Part 2: Campaign draws “link” between debt to China, and spending on Social Security and Medicare
JESSE FREESTON, PRODUCER, TRNN: In part one we profiled the growing campaign to cut entitlement programs in the United States, where President Obama’s recently formed Fiscal Responsibility Commission has been loaded with supporters of cuts to Social Security and Medicare. Back in January of 2009, one week before his inauguration, president-elect Obama had dinner with four conservative commentators—George Will, Charles Krauthammer, Bill Kristol, and David Brooks. Brooks, a columnist with The New York Times, described his satisfaction with the meeting during an interview with National Public Radio.
DAVID BROOKS, COLUMNIST, NEW YORK TIMES: —which I think is really reassuring for a lot of us is we’re going to be spending a lot of money in the next couple of years, and we understand that. But he’s clearly demonstrated this week that he’s committed to tackling the big entitlement projects—Medicare, Social Security, that are the real fiscal disaster waiting to happen.
FREESTON: Brooks was particularly pleased that Obama would take this on after being largely silent on the issue during his campaign, therefore having little mandate for such actions.
BROOKS: So it’s not only short-term spending, but it’s long-term fiscal balance that’s very much on his mind, which was not on his mind, or at least not talked about as much, during the campaign.
FREESTON: This distinction between long-term and short-term spending was a central talking point at Fiscal Summit 2010 in Washington, D.C., a conference sponsored by the Peter Peterson Foundation.
PETER G. PETERSON, FOUNDER, PETER G. PETERSON FOUNDATION: We make a very important distinction between current budget deficits and our longer-term structural deficits.
FREESTON: President and CEO of the Peterson Foundation David Walker identified some of the short-term government spending that the foundation isn’t concerned about.
DAVID WALKER, PRESIDENT AND CEO, PETER G. PETERSON FOUNDATION: This is the challenge that will exist after the economy has fully recovered, after unemployment levels are down, after the wars are over, and long after the financial and housing crises have passed.
FREESTON: This distinction between short- and long-term expenses isolates Social Security and Medicare programs. Tom Ferguson of the Roosevelt Institute believes that this short-term/long-term distinction is a false one. He highlights war funding and bank bailouts as long-term expenses that deficit hawks like Peterson tend to leave out.
THOMAS FERGUSON, POLITICAL SCIENTIST AND AUTHOR: On the too-big-to-fail story, if you let banks simply gamble with taxpayers’ money, they will just keep doing it. You know, the deficit hawks have been strangely quiet on the whole financial reform process, but, boy, if you were a deficit hawk, you ought to think about that, ’cause these folks for sure will be back. Indeed, it only takes European countries misplay the crisis building in Europe, there are going to be a lot of bank failures.
FREESTON: Former chairman of the Federal Reserve Alan Greenspan confirmed that big finance is now counting on future bailouts by the public.
ALAN GREENSPAN, FMR. CHAIRMAN, U.S. FEDERAL RESERVE: —the point where the solvency of our banking system is really no longer a concern of anybody, for no other reason [than] that there is still a belief that the U.S. government will step in and prevent a too-big-to-fail type of situation.
FREESTON: As for military spending, which represents more than a quarter of the U.S. budget, it was mentioned a couple times in passing, but spending on the wars in Iraq, Afghanistan, and Pakistan were brushed off as a short-term expense. According to the U.S. Library of Congress, since independence the US military has been deployed in over 200 foreign conflicts. These stats do not include the campaigns against the indigenous Nations of North America. For some, this largely uninterrupted succession of conflicts means that war is better understood as a long-term structural expense than the short-term state of exception referred to by the Peterson Foundation. At the conference, attention turned to how to convince the public that now is the time to cut entitlement programs.
BOB SCHIEFFER, HOST, FACE THE NATION (CBS): How do you get elected, and I would also say how do you stay elected, by telling people we’re going to have to do something here, we’re going to have to do something about Medicare and Social Security. We may have to raise taxes.
BILL CLINTON, FMR. U.S. PRESIDENT: The way to sell this to people around America is just to tell them half our debt’s held by people from other countries, and pretty soon that’ll be 75 percent, and do they really want that for their children and grandchildren.
FREESTON: This captures the growing public awareness of the U.S. government’s debt to foreign countries. Following President Obama’s November trip to China, this skit on Saturday Night Live highlighted China’s position alongside Japan as the U.S.’s major international creditor.
