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Dean Baker
Published: Wednesday 17 October 2012
“The corporate honchos are not expecting to convince the public that we should support cuts to Social Security and Medicare.”

The National Debt and Our Children: How Dumb Does Washington Think We Are?

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While much of the country is focused on the presidential race, the Wall Street gang is waging a different battle; they are preparing an assault on Social Security and Medicare. This attack is not exactly secret. There have been a number of pieces on this corporate-backed campaign in the media over the last few months, but the drive is nonetheless taking place behind closed doors.

The corporate honchos are not expecting to convince the public that we should support cuts to Social Security and Medicare. They know this is a hopeless task. Huge majorities of people across the political spectrum strongly support these programs.

Instead they hope that they can use their power of persuasion, coupled with the power of campaign contributions and the power of high-paying jobs for defeated members of Congress, to get Congress to approve large cuts in Social Security, Medicare, Medicaid and other key programs. This is the plan for a grand bargain that the corporate chieftains hope can be struck in the lame duck Congress.   

Most of the media have been happy to cooperate with the corporate chieftains in this plan. There are two main ways in which they have abandoned objectivity to support the plan for cutting Social Security and Medicare.

First they continually run stories about how the deficit and debt are the biggest problems facing the country. They routinely use phrases like “crisis” and other hyperboles to scare their audience about the risks that the debt poses to the country.

The whole notion of a “fiscal cliff” is an invention that implies an urgency that does not exist. There is almost no consequence to not having a deal in place by the end of 2012. The dire projections of recession and rising unemployment assume that we don’t ever get a deal on the budget.

The fixation on the debt certainly cannot be justified by any objective standard. Clearly the most pressing economic problem facing the country is the tens of millions of people who are unemployed or underemployed as result of the collapse of the housing bubble. These people and their families are seeing their lives ruined due to a monumental failure by policymakers.

Furthermore, it is easy to show that the large budget deficits of recent years are entirely the result of the economic collapse. If the economy were back near full employment, the deficits would be relatively small as was the case before the collapse. Yet it is the deficits and debt that dominate news reporting and debate questions, not the overall state of the economy. 

The other way in which the media have been pushing the agenda of the corporate honchos is by refusing to press candidates on their support for the cuts to Social Security that are a likely part of a grand bargain. Does President Obama support reducing Social Security benefits by 3 percent by cutting the annual cost-of-living adjustment? Does he support raising the age of Medicare eligibility to 67? How about your candidates for the Senate or the House?

It’s unlikely that many people know the answers to these questions because the reporters have not been asking them. Yet these policies and other cuts that would likely be part of a grand bargain would have a much more direct impact on most people’s lives that the tax proposals being touting by President Obama and Governor Romney.

To be specific, the reduction in Social Security benefits from the cut in the in the cost-of-living adjustment that is being pushed as part of a grand bargain would have more impact on most future retirees living standards than ending the Bush tax cuts on the richest 2 percent would have on their living standards. While the media have done endless pieces on the impact of this possible tax increase on the wealthy, they have done almost nothing on the impact of cutting the cost-of-living adjustment on the living standards of retirees.

This of course fits the needs of the corporate honchos who are pushing the agenda for cutting Social Security and Medicare. They don’t want these cuts to become an issue before the election because it will make it harder for members of Congress to vote for them.

This is why the reporters covering this election deserve nothing but contempt from the public. It is their job to highlight the issues that will matter to people’s lives, not to help push the agenda of corporate America. But clearly they have decided to do the latter.

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ABOUT Dean Baker
Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He is the author of several books, including Plunder & Blunder: The Rise and Fall of the Bubble Economy, The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer and The United States Since 1980. He was the editor of Getting Prices Right: The Debate Over the Consumer Price Index, which was a winner of a Choice Book Award as one of the outstanding academic books of the year. He appears frequently on TV and radio programs, including CNN, CBS News, PBS NewsHour, and National Public Radio. His blog, Beat the Press, features commentary on economic reporting. He received his B.A. from Swarthmore College and his Ph.D. in economics from the University of Michigan.

MountainMan23, Your initial


Your initial comment, “The Debt is an illusion. Numbers on a piece of paper,” is likely to be the most uninformed thing I ever have heard anyone say about the subject of our national debt.

Are you aware of what is happening to European countries that have too much debt to service? Say, Greece, for instance? Ask someone in Greece if debt is “just an illusion. Just numbers on a piece of paper.” I think they would beg to differ.

Of course, you are quick to note that we can simply print up more money (which Greece, of course, can't do.) Before you advocate this hazardous and bone-headed idea, though, you should do some historical research on various inflations around the world. Check the numerous French inflations to see how they worked out. Or check any of the South American countries; they all have had serious inflation problems at one time or another. “Numbers on a piece of paper.”

This may come as a shock to you, but you cannot print your way to prosperity.

I would like to see the look on your face (as well as the face of Mr. Baker) when over the next several years the national debt continues to pile up and as buyers of U.S. Treasuries (China, for instance) decide that they need a tad more interest than 2% in order to extend any additional loans.

