Rein in entitlements? No. Increase them, says James Galbraith.
COMMENTARY | October 08, 2009
It's time the press stopped falling for false, ongoing efforts to portray Social Security and Medicare as going broke, says economist James Galbraith. To the contrary, increases in entitlement program benefits would provide a major boost to economic recovery. For reporters and editors Galbraith's message is: Separate propaganda from facts.
By John Hanrahan
Although the mainstream press, with rare exceptions, routinely portrays the Social Security system as fiscally troubled and facing deficits that could bring down the economy in coming decades, prominent economist James K. Galbraith is unequivocal: The Wall Street insiders and news media promulgating that view are flat-out wrong.
Galbraith, the author of seven books, holds the Lloyd M. Bentsen Jr. chair in government/business relations and is a professor of government at the University of Texas, Austin.
“Let me make this clear,” Galbraith said in an interview with Nieman Watchdog. “Social Security is untroubled. It is sustainable.” In fact, contrary to the prevailing inside-the-Beltway wisdom that “entitlement programs” need to be reined in, Galbraith believes Social Security -- and Medicare -- benefits should be increased.
Galbraith said the press has been subjected to, and has largely bought into, a long-running “massive assault and propaganda campaign by the Wall Street crowd,” spearheaded by Peter G. Peterson and David Walker, “over the notion that Social Security is unsustainable.”
Peterson, the Commerce Secretary under President Nixon and cofounder of the private equity firm, the Blackstone Group, also founded the Concord Group and the Peterson Foundation, both of which claim Social Security is going to go broke without drastic changes. Walker, Comptroller General of the United States from 1998 to 2008, now heads Peterson’s foundation and regularly sounds warnings that Social Security is heading for fiscal disaster.
The Concord Group, in concert with six think tanks and four tax-exempt foundations, issued a report last year which, among other things, called for congressionally imposed budget caps on Social Security, Medicare and Medicaid, with automatic benefit cuts or premium increases if the caps are exceeded. The report recommended that Social Security, Medicare and Medicaid be taken “off autopilot” and compete for federal budget dollars with funding for “education, infrastructure, and research or meeting national defense or homeland security needs.”
Rather than being a troubled program, Galbraith said that Social Security “merely by the fact of its existence is a major stabilizer in the economy,” especially in these tough economic times when seniors’ wealth has been hard-hit by the stock market fall affecting retirement income; by the collapse of housing values, and by the drop in interest rates, which reduces interest income. For more and more retired elderly, “Social Security and Medicare wealth are all they have.”
As Galbraith elaborated in an article in a recent issue of the Washington Monthly, “The entitlement reformers have it backward; instead of cutting Social Security benefits, we should increase them, especially for those at the bottom of the benefit scale. Indeed, in this crisis, precisely because it is universal and efficient, Social Security is an economic recovery ace in the hole. Increasing benefits is a simple, direct, progressive, and highly efficient way to prevent poverty and sustain purchasing power for this vulnerable population.”
“In reality,” he added, “there is no Social Security ‘financing problem’ at all. There is a health care problem, but that can be dealt with only by deciding what health care services to provide, and how to pay for them, for the whole population. It cannot be dealt with, responsibly or ethically, by cutting care for the old.”
Galbraith told Nieman Watchdog that the dire warnings about looming Social Security shortfalls and the need for future cuts ignore the fact that “there is no earthly reason to fund Social Security benefits only from the payroll tax,” as is now the case. Rather, he said, benefits could be funded for a time directly from the federal treasury.
In a December 8, 2008, article for Mother Jones, Galbraith proposed an across the board benefits increase of 30 percent for Social Security, “and let the federal government make the contributions for five years.” He called for lowering the Medicare eligibility age to 55 as an emergency measure, and a “payroll tax holiday” with Social Security and Medicare funded directly from the treasury “until the economy gets back on track. Workers would get an immediate 8.3 percent raise to help meet their mortgages; employers would have the same amount to spend on wages, job creation, or investment.”
Galbraith said that the press is too willing to accept uncritically the pronouncements of Peterson and Walker and their allies. William Greider, author and national affairs correspondent for The Nation, put it bluntly in an article earlier this year: “The major media treat him [Peterson] adoringly. Many reporters are too lazy (or dim) to check out the facts for themselves, so they simply repeat what Peterson tells them about Social Security.”
Summing up, Galbraith has some very basic advice for reporters covering Social Security issues: Separate propaganda from fact.