Jamie Galbraith on how the deficit hawks are using national security as a rationale for cutting Social Security and Medicare:
“Everything must be on the table,” we’re told, as the Simpson-Bowles commission prepares to explain why Social Security and Medicare must be cut.
But why? Social Security and Medicare are not broken. They are successful, popular programs that protect America’s elderly from poverty. Cutting them would be devastating. Today, at a time when people have lost jobs, investments and equity in their homes — the very things that an aging population counts on for economic stability — Social Security and Medicare are more important than ever. They are the most important bulwarks of middle-class life in America. And we can afford them. A rich nation can always afford modest retirement benefits and decent healthcare for its old. Cutting them would be, in fact, totally inconsistent with the spirit of the National Security Strategy, which correctly equates human security with national security around the world.
The real cause of our deficits and rising public debt is our broken banking system. The debts our economic leaders deplore were largely due to the collapse of private credit, and to the vast giveaways the federal government made to banks to prevent their failure when credit collapsed. Yet those rescues have failed to reanimate private credit markets and job creation, as the latest employment reports show. And so long as that failure persists, public deficits and rising public debt must remain facts of life.
Are broken banks a national security threat? Let’s avoid going that far. But the only way to reduce public deficits eventually is to revive private credit, and the only way to do that is build a new financial system to replace the one that has failed. The “national security” case for cutting Social Security and Medicare is bogus. In economic terms, it’s just a smokescreen for those who would like to transfer the cost of all those bank failures onto the elderly and the sick.