Windy14, you may think that we are safe simply because no one can “repossess our country” (which, by the way, could theoretically happen—it’s called “war” or “invasion”.) But what you may not be considering is that long before any doomsday invasion scenario, Uncle Sam is certain to pay higher interest rates, probably much higher, to borrow. And, to meet an interest expense not of $300 billion per year, but of $600 or $900 billion per year, Uncle Sam will have to increase taxes or reduce spending. Either way, this means a worse economy, reduced federal tax revenues, a higher deficit, and increases to the national debt. (And, MountainMan33, much less money to solve your hungry and homeless problems.)

Then the cycle repeats and interest rates rise to the point where no person or business can any longer afford to pay their debt. (I know. This is the part where we’re supposed to cheer, “Good! Those greedy banker bastards don’t deserve to get paid back!) The only problem with this is that the bankers aren’t lending their own money. They are lending their depositors’ money. But even that will be OK, because Uncle Sam will step in and give the depositors their money. Won’t he? You know Uncle Sam. The guy with a now-crappy credit rating and trillions of dollars of other promises to make good on. Right… He’ll pay it back. Sure he will. Yeah, that’s the ticket…

As you might guess, I could go on for a very long time, but I think (I hope) this is sufficient for you to consider that just because Republicans are warning about the bankruptcy of the U.S. government doesn’t necessarily make it untrue. It is very true, and several years from now, when it is entirely too late, you will believe it.

For heaven's sake, see

For heaven's sake, see

"Money" quote: "With one brief exception, the federal government has been in debt every year since 1776. In January 1835, for the first and only time in U.S. history, the public debt was retired, and a budget surplus was maintained for the next two years in order to accumulate what Treasury Secretary Levi Woodbury called “a fund to meet future deficits.” In 1837 the economy collapsed into a deep depression that drove the budget into deficit, and the federal government has been in debt ever since. Since 1776 there have been exactly seven periods of substantial budget surpluses and significant reduction of the debt. From 1817 to 1821 the national debt fell by 29 percent; from 1823 to 1836 it was eliminated (Jackson’s efforts); from 1852 to 1857 it fell by 59 percent, from 1867 to 1873 by 27 percent, from 1880 to 1893 by more than 50 percent, and from 1920 to 1930 by about a third. Of course, the last time we ran a budget surplus was during the Clinton years. I do not know any household that has been able to run budget deficits for approximately 190 out of the past 230-odd years, and to accumulate debt virtually nonstop since 1837.

"... The United States has also experienced six periods of depression. The depressions began in 1819, 1837, 1857, 1873, 1893, and 1929. (Do you see any pattern? Take a look at the dates listed above.) With the exception of the Clinton surpluses, every significant reduction of the outstanding debt has been followed by a depression, and every depression has been preceded by significant debt reduction. The Clinton surplus was followed by the Bush recession, a speculative euphoria, and then the collapse in which we now find ourselves. The jury is still out on whether we might manage to work this up to yet another great depression. While we cannot rule out coincidences, seven surpluses followed by six and a half depressions (with some possibility for making it the perfect seven) should raise some eyebrows. And, by the way, our less serious downturns have almost always been preceded by reductions of federal budget deficits. I don’t know of any case of a national depression caused by a household budget surplus."

Hows about eminent domain on

Hows about eminent domain on the bank accounts of the obscenly wealthy as this is not part of our constitution taking personal property eminent domain
would allow for the confiscation of those funds with fair compensation. The compensation would be that those confiscated from would be educated about greed and they would feel so much better than before. Isnt that lovely and legal
as these people are holding up our entire planets economy. Time to pay up for
a lopsided system of capitalism. Remember when you were younger if you went to the doctor you would get a sucker so if eminent domain takes your billions then they shoud get a sucker to ease the dollar drain pain. national debt will cause inflation $100 loaf of bread


If we don't balance our

If we don't balance our budget, who is going to repossess our country? Native Americans? China? THINK! As long as I can remember we have a negative balance. Clinton was the only one to balance it and I wouldn't bet the farm that was as factual as it looked on paper. Figures lie and liars figure. You can come up with any answer you want if you manipulate numbers.

The Debt is an illusion.

The Debt is an illusion. Numbers on a piece of paper.

Hunger and Homelessness are real.

It is utterly irresponsible of "our" government not to address the real problems but instead to cave in to the wish of the banksters and shovel tons of money their way.

Congress has the power to "coin money" and "regulate the value thereof" - Section One Article Eight of the US Constitution. Therefore all federal borrowing is unnecessary, an artificial contrivance to enrichen the banksters and their co-conspirators (read: politicians) and simultaneously assure their power over the rest of us.

To the wealthy and those who wish to be wealthy, money is a commodity to acquire, to pile up, to get more of than anybody else. To the rest of us, money is a medium of exchange. Money flows into my pocket and right back out again. It is that flow of money that makes a healthy economy. But when the wealthy hoard vast sums of money it stifles the flow, kills the real economy.

"Our" government should "coin" $1 trillion and use it to put an end to unemployment by investing in our infrastructure and transitioning to sustainable energy.

Problem solved. Now all we need is the political will to do it.

When the banksters, who have

When the banksters, who have been sitting on mountains of cash, see the injection of constitutional money into legitimate enterprises, not armaments and fossil-fuel subsidies, they will start dumping their hoards, or end up looking like the financial dummies that they really are.

This corporate agenda of

This corporate agenda of course originated in the Koch funded right wing think tanks and has been echoed by craven politicians and corporate hack reporters. I would say they think the American public is about as stupid as a bag of hammers, and that might be overestimating it by a few pounds.

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