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Dean Baker

Dean Baker is co-director of the Center for Economic and Policy Research

November 8th, 2011 5:12 PM

The One Percent Turns Class War Into Generational War

Major news outlets like the Washington Post and National Public Radio constantly bombard us with news pieces on the budget deficit. Invariably these stories focus on the cost of "entitlements," which most of us know as Medicare, Medicaid and Social Security. The story pounded home in these pieces -- often explicitly -- is that these programs, that primarily benefit the elderly, are creating the basis for a generational war between the young and the old.

The media focus both contributes to and follows the Washington policy debate. At the moment, we have the congressional "supercommittee" scheming to produce a deficit-reduction plan that will almost certainly involve large cuts to all three programs. There is a commonly repeated view in Washington policy circles, based on no evidence whatsoever, that there will be a disaster if the supercommittee comes up empty handed. This means that members of the committee are feeling great pressure from the 1 percent to produce a package with big cuts to Medicare, Medicaid and Social Security.

It is truly impressive how the Washington elite have managed to make these modest protections for the country's working population (the 99 percent) into the greatest problem facing the country. The obsession with cutting these programs is occurring at a time when we have more than 25 million people unemployed, underemployed or who have given up looking for work altogether. One might think that Congress would convene a supercommittee to get people back to work rather than figuring out a way to undermine programs that people need, but it's the 1 percent that pay for elections, not the 25 million workers suffering from their greed and incompetence.

Since almost no one can be immune to the hysteria that the media have created around the cost of these programs, it is worth putting it in some context. Starting with Social Security, the latest projections from the Congressional Budget Office show that the program can pay all benefits through the year 2038 with no changes whatsoever.

Even if we never did anything, the program would be able to pay more than 80 percent of scheduled benefits well into the next century. Since the value of benefits is projected to rise through time, 80 percent of the projected benefit in 2040 is considerably higher than the average benefit received by retirees today. Therefore the often-repeated comment that there will be nothing there for our children or grandchildren is a telltale sign of ignorance or dishonesty.

The cost of making the program fully solvent for its 75-year planning horizon is projected at 0.58 percent of GDP. By comparison, the increase in annual spending on the military as a result of the wars in Iraq and Afghanistan is 1.7 percent of GDP, almost three times as much. The upward redistribution from the rest of us to the 1 percent over the last three decades was 6 percent of GDP or more than 10 times as much as this shortfall. But it is only shortfall in Social Security that the media want us to see as a crisis.

The health care programs, Medicare and Medicaid, pose more of a problem, but this is because the U.S. health care system is dysfunctional. We pay more than twice as much per person as do people in other wealthy countries with little, if anything, to show in the form of better outcomes. (We rank near the bottom of wealthy countries in life expectancy.)

If we had the same per person health care costs as people in Germany, Canada or any other wealthy country, we would be looking at long term budget surpluses, not deficits. But controlling costs involves reducing the income and profits of the 1 percent. It means reducing payments to insurers, drug companies, medical equipment manufacturers and highly paid medical specialists.

Rather than control costs, the folks in Washington would rather make people pay even more for health care. This is why we see proposals like raising the age for Medicare eligibility to 67 or turning the program into a voucher system. Both plans are likely to protect the income of health care industry, while making it even more difficult for current or retired workers to cover their health care costs.

The public should realize that "generational warfare" is an agenda that was deliberately designed by the 1 percent to distract the rest of us from the class war that they have been successfully waging over the last three decades. Rather than have a public debate on the policies that have redistributed so much income upward, the 1 percent want to pit children against their parents and grandparents, forcing them to fight over crumbs.

In this context, the only victory that the supercommittee can hand to the 99 percent is a blank sheet of paper. People will have enough things to worry about this Thanksgiving without adding a congressional plan to slash their Social Security and Medicare.

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