Obama’s “Cat Food” Social Security Reform

Obama’s “Cat Food” Social Security Reform


PAUL JAY: Welcome to The Real News Network.
I’m Paul Jay. President Obama released his budget, and the
most controversial piece of it is he wants to make some cuts to Social Security. Now
here’s a little bit of what he said: “Most economists agree that the chained CPI provides
a more accurate measure of the average change in the cost of living.” This chained CPI is
at the heart of the controversy, ’cause critics are saying this is in fact a cut to Social
Security benefits in the future. Why is President Obama doing all this? Well,
the logic for it is given more or less by The New York Times in their report on the
budget. Here’s what they wrote. Social Security benefits would increase from $860 billion
next year, less than the projected $743 billion in payroll tax revenues for the program, to
$1.4 trillion in 2023 fiscal year, about equal to the entire amount of discretionary spending,
Medicare and Medicaid, which would total $504 billion and $267 billion, respectively, next
year. Each would be nearly double those amounts in 2023. And interest on the federal debt,
projected to be $222 billion next year, would be four times that in 2023. Now joining us to talk about all of this is
Michael Hudson. He’s a distinguished research professor of economics at the University of
Missouri-Kansas City. His two newest books are The Bubble and Beyond and Finance Capitalism
and Its Discontents. Thanks very much for joining us, Michael. MICHAEL HUDSON: Thank you, Paul. JAY: So first of all let’s start with the
New York Times quote, where they give a fairly–what’s the word?–apocalyptic sense of where we’re
headed in terms of debt and Social Security and Medicare, Medicaid not being able to be
paid for. What do you make of that? HUDSON: Well, it’s sort of like The Hound
of the Baskervilles, where Sherlock Holmes said the important thing is that the dogs
didn’t bark. When the government printed $13 trillion to give to the banks after the 2008
breakdown, nobody complained at all about the fact that the government can simply print
the money, pour it into the economy, and do something. Nobody’s complaining about the
increased war spending that we’re doing, the waste that the Pentagon [incompr.] war. Why is it that all these complaints are only
focused on one particular small part of the budget, Social Security and medical care and
health care? And the reason is this is pure, naked class war. There’s no other word for
it. You can’t believe that people are being honest when they don’t talk about the whole
budget or the overall economy, when they’re singlemindedly tunnel-visioned, focused only
on how do we pay retirees less so that we can give the bankers more when President Obama
continues the bank deregulation he’s doing. You have the idea that they’re cutting back
pensioners, cutting back Social Security, in order to be able for the next big bank
bailout. JAY: So what do you make of this, the prediction
that the deficit, the spending on the deficit, the interest on the debt could be four times
what it is now? I mean, isn’t that some kind of danger? HUDSON: It’s never been considered a danger
by economists in the past for this simple reason: when these people talk about the debt,
first of all, they’re talking about $16 trillion in debt. But of this, a huge amount, like,
$4 trillion, is owed by the government to the Federal Reserve and another $2 trillion
owed to the Social Security fund. Now, the fact is that the government is paying
interest to itself. So all of this interest that it pays to itself is simply a bookkeeping
accounting fiction. This is not really paying interest. This is not paying interest to the
economy or to bondholders. When people talk about these numbers, you know that they’re
not being honest. JAY: Well, is the argument that they would
give, that when the Fed gives money to the banks, as you were talking about in the bailout–as
you say, they punch these numbers in one ledger and then it shows up in the banks’ ledger.
But they do eventually get paid back, don’t they? And in a sense it doesn’t create more
debt. That’s the argument they give, whereas these payments on Social Security–. HUDSON: Ha! Every government’s debt grows
steadily upwards over time. The Federal Reserve has never reduced its debt to the United States
government. The debt is–this does not involve banks. The Federal Reserve and the Treasury
can simply create money on their own computer keyboards, just like banks can do, electronically.
It doesn’t cost a penny for them to do it. The debt is never paid back. Two hundred years
ago, already in 1776, Adam Smith wrote that no government ever has repaid its debt. So
the government doesn’t–the debt doesn’t have to be repaid. It’s not like a private-sector
account book where you have to–if you run into debt, you have to keep paying the banks
more and your credit card and your bank loan. This is zero interest money. And so the zero
interest will go up from zero to zero. That’s really what’s happening. And you’ve had Bill
Black on your show explaining this. You’ve had the University of Missouri-Kansas City
people explaining this. When people refuse to acknowledge what every
university teaches in its courses, you know that they’re just pulling a con job on you. JAY: There’s two sides to this. There’s the
side of the money the Fed just simply creates, and then there’s the part where they go and–the