TRANSLATOR (ACTOR): I completely understand why you feel entitled to come here and lecture China on our shortcomings. After all, my country does owe the United States a great deal of money. Oh, wait, hold on a moment. I believe I had that backwards. In fact, now that I think about it, it is your country that owes us a large sum of money.
LAWRENCE MISHEL, PRESIDENT, ECONOMIC POLICY INSTITUTE: When we buy a lot of things from China, they hold a lot of dollars, but they’ve got to do something with dollars. They’re either going to buy our factories or buy our stocks, or they’re going to buy our Treasuries.
FREESTON: Lawrence Mishel of the Economic Policy Institute says that while the foreign debt has real consequences, it has little to do with deficits.
MISHEL: They keep on claiming that our fiscal deficit is making us indebted to foreign nations. It’s absolutely incorrect. Economics would tell you that the reason why we have greater foreign indebtedness is that we have growing trade imbalances. So let me tell you that in the late 1990s, from 1994 to 2000, when we went from a deficit to a surplus, the share of our Treasury bonds that were foreign doubled, and the reason is because we started having a very big trade deficit with China, in fact.
CLINTON: Never before has our nation enjoyed at once so much prosperity and social progress with so little internal crisis and so few external threats.
MISHEL: So what they’re trying to do is martial a fear of foreigners around their efforts for deficit reduction and cut social insurance programs, basically.
TRANSLATOR (ACTOR): I suppose if I really wanted to get my money I could call and say I was a Wall Street banker who needs his bonus.
FREESTON: Former Treasury Secretary Robert Rubin, an early economic advisor to President Obama and former Chairman of Citibank, stressed national unity in the face of crisis.
ROBERT RUBIN, FMR. U.S. TREASURY SECRETARY: This is not a Wall Street problem; this is a problem for all of Americans that undermine jobs, it undermine incomes, and that is going to be very, very difficult to deal with. I’m more worried about this peak than anything in my adult lifetime.
FREESTON: Mishel points out that with all the talk of calamities, nobody in the room proposed putting their own fortunes on the line.
MISHEL: Almost all the income growth in the last three decades went to the upper 1 percent, in fact 55 percent of all the income growth. So I’d like to go get some money there before—.
FREESTON: Meanwhile, outside the conference a group calling themselves the Billionaires for Social Insecurity were mocking the word choice of people inside.
TROUPE LEADER: We are all in it together.
ALL: Sort of.
FREESTON: They see this campaign as an attempt to pass the costs of the financial crisis on to the majority.
TROUPE LEADER: It’s a crisis—
ALL: Because we say so!
TROUPE LEADER: In the finest American tradition, us billionaires are not going to have to pay for our mistakes.
MISHEL: These people also, unfortunately, don’t seem to understand that not everybody’s the same in America. They say we should raise the retirement age, and they just say it is a matter of fact. You know. But these are white-collar professional people who say, I can work longer. They don’t recognize that, one, the retirement age is already used scheduled to go up to 67, that we have retirement ages, you know, near the top of what advanced countries already have. And even though people are living longer, living longer has been the benefit only to the upper half of the income distribution. The bottom half, they’re not living so much longer anymore. So to raise the retirement age is to make people have, you know, less retirement in a country that’s getting wealthier and wealthier every decade. And that seems to me very misguided.
WALKER: But the only way this will happen, short of crippling crisis, is if the first three words of the Constitution come alive, “We the people”. We the people are ultimately accountable for what does or does not happen in our nation’s capital. The fact is, we cannot afford a toxic mix of public ignorance and apathy.
FREESTON: As part of its campaign, the Peterson Foundation has shown its documentary film I.O.U.S.A. numerous times on CNN. Next up is The Citizen Engagement Plan. On June 26, the Peterson Foundation and two other foundations will hold a simultaneous town hall in 20 cities across the country.
WALKER: The participants will be provided the physical facts and then asked to express their views on a broad range of reform options.
FREESTON: President Obama’s commission has given its support to this process.
FERGUSON: I think the whole role of private money in this type of thing is way, way out of line. They ran the most expensive presidential election in history. They broke every record for contributions. And, you know, they’re just turning the policymaking apparatus over to wealthy folks and corporations. This is crazy in a democracy. President needs to decide, I think, whose president he is.
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