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REICH: Federal deficit shouldn't be the focus now
Robert Reich
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Tess Vigeland: The presidential commission charged with figuring out how to reduce the federal deficit met again today. Members are still revising the plan before a final vote on Friday. Proposals include raising the Social Security retirement age, cutting the budget for Medicare and raising some taxes.
Commentator Robert Reich says the economy's not ready for that kind of austerity.
Robert Reich: For America to worry about the budget deficit right now is like someone who's starving worrying about weight control. Right now, when consumers can't and won't spend, we need more federal spending to make up for the shortfall in demand. Otherwise, we're gonna suffer near double-digit unemployment for years.
Yes, the projected deficit will be a problem eventually. So it is wise to take steps so we don't go broke in the future. But the president's deficit commission is all over the map.
Let's be clear about what that long-term problem really is. It's not Social Security. Social Security's only problem is so much of the nation's total income has gone to top earners in recent years that the Social Security tax covers a smaller percentage of total income than was planned for. The obvious answer is to lift the cap on income subject to the Social Security tax, to about $150,000.
The biggest problem is what lies behind Medicare -- the explosive growth in medical costs, combined with aging baby boomers. Over the next three decades, drug costs are projected to soar, as well as new medical equipment, diagnostic tests and complex procedures.
The answer is to finish the job of reforming health care. Let Medicare use its bargaining leverage to get low-cost drugs and supplies. End health insurer's immunity from antitrust laws. Allow the public to buy health insurance from a Medicare-like public option. And award plans that focus on disease prevention rather than expensive diagnostics and procedures.
Finally, in our zest to cut the budget deficit, let's not shoot ourselves in the feet. We should be spending more, not less, on education, infrastructure and basic research. These are critical to our future economic growth.
Without adequate growth, the deficit will become an even larger share of the total economy. And then we'd really be in trouble.
Vigeland: Robert Reich was secretary of labor in the Clinton Administration. His latest book is "Aftershock: The Next Economy and America's Future."
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Let’s stop living in debt and deficit denial and stop buying the White House and Wall St myth that an economic recovery is around the corner. The US economy is on life support after $3T in bailouts and stimulus. Republicans are turning off Obama’s fiscal stimulus programs. Local and State governments are laying workers off and the layoffs will accelerate in 2011. We are doomed unless Congress tackles runaway healthcare costs. They won’t so the future is easy to see.
The cost of medical car may "solve" itself by being the next big bubble/meltdown.
Today, medical care in the US represents about 1/6th of the GNP and at current growth rates will be 1/3 within 10 years. I think anybody would agree that's unsustainable, especially since medical care in the US has declined in quality since the "for profit medical business" took over.
Did you know that 50 years ago, lifespan in the US was 5th in the world and now it's 49th?
Greed from the insurance companies, drug companies, private hospitals, medical test labs and their suppliers, etc, all part of this "for profit medical business" are pricing medical care out of the market, just like housing 5 years ago.
Mr Reich is wrong, wrong, wrong. We are facing a federal (i.e. taxpayer) debt tsunami, and the longer the federal government puts off making the hard choices, the worse it'll be. The general accounts debt is growing by 10% a year, yet GDP is growing by an anemic 2%. Federal spending - especially "entitlement" spending - has skyrocketed in the past 10-15 years. But our ability to pay off the debt has not. And coupled with the big demographic changes already underway in America, the problem is only going to get worse without the Congress and the President getting serious about balancing the books. Lastly, it's not the federal government's responsibility to prop up (consumer) demand. But I do favor Mr Reich's suggestion that the government help find ways in investing in education, research and technology -without regulatory mandates.
We have to focus on the deficit now. The longer we wait, the more drastic spending cuts/tax increases we will have to make. Everyone knows this - but as usual people can always find a reason why they can't do the right thing now, but they'll it later. Of course "later" never actually comes.
Mr Reich is right about Medicare, but wrong about Social Security. Actuarial study show that the simplest way to "save" Social Security is to eliminate the payroll cap on Social Security contributions. We already do that for Medicare. Why should the Social Security contribution stop at $106,000? Is it because everyone on the deficit commission makes much more than $106,000?
Let's make the simple fix on Social Security and preserve it for the next 75 years. Not by raising the age of retirement or the faux "saving" Social Security by cutting Social Security benefits.
Just eliminate the cap.
The focus should always be on the deficit. The idea that you should ignore it in bad times results in ignoring it in good times. The reason is because when times are good the politicians keep up their spending habits. The public sees that things are working and ignore that there's a problem.
Why do you keep giving time to a "commentator" with no credibility? Our problem is not a shortfall in demand, it's overconsumption, spending more than we have. The problem with Social Security is that it's a Ponzi scheme, not that it doesn't tax us enough. The problem with Medicare is indeed rising costs, but the root problem there is that insurers are forced to insure against certainties and people don't pay for their own routine health care. And if we should be spending more on education, infrastructure, and research, find something to cut so we have the money to pay for them. Taking steps to "make sure we don't go broke in the future" isn't enough. That future is *now*. We're already broke, and if we follow his plan we'll be bankrupt. Demand-side and Keynsian economics have been tried; they ended in starvation and collapse. Do you *want* us to turn into a third-world banana republic?
It is interesting that SIMPSON AND BOWLES are quite willing
to impose austerity on the middle class, but not on large corporations
and the wealthy.
For example, why not cap or eliminate the corporate interest
deduction instead of the individual mortgage interest deduction ?
Excessive corporate leverage increases volatility and risk,
and leads to waves of debt-financed takeovers, the reduction of
U.S. jobs and offshoring. The idea that middle-class tax payers
should subsidize this destructive corporate welfare is alarming.
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