEOs. Whether or not business compensation
packages shift back (unlikely given the direction of dividend and
interest tax rates), we need to recognize that there is a need to
re-examine tax policy (not spending) when the assumptions of an earlier
era no longer apply (an era when only an 'insignificant' percentage of
the population was meaningfully excluded from wage taxes).
It is true that the Medicare entitlement is headed for disaster - in
many states it's already there. However, what afflicts medicare is what
afflicts medical care in this country generally: medical inflation is
out of control. Is medical inflation out of control because of
third-party-payer effect? Perhaps - just as abnormally low mortgage
interest rates have caused enormous home price inflation, the "cheap to
the buyer" medical services have encouraged growth in the use of those
services. But if so, that effect is as much the result of medicare as health insurance generally - and it's evident (now that we've tried it) that private bureaurocracies (HMOs) do no better than public ones at rationing care and preventing inflation. In fact, it's pretty clear that whatever savings they might accomplish are returned neither to the payees (enrollees) nor the providers. Indeed, it's pretty easy to find a number of ways in which
the entire medical 'marketplace' is badly broken - small wonder we have runaway inflation. Moreover, do we really want the type of health care provided by a free market - as a capitalist and investor, it's critical to me that I have the option of walking away from a bad deal - and that option isn't there for health care.
This brings me to the real question: just what entitlements, excepting
medicare, are you talking about? The notion that entitlements by their nature are structurally unsound and the root cause of the fiscal crisis requires buying into two key plutocratic axioms, neither of which ought to be accepted at face value. The first is that they are unworkable Ponzi schemes - but if that's true, then so are all the privately operated pension and retirement funds which are guided actuarially, basically all private insurance. The second presumption is that a private marketplace can replace government as a provider of these services, always resulting in greater efficiency - this is a wonderful idea that operates well in a vaccum - as I note about medicare: the real issue is the lack of a properly functioning market. The waste in our medical system is staggering.
In fact, so far as providing 'entitlements' is concerned, the private sector is failing miserably at providing pensions too. Indeed, it's becoming very clear that most major industries that still have defined benefit plans are dumping them, often declaring bankruptcy to be able to hand them off to the government! The financial services industry clearly demonstrates that it does as bad or worse in handling 401ks, Mutual Funds and other pension plans, than simply throwing darts at the stock report hanging on the wall and picking stocks that way! For this, this private bureaurocracy on Wall Street manages to live far better than the government G15s in DC.
Taking tax policy reform off the table, or insisting that it's tied to some sort of quid-pro-quo vis-a-vis entitlement spending is forcing the issue on the horns of a manufactured dilemma. It's a false choice because it makes the assumption that one cannot successfully restructure the tax policy to adjust it to emerging changes in our economy and in the services we provide. That simply isn't true. The president's commission has just reported back their set of recommendations, and made indirect attempts to address the real issues: but in every case, they ducked the hard choices. Instead of inflation indexing the AMT, they use the excuse that it no long affects the ultra-wealthy but everyday americans, so eliminate it. Same for the mortgage deduction; same for the gift and inheritance taxes. All of these taxes have become problematic simply because they have not been adjusted for inflation. This is a simple, simple solution.
The Republicans (well, the rich really) would have us believe we are in a crisis for entitlements and tax policy, largely to create an atmosphere where they, a very distinct minority, are able to do away with those taxes. They might reasonably protest that there is no real reason the rich should pay a higher percentage than anyone else, but that ignores the fact that they are the primary benefactors of this country's economic bounty. A quick look at who owns what and how much reveals that most of us making under a quarter of a million a year, and that most certainly is most of us, do not benefit and have not benefited from our economy - most are losing ground to inflation, except where we are using up the gains in our homes via refinancing, and even then, we're paying the wealthy for access to that equity. Certainly that's true for the past five years.
I'd suggest that you have it backwards: let's talk some meaningful tax reform, which begins with rolling back the Bush tax cuts, adjusting the AMT, home mortgage deduction (really, why should millionaires be deducting interest on their seaside vacation homes?), indexing a number of the 'threshold' taxes (the SSI & FICA exemptions), and the type of income we're taxing (stock options really do belong in compensation, both in corporate accounting and on 1040s). Then, after we've seen what can be done there, perhaps we can talk about similar adjustments in entitlements. Right now your thesis is a call to cut entitlements ignoring the artificially created revenue side of the mess - that's just plain wrong, for Democrats or Republicans.