Federal government borrows money from outside sources. They borrow money from–they sell
T-bills. And at the moment, that borrowed money is practically costing the federal government
nothing, but that could change is the point. HUDSON: It could, in which case there would
probably be a shift away from borrowing from the public to simply monetizing it, which
is what the U.S. government has always done, the British government, the Chinese government.
Any government that has a central bank has the option of doing that. So this is a–to
pretend that the debts to the banks and bondholders are the whole thing just avoids looking at
the overall budget situation. And it also assumes that, okay, we’re going
to be paying the rich–we know that the bondholders, the 1 percent, own maybe 75 percent of all
the bonds. So if the government pays them a lot more interest and doesn’t tax them,
then this is a pure giveaway to the 1 percent. So what they’re really saying, The New York
Times and the others, is we’re running a probability of giving a huge amount of money to the wealthiest
1 percent in the future. In order to pay them, in case we have to pay them more, we really
have to screw the Social Security recipients, screw the Medicare recipients, screw Medicaid.
We have to squeeze the 99 percent more to pay higher interest to the 1 percent that
are the bondholders. JAY: Now, President Obama in this budget proposal
wants to raise taxes on the wealthy, he says. Anyone over making more than $1 million he
wants to pay, I think, a minimum of 30 percent tax. Is that something? HUDSON: No, for the following reason. Yes.
It is a fraud. It is doubletalk. Rich people don’t make income. Income is for the little
people, as Leona Helmsley said. Rich people make capital gains. So Obama’s going to say, folks, when you fill
out your tax returns, don’t say you’re earning income. Say you’re earning capital gains.
We’ll cut the taxes for you on that. So what he’s doing is simply flimflam. Don’t believe
it when he talks about income and rich people. And the Congressional Budget Office has shown
that the wealthy people get their money in capital gains, not income. He’s not making
a peep about that. So that is absolute straight dishonesty. JAY: So the other argument I guess you hear
from Obama supporters is that he’s dealing with a Republican-controlled House, and if
he doesn’t do this–New York Times, I think even their headline of the coverage of this
was President Obama’s budget meant to engage the Republicans, that this is more about the
politics than it is about the economics. HUDSON: Well, when you say engage the Republicans,
what it means is that Mr. Obama says, I’m a follower of Rubinomics, of Robert Rubin
at Citibank. I’m going to do something that the Democrats don’t like, I’m going to do
something the voters don’t like, but I’m going to blame it on the Republicans. JAY: Just quickly dig into this CPI thing,
this chained cost of living. Why are people criticizing this, and what does it mean? HUDSON: Well, because it’s not a cost of living
index. It’s the cost of lower living standards index. It’s the–some people call it the cat
food index. Here’s what it does. Suppose that you have
to switch away from eating steak or eating meat or eating fish to eating canned tuna
fish or canned beans. That’s considered a price reduction. If the chained index is done properly, you
can cut Social Security by 50 percent. And here’s how. If people stop taking cabs and
begin to take buses, that’s considered a lower cost of living. Well, what if they buy a bicycle?
All Obama has to say is, look, folks, if you really want to save money, get a bike. That’s
what Margaret Thatcher said. That was one of her campaign slogans, get a bike. So all
of a sudden, the transportation in the cost of living goes down to zero. People pay between
25 percent and 40 percent of their income on rent. Let them live out on the street.
Let them live in a homeless shelter [crosstalk] JAY: Because the point of this chained–. HUDSON: –about 15 percent of their income
on medicine. Let them do what George Bush said. Go to the emergency ward. If people live–if the living standards are
ground down and down and down because people are poor, then all of a sudden the government
can say, look, because you’re getting poorer and poorer, your living standards are declining,
so we don’t have to pay you so much to live. This is no longer a price index. This is an
index of declining living standards. JAY: And that’s because the concept behind
this chained CPI is that people are finding cheaper ways to do things, and that’s supposedly
not being reflected in the current system. HUDSON: Ha! That’s right. People are having
to walk to work instead of taking buses. They’re having to eat tuna fish and canned beans instead
of buying fresh food on the table. Of course they’re finding cheaper ways. We call that
declining living standards. And the start of the budget is: how can we
screw the Social Security recipients, how can we pay them less to pay our clientele,
our campaign contributors, the 1 percent more? You have to start with where they do, with
the class war is back in business. And how do they sugar coat it? By calling it a price
index instead of a cat food index or a declining living standards index. This is absolute slimy
politics. JAY: Alright. Thanks for joining us, Michael. HUDSON: Okay. JAY: And thank you for joining us on The Real
News Network.

