The Concord Coalition is back, the group of bipartisan elders founded in 1992 to sound the clarion call for budget balance. Last Sunday, the Coalition bought a full-page ad in The Concord Coalition is back, the group of bipartisan elders founded in 1992 to sound the clarion call for budget balance. Last Sunday, the Coalition bought a full-page ad in The New York Times, warning of the costs of Social Security and Medicare and the dangers of continuing federal deficits.
The Coalition projected the future "unfunded" expenses of Medicare and Social Security at $39 trillion. The ad included an ominous chart showing mandated programs such as these plus interest on the national debt eating up the entire federal budget in just 13 years.
It called for "a bipartisan plan to balance the budget," declaring that "a realistic strategy will require reductions in promised benefits, higher revenues, or a combination of both." The two most prominent signers of the ad are Wall Street elders Peter G. Peterson, a longtime nemesis of social insurance who was once Nixon's commerce secretary, and Robert E. Rubin, treasury secretary under Bill Clinton and the most influential economic voice of centrist Democrats.
In George Bush's Washington, where there is too little talk about progressive taxation, this enterprise passes for bipartisan political courage. But the Concord Coalition is pure ideological mischief. It is about as bipartisan as Wall Street.
Consider first the roots of today's budget imbalance. After 12 years of tax cuts and deficits by Reagan and Bush I, the Clinton administration succeeded in balancing the budget and even produced surpluses. Bush II then came in and enacted more than $3 trillion worth of tax cuts, tilted to the top. It was a purely partisan assault, intended to reduce taxes paid by the wealthy and gut government's ability to address social needs.
So, why does it need a bipartisan solution -- with more cuts on the spending side? The remedy is as simple as the cause -- get rid of Bush's tax cuts, except for tax relief for those of moderate income. (Getting rid of his off-budget war would help, too.) End of budget problem.
The idea that we need absolute balance, by the way, is wrong as well. Mild deficits, as long as the revenues are invested in things that help the economy grow, such as education, worker training, and research, are actually a tonic for economic growth. There's nothing unsustainable about a deficit of 1 or 2 percent of GDP, as long as the economy is growing at 3 percent.
As for Social Security and Medicare, the Concord Coalition is an ideological attack on social insurance masquerading as a concern for the common good. The projected shortfall in Social Security, over the long term, is about 1 percent of payroll. That's an adjustment problem, not a terminal crisis. If you project it out into the indefinite future, you can make the "unfunded liability" seem like a very large number. On the other hand, as economist Dean Baker observes, the Pentagon is going to spend huge sums of money over the next century too, and nobody calls that obligation an unfunded liability.
Numerous people have put forth a variety of plans to balance Social Security accounts without further cuts in benefits. As economist Alicia Munnell observes, past adjustments have already significantly cut Social Security payouts relative to lifetime earnings for future retirees. We don't need more benefit cuts.
A combination of investing some of the trust funds in a collective pool of prudent stocks and bonds, where the funds could earn higher returns, plus raising the cap on earnings subject to payroll tax (now capped at $97,500), would end the crisis. It would even generate a modest surplus that could be redirected to tax relief on payroll charges for lower income workers.
As for Medicare, yes, that system does face a serious shortfall -- if we do nothing. But Medicare's costs are rising faster than its revenues because it is part of the world's most inefficient and fragmented system. It is a system in which insurers and drug companies and resultant administrative expenses take out far too much money, making delivery of care far more costly than it needs to be.
The cure for Medicare's budgetary crisis is the same as the cure for its problems of access, affordability, and reliability -- universal health insurance. Where are the Wall Street eminences calling for universal health insurance or adequate retirement or restoration of progressive taxes?
It's understandable that conservative Republicans promote this remedy, and appalling that influential Democrats are part of it. How to say this politely? These people have all the retirement protection and medical care they need. Most Americans don't.
Robert Kuttner is co-editor of The American Prospect. This column originally appeared in The Boston Globe.
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