The One Percent Want Your Social Security and Medicar

http://www.cepr.net/index.php/blogs/beat-the-press/the-one-percent-want-your-social-security-and-medicare-and-steven-pearlstein-is-trying-to-help

Steven Pearlstein, the Washington Post business columnist, often writes insightful pieces on the economy, not today. The thrust of his piece is that we all should be hopeful that a group of incredibly rich CEOs can engineer a coup.

While the rest of us are wasting our time worrying about whether Barack Obama or Mitt Romney are sitting in the White House the next four years, Pearlstein tells us (approvingly) that these honchos are scurrying through back rooms in Washington trying to carve out a deficit deal.

The plan is that we will get the rich folks' deal regardless of who wins the election. It is difficult to imagine a more contemptuous attitude toward democracy.

The deal that this gang (led by Morgan Stanley director Erskine Bowles) is hatching will inevitably include some amount of tax increases and also large budget cuts. At the top of the list, as Pearlstein proudly tells us, are cuts to Social Security and Medicare. At a time when we have seen an unprecedented transfer of income to the top one percent, these deficit warriors are placing a top priority on snatching away a portion of Social Security checks that average $1,200 a month. Yes, the country needs this.

The most likely cut to Social Security is a reduction in the annual cost of living adjustment of 0.3 percentage points. While that might sound trivial, the effect accumulates through time. After ten years, a typical check will be about 3 percent lower, after 20 years it will be 6 percent lower, and after 30 years it will be about 9 percent lower.

Social Security amounts to 90 percent or more of the income for one-third of seniors. For this group, the proposed cut in benefits would be a considerably larger share of their income that the higher taxes faced by someone earning $300,000 a year as a result of the repeal of the Bush tax cuts on high income earners. The latter is supposed to be a big deal, therefore the proposed cuts to Social Security are also a big deal.

The most likely Medicare cut is an increase in the qualifying age from 65 to 67. Those who pay attention to policy issues know that the health insurance market for people in their sixties is a disaster. And, if they could be bothered to look at the Congressional Budget Office's analysis, they would know that this change would hugely increase the cost of care for the country as a whole, even if it saved the federal government money. In other words, it is exactly the sort of budget cut we would expect from a group of cynical rich people.

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