58 thoughts on “Obama’s “Cat Food” Social Security Reform

  1. The Buffett Rule covers the high-class that receives most income from capital gains.

    So it still helps…

    And yes I hate and disagree with Chained CPI and any SS cuts, but the buffett rule and 28% deduction cap do hit those who get their income from cap gains.

  2. Old people is the name they had before we realized they were useless eaters. They payed themselves and left us with the debt. Inter generational debt slavery. Look at all the kids with degrees, student loan debt, and no job. The vets have stored guns and ammo so they are ready when the shoe drops. Have a good day.

  3. For those who doubt it, see here:

    w w w x foreffectivegov x org/node/12045

    So Hudson is wrong — the Buffett Rule minimum 30% tax DOES hit people REGARDLESS of if their income is capital gains or regular income.

    The whole point of it and its namesake was that Buffett took his income mostly in cap gains to avoid the higher marginal income taxes.

    And it catches the rich people like Romney who were paying 12%, the Buffett Rule minimum REGARDLESS under the rule is 30% tax.

  4. The elderly can not only expect to be eating cat food but they should also expect a new "mystery virus" that's killing their peer's at alarming rates.

  5. That's an interesting concern that I've been wrestling with too. It's my understanding that the SSA was "raided" for its cash in exchange for bonds in order to help pay for the Iraq war. If that's the case, then the interest really is owed to the SSA, so it's just a bookkeeping issue and not a "debt" that you and I owe. Unfortunately, the Fed is a semi-private corporation and our money supply basically privatized, which is a problem. I'm for direct issue of currency by the Treasury.

  6. Gee thats pretty much whats happening…

    We were screwed either way, so I voted third party. The whole 'lesser evil' thing is just smokescreen.

  7. You're being disingenuous because surely you know that no third party candidate had a reasonable chance of winning, and they never will until the entire system is reformed and the influence of money in politics is scaled back. In order for a third party to succeed on a national level in our current system, they'd have to sell out just as much as the two major parties. Therefore, any argument against the fact that we currently only have a choice between two evils is just smokescreen.

  8. Until you realize that neither Repub or Dems are on your side you cannot be effective. You hurt us all when you let any politician slide.

  9. Obama is just showing that he wants to compromise with the Repubs. Cuts in SS, Medicare or Medicaid won't happen. The Dems in Congress won't let it happen. Vote all the Repubs out!

  10. Obamabots are just as clueless as their Fox counter parts; dumb as a sack of hair. Obama cares not one iota for we the people; he is a creature of the reich and always has been. The history of his life has been that of kissing up, social climbing and, now he wants to pay the 1pct. When he leaves the WH Obama expects to be in the warm embrace of their money like the good pet he is. The rest of us be damn!.

  11. Michelle Obama has this all figured out. If we grow our own food in our own gardens, we can eliminate the food part of the cost of living.

    My wife explained to me this logic of what Michelle is up to.

  12. Ha ha! When their scam is so bold, it will surely implode. They can never bite the hands that feed them. If this is the paradigm shift, if "budget cuts" have to be their new scam, then surely we are entering the final phases of statism. When their options are reduced to shitting on people that empower the racket in the first place, then they lose the ground they stand on. I suspect it won't be long before they make a run on the outstanding resources.

