Why Should We ACT Based on CBO’s Projections?
Today, Dean Baker questioned the sanity of The Washington Post, after its editorial staff once again came out for cuts in Social Security to avert a crisis which will not be manifest until 2037. In reply to the Post’s observation that this year is the first in which the Social Security program will pay out more than it takes in, and that this is a warning sign, Dean points out that it:
. . . certainly is a warning sign. The falloff in Social Security tax revenue is a warning that the economy is seriously depressed due to the collapse of the housing bubble. Double digit unemployment leads to all sorts of problems, including the strains that it places on pension funds like Social Security.
He then goes on to criticize the Post for not advocating the urgency of the need to get back to full employment to solve any pending shortfall in Social Security, and for advocating instead for possible Fiscal Commission–recommended "balanced" measures, including Social Security spending cuts to be implemented gradually to avert the projected 2037 crisis.
Dean then advocates that we reject this recommendation and wait to act. He says:
A Greenspan Commission size fix put in place in 2030 would leave the program fully solvent for most of the rest of the century.
There is also a very good reason for delay. The opponents of Social Security have been spending huge amounts of money deliberately promoting misinformation. Peter Peterson, the richest and most prominent opponent, has repeatedly asserted that the Social Security trust fund does not exist. This flat earth view of the program has been given respectful treatment at the highest levels of government. When Peterson put on a daylong program on the deficit in the spring both of the co-chairs of President Obama’s deficit commission took part in the program as did former President Clinton.
This massive effort to undermine confidence in the program has been largely successful. Polls show that substantial majorities of younger workers do not expect to receive their Social Security benefits.
That is not a good environment in which to debate substantial changes to the country’s most important social program. Since there are several decades until the program faces any real problems, it is entirely reasonable for those who support the program to focus on educating the public about the program’s financial health and to seek to delay any major changes until the Peterson-type misinformation campaigns have been defeated.
I think this is a very good argument, and I’m glad that Dean has made it. But why have he and other economists chosen not to go directly at the CBO projections that are currently driving much of the WaPo/Peterson/Fiscal Commission/deficit hawk propaganda, not only against Social Security, but also against every form of Government spending that is not deficit neutral, regardless of the vital need for that spending to allow us to meet our increasingly severe national problems?
Both WaPo and CBO are suggesting that the CBO projections, which admittedly are not predictions, and in CBO’s own view are extremely unlikely to come true, should be taken as the basis for actions this Fall that will put in place a framework for spending cuts that will hurt very real and very vulnerable people, if not this year or next, then certainly in the next few years, when the current economic crisis ends. But this contention is insanity. It is the height of true fiscal irresponsibility.
It is one thing to ask people to sacrifice to fight a war for survival, or to respond to dangers that they have a clear expectation will come true at some time in the future. But, it is entirely another to ask people to sacrifice for some projected state of affairs that by CBO’s own admission is “not likely” in the sense that scientific predictions are likely, and that is “unlikely” in the sense that CBO itself doesn’t think they will occur.
CBO’s scenarios are not as likely as an assertion that a Katrina-like hurricane will hit New Orleans again sometime in the next decade. They are not as likely as the scenario that we have a double-dip recession during the next year. Its projections are not predictions that will come true. They are projections based on a policy environment and on policy choices that “we” can change at any time.
And, as I have pointed out elsewhere, the so-called projected fiscal crisis is not based primarily on the structure of our current expenditures, or even on the projected growth of our health care and Social Security entitlements. Rather, if it is real at all, which I very much doubt because the absolute level of the public debt-to-GDP ratio has no significance in the abstract, it is because we are refusing to stop issuing Governmental debt, and even more importantly, because we are refusing to provide full employment, out of an exaggerated fear of inflation. If we stopped issuing debt, and also provided a Federal Job Guarantee program ensuring full employment at all times, we could cut out the huge projected interest expense and also, restore economic growth rates to historical norms and even beyond, and then the automatic stabilizers would give us a surplus problem rather than a deficit problem soon enough.
So, because WaPo and CBO are unwilling to consider, or to envision such initiatives, or any other changes that would make a real difference in their projections, except myriad little cuts in spending or tax increases that would cause most Americans to suffer; they tell everyone who will listen that austerity, sacrifice, and suffering are the only way out. And, of course, they expect us to believe this. But what we ought to believe instead is that these institutions have no interest in solving real problems, but are only interested in offering painful solutions to problems they’ve conjured up to maintain their own sense of authority and relevance.
Fiscal responsibility in Government is using the Government’s fiscal power to fulfill the public purpose, including full employment and price stability, enough economic economic growth that improves the lot in life of all Americans, environmental sustainability, educational excellence, a new energy foundation for the American economy, universal health care, and other public purposes. It has nothing to do with maintaining particular levels of deficits, the national debt, or the debt-to-GDP ratio considered in the abstract. It’s time for The Washington Post and the CBO to begin advocating for real fiscal responsibility and to give up Peter G. Peterson’s wet dream of shredding the Social Safety net