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 Costantini
Seattle, WA 98112