  13. Funny that the academic bubble Keynesian left can think that continuing supporting and running this money printing scam will go on forever. All scams eventually come to an end.

  14. People in this Country love to get hurt. This time around they are going to get it hard core. Obama is a flunky teleprompter reading Wall Street Puppet who lives like a pimp. IT-IS-THE-BANKERS! IT-IS-THE-BANKERS!

  15. "Give me control of a nations money supply, and I care not who makes it's laws" quote by Mayer Amschel Bauer Rothschild. Federal Re$erve coup d'etat in 1913. END the FED – Zionist Rothschilds Federal Re$erve criminal cartel counterfeiters.

  16. "If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered," quote by US President Thomas Jefferson.

  17. Unless its a genetically engineered plant that grows its own poison, in a field of toxic soil air- and watered with pharmaceutical and other toxic compounds laden water. You know that is not good for you even if it does fall under the umbrella of vegetarian.

  18. don't buy the interest argument–why pay interest on a debt owed to oneself, which is no debt at all? the effect is to remove money from an already depressed economy, creating artificial scarcity. also, interest payments would not be the top priority for the IRS, unless it was owed to third parties (i.e., private banks and owners of our private fed reserve).

  19. if the fed reserve is collecting interest for the social security trust fund, then the interest is still going directly to private banks and shareholders of the fed reserve and not the government.

  20. I think the White House and Congress should just give everybody a noose on their 65 birthday and that will lower the cost of Medicare as well as Social Security. Hmmm… wait a minute how much does rope cost? Maybe they should use plastic twine.

  21. "WRONG", sure things looked good for a little while, Mandela was riding the wave left over after Apartied, which was the best thing for S.A., then of course look at Zimbabwe, Mugabe, killed or drove off all, 5,000 Dutch farmers , Zimbabwe was the bread basket of Africa, who had been there for over 200 years, now they are starving to death. the place is so broke, I am looking at one of their 100 trillion bills now.,Ha,Ha,

  22. Also, profits don't really matter when you can print and loan as much money as you'd like to, to shareholders or friends. Even if they keep losing money they can simply keep loaning money with no limit.

  23. Every gov. debt has steadily gone up over time.

    This statement alone should disqualify Hudson's macro economic views. Not only is it factually untrue. It virtually begs for a currency collapse to reset it.

  24. I get your point, but I guess you don't realize that the whole gov't, to my knowledge, has its own healthcare and pensions, etc. They will never ever be in the position of applying for Medicare, idk if they get Social Security on top of all that, but God knows they need that like they need a food stamp- not.
    Too bad they don't have to see how much it is NO picnic living on a fixed income and trying to find a provider for Medicaid to fix or maintain your teeth and glasses.

  25. @pongman
    "Give" you a noose?! Not likely. I envision more of us Soylent Green scenario. This way, you can eliminate the useless feeder… and feed your slave workforce all at the same time!
    That's what you call a win win, baby!

  26. It's a little like saying every recovering drug addict is a cocaine user. (untrue)
    So a little bit of cocaine to pick things up isn't bad, and people should stop treating it as a bad thing. It gets you through those tough times.

    Thats both untrue and misleading, just like his view on debt. Also factually false. Countries have had savings which have seen them through tough times. A "treasury" used to have wealth in it. (savings) Now it's just a backstop for IOU's and a printing press.

  27. So what happens when a country goes through rough times with savings? Barring the debt trap and war, it continues on in perpetuity.

    What happens when you finance infinite debt as if it's "no big deal"? You eventually get a currency collapse.

    How rough on the population is either option? No big changes in the first.
    Vs. nearly all public services change and all but what is needed to retain power are culled. Not to mention inflation and destruction of the middle class.

  28. used to believe that barack was simply too much the scholar, and too little the warrior, to fight. is the same president who persists in characterizing the mass wall street pillage as an honest mistake, based upon a flawed philosophy, which just happens to include the belief that the american rich should own and rule the nation. is why he locked in tax immunity, and backed the ndaa, after promising to oppose and. now he comes for medicare and ssa. barack has ALWAYS been a sellout.

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