JAMES GALBRAITH GIVE WAR A CHANCE The news from Bosnia is astonishing. Within weeks the siege of Sarajevo has been lifted, that of Bihac broken, and the allied forces of Bosnia and Croatia have retaken over fifteen hundred square miles of Bosnian national territory. They are now nearly in position to dictate terms to a brutal enemy who only last spring was still committing systematic murder, as we know from the recent discovery of a mass grave in the Srebenica enclave. At Washington, on the other hand, the siege guns are booming. Newt Gingrich, the Karadzic of our political culture, rolled out a big one on September 21, a threat to force default on the U.S. national debt unless Clinton capitulates on the budget. This, on top of longstanding threats to shut down the government itself. “Rule or ruin” is the common maxim of the Republicans and the Republika Srpska. The pressure is building. The abolition of federal child welfare assistanceAFDCis all but agreed to, apart from details of just how punitive to be. Medicaid and Medicare are slated for huge cuts in service and a doubling, or more, in premiums. Environmental protection will be dead, very soon, and a vast rape of natural resources will get underway, if the congressional appropriations bills are passed and signed. And nasty little abuses of power, such as an amendment aimed at silencing public interest advocacy groups, are making the news. Most recently, an attack has started on Social Security itself. This takes the form of a suggestion that cost-of-living adjustments to Social Security be cut to one percentage point below the inflation rate. The suggestion originated years ago with Martin Feldstein, chief economist under Reagan, and is now backed by a hastily-assembled congressional commission of prominent economists headed by Michael Boskin, chief economist to George Bush. Not surprisingly, the commission was rigged. According to a critique by Dean Baker of the Economic Policy Institute, before they were appointed to the commission, all members were on record that the official Consumer Price Index overstates actual inflation, and that cost-of-living adjustments based on it are excessive. Economists with contrary views, such as former Commissioner of Labor Statistics Janet Norwood, were excluded. The maneuvers of the Boskin Commission illustrate the political motives of some academics. The issues are complex, and very little research has been done. Yet the commission made no effort to conduct any research of its own. As Baker shows, the Commission’s interim report, produced in a month, also misstates existing BLS findings and the conclusions of an article by one of its own members, and takes no account of phenomena, such as the high percentage of health care costs in the consumption of the elderly, that might cause the CPI actually to understate inflation for the Social Security population. There are rich ironies if inflation really has been overcounted all these years. For that would mean that real output and real wages have been rising much more rapidly than we’ve thought. Bingo: no productivity crisis! So, no need for more savings or investment, and no urgent reason to cut the budget deficit in the first placeout with the whole Republican agenda! And interest rates have been much too high. Perhaps we should all get refunds on our mortgage loans, which have been transferring huge sums of real wealth to our bankers, which they told us was only to compensate for inflation. There may be something to thisas a systematic research program could show. But the Boskin commission isn’t interested, and to make one argument for one purpose screwing the oldwithout exploring any of its implications, is to reveal the motive behind the deed. Why play these games? Easy: the numbers are very big. Social Security will account for some three hundred and fifty billion dollars in expenditures next year. A cut of nearly one percent per year, cumulating over time, quickly mounts up. Squeezing the elderly means more money will be available to save other programs, to balance the budget, for tax cuts to the wealthydepending on your political agenda. Even a liberal like New York’s Daniel Patrick Moynihan, who fought hard to save AFDC, can be tempted. Moynihan knows that his home state, and many others, cannot actually tolerate beggar children on street corners and kids dying because they cannot pay for life-saving drugs. What will happenwhat is happening alreadywill be life-crushing financial burdens on state and local government, continued cutbacks in sercreased regressive taxes in an attempt to cope, followed ultimately by bankruptcy and ruin. Cuts in a transfer program like Social Security, instead, open the way to shift some of the burden away from service-providers at the state and local level. Yet one can understand Moynihan’s dilemma without agreeing to the present re treat. For surely there are times when a last ditch stand is called for. Social Security is rightly popular. It is an efficient, progressive, universal program that keeps most elderly Americans out of poverty. It is not bankrupt, and not heading that way. It is a model, indeed, for federalism; a model followed by food stamps, and in recent years for the working poor by the Earned Income Tax Credit, another successful and rightly popular transfer program under attack. The electoral calendar assures that 1995 is the year for the dirty work. None of the Republicans’ present actions are popular. To the contrary, they are widely, accurately viewed as vicious and unnecessary. Most were not featured in the Contract with America, but emerged from hiding after the 1994 election or even later. The GOP is flexible: give an inch, and they demand another mile. Their apparent strategy is to cut as much as possible, on all fronts, right now, ethnic cleansing of the poor, the old and the sick. This will leave time for a big, happy argument next year over how to divvy up tax cuts among the healthy and the rich. This strategy can be broken, and a defense mounted that may ultimately turn the tides. But it must be based on a principled, stubborn defense of the good things that the federal government does: fighting poverty, financing health care, supporting the old, and paying for all of this by taxing those who can better afford to pay. These are bedrock commitments, worth rallying around. They won’t be saved if our leaders keep looking for ways to retreat. Sometimes you can’t, and sometimes when you don’t, you come out all right in the end. Look at Bosnia. James K. Galbraith teaches economics at the Lyndon B. Johnson School of Public Affairs at the University of Texas, Austin. Squeezing the elderly means more money will be available to save other programs, to balance the budget, for tax cuts to the wealthydepending on your political agenda. 14 OCTOBER 13, 1995
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