President Obama,
I supported your campaign with money and volunteer time, and
encouraged my friends to do likewise. Some of them refused or hesitated
out of fear that a second Obama administration would try to bargain with the
congressional Republicans on issues where there is no room to bargain, where
the Republicans are 180 degrees off course from reality and would love to sink
your second term in the catastrophe of economic and fiscal austerity in the
face of deep unemployment.
We are not facing a debt or deficit crisis. We are facing a
tenacious crisis of unemployment and lack of aggregate demand, the Great
Recession. The United States is paying the lowest interest rate on its debt in
a long time, with no hint of inflation. The fiscal imbalance is the
result of the crash and deep recession, and the quickest and best way to bring
down the deficit and the debt substantially is more and better-targeted fiscal
stimulus measures two to three times the magnitude of your first stimulus to
create the demand necessary to drive a serious recovery. Austerity would
be dangerously, tragically wrong. Bringing unemployment down to a normal
level and accelerating growth are the only sane approach to our current
problems.
There is no such thing as a “fiscal cliff”. There is a
gradual ramp that would only cause damage after six months to a year. The
whole issue is simply a Republican tactic to inflate the administrative task of
raising the debt limit into a political issue and hold your government hostage
to it.
As you know, many in the economics profession, and even at
the Fed, have clearly moved towards recognizing this reality, along with the
need to look for Keynesian-inspired solutions, since the Crash of 2008.
The opinions I’m voicing here are shared by many of the economists and analysts
who predicted and correctly diagnosed the bursting of the housing bubble and
resulting financial crisis.
In the coming negotiations, I urge you to refuse to touch
Social Security, Medicare or Medicaid benefits.
Social Security is not in crisis and does not need to be
rescued: it is solvent for over a quarter-century even by the pessimistic
actuarial estimates of the Trustees. It is financed independently and
does not contribute to the deficit. It would be tragic if you allowed
Republicans and Goldman Sachs / Morgan Stanley / private-equity Democrats to
kill the healthiest and most successful New Deal program after all these
years. The only acceptable reform would be to eliminate the cap on income
and bring the retirement age back down to 65. The Democrats should start
pushing for that, but it will probably have to wait for a more politically
propitious moment. For now Social Security must not be touched.
Medicare and Medicaid do indeed have growing costs, but the
problems they face are due not to the programs themselves, but to a bloated
private health care industry. If we could reduce the costs of private
health care to close to what every other industrialized country pays, Medicare
would be in balance and the projected deficit would be greatly reduced.
Rather than cutting benefits, which are desperately needed, the programs should
be used to help bring down excessive costs on the supply side, and to encourage
good medical practice such as prevention and wellness care. The Bush big
pharma gift program would be a good place to start. The next time
political winds shift in a positive direction, we should be pushing to extend
benefits down to younger and younger people to complement your health insurance
reform.
All three programs are among the best-run government
programs in our history, and leverage the economies of scale and efficiencies
that only national public programs can provide. This is why Wall Street
insiders like Peter Peterson and Erskine Bowles have been so persistent and
strategic in trying to undermine them. They are “entitlements” only in
the sense that most citizens rightly believe that they are entitled to the
benefits they have paid for. They are social insurance programs that most
of us pay premiums into throughout our worklife and then receive benefits when
we need them – they are not welfare in any sense, but rather citizens mutually
taking care of each other.
As a result, they are incredibly popular, even among
conservatives. So it is not only good economics but good politics to
defend them tenaciously. To throw them to the sharks would not be bipartisanship;
it would be abject surrender to people who are out to hurt you and the majority
of our people.
But beyond economics and politics, our major social
insurance programs are key elements of the foundation of a decent life for all
of us. As thoughtful economists since Adam Smith have emphasized, people
do not exist to serve the economy – on the contrary, the most basic goal of
effective economies is to improve the quality of life and economic security of
all citizens. Social Security, Medicare and Medicaid are critical to that
quality of life for millions of elderly and low-income Americans. They
are among the most fundamental reasons why we need a government, and they need
to be cherished, defended and fortified as the most basic public goods.
Only you have a bully pulpit large enough to educate
Americans about this. The Republicans are selling poisonous snake-oil to
people who are hurting and ignorant. Despite losses, they are calculating
that they have the tactical means to send the economy into another recession to
prevent you from strengthening our economic recovery. If you hit
back hard at them, you will find the majority of our people, including me,
supporting you and cheering you on.
Hopefully yours,
J. Peter CostantiniSeattle, WA 98112
