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Entire Premise of Cat Food Commission Wrong

Members of the cat food commission have consistently said that they will put a priority on spending cuts with their recommendations for deficit reduction. Co-Chair of the commission Erskine Bowles has, in fact, made a long-term spending target of 21% of GDP. The Center for Budget and Policy Priorities has written a report on this target, and finds it completely inadequate and bordering on numerology.

The average level of federal spending over the years since 1970 — about 21 percent of gross domestic product (GDP) — does not provide a reasonable benchmark for the level of spending that will be necessary or appropriate in the future […] Such recommendations, however, fail to take account of fundamental changes in society and government — the aging of the population, substantial increases in health care costs, and new federal responsibilities in areas such as homeland security, education, and prescription drug coverage for seniors. These factors make the expenditure levels of several decades ago inapplicable today.

A careful analysis of these factors indicates that it will not be possible to maintain federal expenditures at their average level for decades back to 1970 without making draconian cuts in Social Security, Medicare, and an array of other vital federal activities.
Over the 40 years from 1970 through 2009, revenues averaged a little over 18 percent of GDP, and expenditures averaged nearly 21 percent of GDP. Those averages reflected a federal government with far less responsibility than today, and a country with a much smaller percentage of elderly people and considerably lower health care costs. Averages for federal spending and revenues in past periods consequently are not very relevant for discussions about how to reduce deficits to economically sustainable levels in the decades to come.

CBPP’s analysis boils down to “things cost money.” Now, if the government wants to give up on the surveillance state (they don’t) or the military-industrial complex (uh-uh), maybe they can get closer to that target. But with an aging population, higher health care costs, more federal responsibilities, and interest on the debt, a 21% target will basically wipe away a host of “unnecessary” domestic programs.

Matt Miller, who I normally wouldn’t quote, points out that federal spending under Ronald Reagan averaged 22 percent of GDP, above Bowles’ target (and insufficient to the task). In Reagan’s time, health care costs were only 10% of GDP; they’re 17% today. And anyone paying attention to this knows that Bowles would try to cram those “entitlement” programs back down through pure benefit cuts rather than, I don’t know, putting America on the same path as other countries in the world with a more efficient health care system.

If the target of the cat food commission is wrong, the results will be skewed. And it seems that they have been deliberately shrunk to allow commission members to take a knife to Medicare, Medicaid and Social Security. Richard Trumka of the AFL-CIO, previewing the long fight ahead this year, made a great speech on Social Security this morning. I’ll put it on the flip.

Good morning. Working people around the country know the value of Social Security, and the Labor Movement has long been one of its staunchest supporters.  
The American Federation of Labor was there in 1935, advocating for passage of the Social Security Act.  In the decades following, the AFL-CIO played a lead role in designing the evolving Social Security system — supporting efforts to strengthen and broaden the program, and opposing weakening of its protections.  During the last Administration, we were key to defeating privatization.

In a misplaced effort to reduce the deficit, Social Security is under attack again –this time by proposals to raise the retirement age.  And the right wing spin machine has  convinced many Americans that Social Security won’t be there for them, anyway.   

Working America, the community affiliate of the AFL-CIO, goes door to door every night talking to thousands of people a week. What they hear is that working families — including young people — are deeply worried about their retirement security.   They are hearing that their Social Security benefits may be cut — and they don’t see how they can possibly make up the difference.  

At a time when retirement is less secure for working Americans than it has been in many generations, only Social Security remains a defined and stable retirement benefit  — not to mention the important family protections it provides when a worker is injured or dies.    Unions know exactly what is happening to retirement income in this country because we see it at the bargaining table.  Fewer traditional pensions.  More riskier 401(k) plans  — not a great benefit for workers with stagnant incomes who find it difficult or impossible to save.  Now is the time, to strengthen, not weaken, Social Security.

 Raising the eligibility age for a full Social Security benefit would be disastrous for millions of Americans. It is a benefit cut, plain and simple.  It is a cut that is unnecessary and one that Americans can ill-afford.

For those born in 1960 or later, the retirement age for a full Social Security benefit is now 67, rather than 65.  These younger workers have already been hit with a 13 percent benefit cut — and some now want to impose another cut on top of that.  

A 62-year old worker who would receive $800 a month if the retirement age for a full benefit were 65, will get only $700 a month when that retirement age becomes 67. 
Further increasing the retirement age for a full benefit to 69 (and some are even saying 70) means another 13% cut in benefits — for a total benefit cut of more than 25% for anyone who is now 50 or younger.  That probably includes many of you in this room.

An age increase a particular hardship for workers in physically demanding jobs who  don’t qualify for disability — workers like my father who spent his life in the mines and couldn’t work another day by  the time he qualified for Social Security — and those older workers who may no longer be able to find work due to age discrimination.

I know that America can do better than this.  And that’s why the AFL-CIO, as part of a broad campaign, is mobilizing to protect Social Security.  I look forward to working with our many coalition partners to create a secure retirement for our baby boomers, our children, and grandchildren.

Thank you.

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David Dayen

David Dayen