As sequester cuts start to bite a little harder, the Fix the Debt gang is pushing for a "grand bargain," deep cuts to earned benefit programs like Social Security and Medicare in exchange for some vague promises about "tax reform."
They may have a powerful ally in the White House. Rather than barnstorming the country demanding that Congress cancel the sequester (Representative John Conyers, Jr. wrote the one sentence bill to do this) and address our jobs deficit (now topping 9 million), President Obama seems ready to make a deal on the deficit, which is already in a steep decline.
In an unprecedented move, Obama -- who rarely even makes calls to the Hill -- is taking a group of Republican Senators out to dinner tonight. On the menu? "Entitlements"
Read My Lips
"He's reaching out to Democrats who understand we have to make serious progress on long-term entitlement reform and Republicans who realize that if we had that type of entitlement reform, they'd be willing to have tax reform that raises revenues to lower the deficit," White House senior economic official Gene Sperling said on Sunday on CNN.
Jay Carney, White House press secretary, said the same thing on Monday. "The President is interested in moving forward on deficit reduction that pairs the twin objectives of entitlement reform and tax reform in the way that his proposal does, in a way that is consistent with Simpson-Bowles and Domenici-Rivlin and others who have put forward ideas and proposals in a bipartisan way." Simpson and Bowles, Domenici and Rivlin are all on the Fix the Debt board.
But take it from the man himself. On March 1, Obama told the press: "we have a long-term problem in terms of our health care costs and programs like Medicare. And what I've said very specifically, very detailed is that I'm prepared to take on the problem where it exists -- on entitlements -- and do some things that my own party really doesn't like -- if it's part of a broader package of sensible deficit reduction."
His sequester plan, right on the White House website, includes cuts to Social Security -- the so-called "chained CPI" or "superlative CPI" issue is explained here. The point is that it cuts Social Security benefits every year in a way that builds cumulatively. AARP has a calculator to show how big a hit your family might take.
Now you may believe that he has some grand master plan here, but at some point we just have to take the man at his word.
The Wimp That Gave It All Away?
Economists like Paul Krugman and Dean Baker tell us that the real emergency is the jobs deficit not the federal deficit and cogently argue that more federal funds are needed to stimulate the economy -- not cuts.
Baker is pretty harsh on Obama right now, charging that his lack of leadership on the issue led to the sequester. In 2009, Obama "proudly announced the need to pivot to deficit reduction after the passage of the stimulus and then appointed two deficit hawks, Erskine Bowles and Alan Simpson, to head a deficit commission. This set the ball rolling for the obsession with deficit reduction that has dominated the nation's politics for the last three years. Instead of talking about the 9 million jobs deficit the economy faces, we have the leadership of both parties in Congress arguing over the debt-to-GDP ratios that we will face in 2023."
Krugman asks the essential question. After an overwhelming victory at the polls that sent the deficit scolds packing "will Obama go down in history as the wimp that gave it all away?"
On Tuesday, Obama called Senator Lindsey Graham (R-SC) who told reporters that the conversation was "very encouraging" and that he would be open to increased revenues if it was accompanied by a significant overhaul of entitlement programs.
If Obama is finding common ground with Lindsey Graham, we are in trouble.
It Is Time to Put Wall Street on the Menu
The Nation makes the case that embracing a Simpson-Bowles style "austerity bargain" is political suicide, but even after getting hammered for $700 billion in Medicare cuts that he didn't make in the last election cycle Obama seems to think that real cuts are worth the risk. It is Congress' job to tell him he's nuts.
Some in Congress know there are other options -- a lot of them. First of all, there is no deficit crisis. The deficit, caused by the 2008 Wall Street economic crash, has been cut in half in the last few years. There is, however, an ongoing jobs crisis -- a terrible, needless crisis condemning older workers to a bleak future largely dependent on Social Security and damaging the lifelong earning potential of young workers. The jobs crisis demands more government spending not less, a simple fact that even Ronald Reagan understood.
But even if you think that deficits are a problem, you have options. Last week, U.S. Senator Tom Harkin and Representative Pete DeFazio introduced a new bill that applies a tiny tax to financial speculators on Wall Street. They estimate we can generate some $350 billion over 10 years -- other proposals put that number even higher. And let's tax those hedge fund managers that pay only 15 percent on their income when the rest of us pay 35.
Corporate America can afford to do more. With the Dow Jones industrial hitting all-time highs this week (a rally led by many of the Fix the Debt firms, like Boeing, that are failing to pay their taxes or fund their own pension plans) the split between companies making record profits and their workers who are being left behind has never been more stark. Firms are not hiring, Wall Street is not investing and frankly they just don't give a damn about the rest of us. The sequester will cost some 700,000 jobs and a Simpson-Bowles type plan could cost 4 million jobs, but "the market wants more austerity," one analyst told the New York Times.
Or you may just want to call the White House and ask for a dinner invitation yourself. It is time to put Wall Street on the menu.