The far right has been manipulating the sensible center to conjure up an extreme "entitlement crisis." The next president needs to resist being swayed.
Robert Kuttner | August 19, 2008
If Barack Obama is elected president, he will inherit not just the most serious financial and economic crisis since the Great Depression. He will face an obstructionist orthodoxy about government spending that will make recovery even more difficult to achieve. The nature of our economic, social, and fiscal problems and the boundaries of the politically possible have been defined by conservatives who have often skillfully co-opted moderate liberals. Nowhere is this more the case than in the received wisdom that there is an "entitlement crisis" and that the federal budget needs to be balanced.
In a deepening recession, not only would Obama need to use deficit spending as short-term stimulus; he would need to dramatically expand public outlay to remedy 30 years of increasing inequality and the neglect of public systems. To achieve transition to Gore-scale renewable energy, he would need even more public funds. The implosion of the financial system, as a result of deregulation, will deepen recession unless offset by public investment. But if Obama buys into the myth that we can't even afford existing programs, audacity and hope will be lost before he even begins. Obama has already fallen into this trap once, accepting the mistaken premise that Social Security suffers from a mighty shortfall.
It will take great resolve to resist the supposedly high-minded--and well-funded--thinking that pervades Washington and the media. Peter G. Peterson, the onetime secretary of commerce under Richard Nixon and billionaire former partner of the Blackstone Group, has written four books over the past two decades bemoaning the cost of entitlements and forecasting disaster. Peterson recently endowed the Peter G. Peterson Foundation with a personal gift of $1 billion (about half his windfall from the sale of Blackstone) and hired as its founding president the government's former comptroller general, David Walker, a political independent with a facility for garnering good publicity with bad fiscal news. Walker in turn has influenced the thinking of foundation presidents and commentators.
"I would ask that if you leave here remembering only one number, let it be this one: $53 trillion," Peterson testified to the House Budget Committee last June. "Fifty-three trillion in today's dollars is what this country owes between our national debt, future liabilities, and our huge unfunded promises for programs like Social Security and Medicare," he continued, terming that number "unacceptable" and "un-American."
The $53 trillion figure is intellectually dishonest. It is derived by taking the worst-case assumptions about Medicare and Social Security, adding the national debt, assuming no change in social policy (such as universal health insurance) or revenues, and extrapolating these and other projected costs into the indefinite future. As the economist Dean Baker has observed, everyone expects the Pentagon to spend hundreds of billions a year indefinitely, but we don't call this "unfunded liability" because we expect government to collect taxes to pay for it. In his 1993 book, Facing Up, Peterson himself puts the unfunded liability number at a mere $14 trillion, and other estimates run as high as $90 trillion. Any gloom-and-doom estimate that can vary by orders of magnitude should be inherently suspect. But this is the received fiscal wisdom.
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This conventional thinking is shared by a broad cast of characters that includes the 49-member Blue Dog caucus of fiscally conservative Democrats in the House. Among other things, the Blue Dogs blocked a more expansive stimulus package in February.
To appreciate just how disabling is the bipartisan echo chamber on the alleged entitlement crisis, consider the debate on budget restraint that raged in the spring and summer of 2008 between two rival groups of influential budget experts. The story begins with the radically conservative Heritage Foundation and one of its most effective strategists, Stuart Butler, an affable Briton with Thatcherite dreams of privatizing both Social Security and Medicare.
To read much more ...
http://www.prospect.org/cs/articles?article=obama_vs_the_fiscal_fear_mongers
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