It looks the supercommittee is about to throw in the towel. Since the potential deals that had been discussed would have meant large cuts to Social Security, Medicare and other programs that the 99 percent depend upon, we should all be thankful.
In the world of the one percent that the supercommittee types inhabit, the big villains in the US economy are not the rich who are pulling down an ever larger share of national income, but, rather, the country's older workers. Whenever the Washington one percenters raised the cry of “go big,” it invariably meant large cuts to Social Security and Medicare, the country's two largest social programs which provide essential security for the elderly.
Most of the near-retirees who would be the primary targets of supercommittee cuts to these programs struggled with stagnant wages over most of their working lifetimes. Few have defined benefit pensions, meaning that they have only the little amount they have been able to save in 401(k)s and other retirement accounts, plus the equity in their homes to support themselves in retirement. The latter was largely destroyed by the collapse of the housing bubble.
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The Pew Research Center recently published a study showing that the median wealth, including home equity, of the 55-64 age group was just $162,000. The median home sells for roughly $170,000. The Pew study implies that if the median household in this age group used all its wealth, it would still be $8,000 short of paying off its mortgage. And people in this group would then be entirely dependent on Social Security checks (which average $13,000 a year) to support them in retirement.
And remember, this is the median. Half of retirees have less.
In Washington, “going big” meant whacking these near-retirees yet again. The 99 percent can instead propose going really big, which would mean getting the economy back on track. It means attacking the one percent who have the real money and who have been calling the shots.
Let's start with something really simple. Beating up on federal government employees has become a sport enjoyed by politicians of both political parties, even though a recent study by the Bureau of Labor Statistics (BLS) found that they were, on average, underpaid by more than 20 percent.
Since politicians have so much fun beating up on government employees, how about having a little fun beating up on the most highly paid government contractors? Sen. Barbara Boxer (D-California) proposed a cap of $400,000 (twice the salary of a cabinet secretary) on what the government will pay top executives at defense department contractors. Note that this cap only applies to what the government pays; the companies can pay their honchos whatever they feel like. This one should be a no-brainer if we're talking about shared sacrifice.
But if we want to go really big, we have to remember that the real problem is the 26 million people who are unemployed, underemployed or out of the work force altogether. If the supercommittee wants to go really big, how about a youth jobs program, aid to state and local governments to stem the layoffs, and serious funding for rebuilding infrastructure. We could also use funding for work-sharing. We could encourage employers to keep people on the job, working shorter hours, rather than lay people off to collect unemployment benefits.
Yes, this agenda costs money, but a supercommittee that goes really big will know that this is not a problem. Financial markets are willing to lend the US government money at very low interest rates, close to 2 percent on ten-year bonds. The economy's problem is too little demand, not government spending crowding out private business.
Over the longer term there will be budget issues, but they mostly stem from our broken health care system. If the United States paid the same amount per person for its health care as people in other wealthy countries, we would be looking at huge budget surpluses, not deficits. There are simple measures that we can take – such as paying the pharmaceutical companies less money for prescription drugs and allowing for people in the United States to take greater advantage of trade in health care services – to start to get our costs in line. These steps would be easy if the supercommittee is prepared to challenge the one percent.
We can get a huge amount of savings from cutting what we spend on the military. If defense spending were the same share of gross domestic product (GDP) over the next decade as it was in 2000, we would save $2 trillion over the next decade. And we could tell the Federal Reserve Board to just hold the $3 trillion in assets it bought as part of its quantitative easing policies. That should save the government close to $800 billion in interest over the next decade.
If we want some more tax revenue, there is no better place to start than by directly taxing the one percent's trade on Wall Street. A modest financial speculation tax can easily raise more than $1 trillion over the next decade.
There is plenty of potential for the supercommittee to do some serious good if it is willing to go really big. But that would mean confronting the one percent, and it just isn't very likely that this committee would be that super.