Marketplace correspondent and former secretary of labor under the Clinton administration, 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.
*According to the Cost-of-living Adjustment Report issued in October by the Social Security Administration, 2011 will be the second year in a row experiencing a 0.0% increase in the Social Security Wage Base. This is the first time to happen since the early 1960’s. To clarify: With larger and larger swaths of the total national income being corralled by fewer and fewer individuals, the bulk of taxable income spreads thinner across greater numbers of lower-income individuals. Raising the SS Wage Base to $150,000, while maintaining the 6.2% statute tax rate (Reich’s suggestion), would mean that employees with incomes greater than or equal to $150,000 would pay $9,300; with the cap set where it is today, at $106,800, anyone earning over the Wage Base cap pays only $6,621.
I hear your woeful
hum, blissful economy;
shoot you in the foot.