Big problems, small solutions
For a man who is generally known for his deliberate and restrained speech, it was surprising (and quite frankly frightening) to hear Federal Reserve Chairman Ben Bernanke speak of the “a massive fiscal cliff of large spending cuts and tax increases” in testimony to Congress back in February. Of course, it now quite possibly the most famous two words he has ever uttered.
I bet he is regretting those words right about now.
Many commentators have pointed out that a cliff is not the most accurate analogy to this particular situation, with many in favor of “fiscal slope” or “fiscal hill”. I prefer to call it the “Giant Money Knoll of Death”, but maybe that’s just me. Whatever you call the combination of fiscal mismanagement and political intransigence, it looks pretty bad. And that, my friends is no accident. The folks on the far right seized upon the “fiscal cliff” comment as soon as it was made, and haven’t let it go since. It seems calling this problem “reasonable difference in fiscal policy between two rational actors” just doesn’t have the same ring to it.
But why all the doomsday predictions? It’s just distraction from the real issues: cutting your benefits to the bone. Medicare, Medicaid, and Social Security are all fair game for Congressional Republicans in this negotiation, and they are trying to play chicken with the rest of the economy to get their way, claiming these programs are “bloated” and “inefficient”, and refusing to admit that tax cuts for the rich don’t translate into any appreciable stimulus to economy.
Too bad (for them), they are way off the mark.
Let’s take a look at actual facts. Social Security has extremely low administrative costs of 1%, making it more cost-efficient than the Wall Street alternatives, even though it's the foundation of financial security for all Americans, including about one in every six Americans who are currently getting benefits,
On the other hand, one study of 401(k) retirement accounts shows that an ordinary American family will pay, on average, nearly $155,000 over the course of their lifetime in effective total fees. That is important, because most older Americans have very low incomes in retirement. In 2010, half of seniors had an income less than about $26,000.
For their part, Medicare and Medicaid are vastly more cost-efficient and control costs better than private insurance, which has administrative overhead as high as 17%.
Two-thirds of Americans support raising taxes on incomes over $250,000, or the richest 2%. National exit polling from this election also shows 60% think taxes should be increased. The Senate already passed and the President promises to sign a bill to extend tax cuts for 98% of Americans. But Republicans in Congress are refusing to end the Bush tax cuts for the richest 2%.
No one is arguing that the debt and tax cuts are not very important issues, but we are saying that keeping seniors and struggling American workers out of poverty is far more important. Let’s solve lots of small problems by solving a few of the big ones, not the other way around. We don't have time for anything else.