Obama’s Second Term Agenda: Cutting Social Security, Medicare, and/or Medicaid

This is probably the least important Presidential election since the 1950s. As an experienced political hand told me, the two candidates are speaking not to the voters, but to the big money. They hold the same views, pursue the same policies, and are backed by similar interests. Mitt Romney implemented Obamacare in Massachusetts, or Obama implemented Romneycare nationally. Both are pro-choice or anti-choice as political needs change, both tend to be hawkish on foreign policy, both favor tax cuts for businesses, and both believe deeply in a corrupt technocratic establishment.

So while the election lumbers on like the death rattles of the wounded animal known American democracy, no one on either side is asking what the plan is for the next term. For Obama, his team is going into rooms of donors and shouting “Supreme Court”, while mumbling something about bipartisanship and $4 trillion, or Simpson-Bowles. What this means is that term two of the Obama White House will be organized around cutting entitlements.

The White House already tried cutting all three main entitlement programs, last year (cuts to Medicaid are actually cuts to Obamacare, for what it’s worth, since an expansion of Medicaid was a key plank of the new health care law).

The White House agreed to cut at least $250 billion from Medicare in the next 10 years and another $800 billion in the decade after that, in part by raising the eligibility age. The administration had endorsed another $110 billion or so in cuts to Medicaid and other health care programs, with $250 billion more in the second decade. And in a move certain to provoke rebellion in the Democratic ranks, Obama was willing to apply a new, less generous formula for calculating Social Security benefits, which would start in 2015.

Going after entitlements is in fact a tradition of Democratic politicians since the 1980s. The post-WWII model of dealing with entitlements was to expand them as a way of boosting aggregate demand. But as Carter, Reagan and Volcker ushered in an era of Wall Street greed and austerity, that trend reversed. In the early 1980s, Speaker of the House Tip O’Neil collaborated with Ronald Reagan to raise taxes on the poor and middle class with a “grand bargain” around Social Security. Later on, Bill Clinton had his go at the programs, with an even more aggressive plan to destroy the remains of New Deal liberalism.

One of the little known political stories of the late 1990s is how Bill Clinton tried to work with Newt Gingrich to cut Social Security for recipients and pour some of the Social Security trust fund into the booming stock market. Clinton was willing to oppose the liberal wing of his party to cut a deal, and accept Republican demands for private accounts and a higher retirement age. Gingrich was willing to let Clinton succeed at doing so. And Clinton put Erskine Bowles, a conservative Democrat, in charge of the effort.

But then Monica Lewinsky happened, and Clinton had to take refuge with the liberals, who might have abandoned him during his impeachment had he cut entitlements. As Bowles said, “Monica changed everything”. Bill Clinton was an obscenely corrupt politician, starting with NAFTA in the early 1990s and ending with financial deregulation until his final days in office. After he left office, he took over $80 million in bribes, and his team of advisors – people like Gene Sperling, Bob Rubin, and Larry Summers – operated just like he did, spinning between DC power and New York money for decades in a sea of graft and pay-to-play favors.

Barack Obama continues in this fine tradition of Democratic policymaking, and his advisors are quietly laying plans to cut Social Security, Medicare, and/or Medicaid in the second term of his administration. Obama appointed Erskine Bowles, who now works for a Wall Street botique, to head up his commission on fiscal responsibility. Bowles, along with an old man named Alan Simpson, came out with a set of proposals to cut the programs. And while Obama couldn’t get the Republicans to agree to it in 2011, he will try in his second term. Here’s the New Yorker laying out the plan.

There is a possibility that a second Obama term could begin with major deficit reduction and serious reform of taxes and entitlements. A similar opportunity arose in the second terms of Reagan (who in 1986 signed into law a historic tax-reform bill) and Clinton (who in 1997 reached a significant budget deal with Republicans). Although both victories occurred when the two parties were less polarized, many White House officials regard the successes as encouraging precedents. Several senior Clinton officials involved in the 1997 deal now work for Obama, including Jacob Lew, Obama’s chief of staff, and Gene Sperling, the head of the National Economic Council.

And sure enough, as Dean Baker points out, a gang of incredibly wealthy CEOs are planning to gut entitlements regardless of which candidate wins in 2012. It’s not just CEOs, of course, it’s also the usual gang of corrupt Democratic establishment folk. Here’s Steven Pearlstein describing one riveting meeting of the designated austerity group.

In addition to Cote, Dimon and Bertolini, the charter business members include Sandy Cutler of Eaton, Gregg Sherrill of Tenneco, Marty Flanagan of Invesco, Gary Loveman of Caesars, Thomas Quinlan of R.R. Donnelley & Sons and financiers Steven Rattner and Pete Peterson.

Later that evening, at Honeywell’s Washington office, over a salmon dinner with the floodlit Capitol dome as a backdrop, the executives huddled with their political co-conspirators: Simpson and Bowles, Warner and Saxby, and Rep. Steny Hoyer, the No. 2 Democrat in the House. Also on board: Simpson-Bowles commissioners Dick Durbin, the No. 2 Democrat in the Senate, and Andy Stern, former president of the Service Employees International Union.

It’s Senate leader Dick Durbin, House leader Steny Hoyer, and a bevy of CEOs and political leaders. As for non-CEO non-politicians, Andy Stern is a key tell. Back in 2009, when he led the powerhouse union SEIU, Stern visited the White House more often than anyone else. Back when he was trying to woo bloggers in the mid-2000s, Stern invited me on a trip around the country to see the union. On that trip, he told me that SEIU was growing so quickly he wished he could cash out and take it public. Since retiring from SEIU, Stern is now on the board of a bio-weapons company and his political connections are what he sells. So he’s one of the links between shutting down liberal opposition to this plan, the White House, and the business community. That level of self-serving cynicism has become the basis of our political system, and it’s an important cultural element in delivering austerity to a public that doesn’t want it.

It’s useful to remember, this election season, that the way the debate is framed matters. That Obama isn’t choosing to discuss in public what he will do to cut Social Security, Medicare, and Medicaid, and that Romney isn’t specific about it either, should show you who this election is for. But in addition, that both Bush, Clinton, and Obama (in his first term) failed at cutting Social Security means that an aroused public can stop austerity, when politicians feel their office is at risk. Clinton chose to abandon his plans to gut entitlements when facing impeachment and Bush chose to stop when his plan threatened the Republican Congress.

The joke during the transition in 2008 was that the people who supported Obama got a President, and those who supported Clinton got a job. The Clintonistas didn’t manage to gut entitlements in the 1990s, but they will sure try again and again until they succeed or someone takes their keys to the White House away.

This election, aside from not being much of an election for anyone but the billionaire funders who have the real votes, doesn’t really matter. But keeping in mind who is doing what does. Because if there’s a chance to save anything for anyone who isn’t ultra-wealthy from 2013 going forward, it’s going to require being able to create credible threats to the politicians making the policy.