The answer is, maybe not. The crisis is deep and more direct intervention will be needed in both banking and shoring up purchasing power, according to James K. Galbraith in an interview on the real news, accessible here.
He especially worries about the shift I have posted on here in a worried manner that Obama seems to have drunk the social security kool-aid and may be looking at long term cutbacks in benefits. Instead of my "stand pat" and do nothing to/with social security, he actually calls for increasing social security benefits.
BTW, the tux he is wearing in the clip was apparently for going to some bipartisan inaugural ball in honor of John McCain. Go figure.
Barkley has Galbraith fleshed out his Social Security proposal anywhere?
ReplyDeleteBecause one question I would have is how he would pay for these increased benefits. This is particularly acute in that the Obama stimulus package seems to be delivering the tax cuts via a payroll tax holiday. (Which in the hazy form it is being presented may not be really harmful to Social Security long term, but cutting revenue seems an odd response to a 'crisis' defined by a future gap between revenue and cost. Subject of a future AB post.) That is not only might Obamanomics solve the overall crisis, it actually may walk Social Security backwards.
I am withholding judgement until I see the details of the stimulus package, but lets just say I am a little less carefree on this front than I was say a week ago.
Bruce,
ReplyDeleteThe answer to your main question is no. I share your concern about the tax cuts if they are going to take that form. Yes, fica is regressive, and there is an argument for this, but not if the people who are pushing this are then going to turn around and start pushing all this overblown baloney about social security being in crisis, and how we need to raise fica or impose it on more people, not to mention some sort of future benefit cut, with the current buzz being yet another increase in the age of eligibility as the most likely one.
Sometimes even the good guys seem to be missing the point. All the technical impacts of this or that seem to pale in comparison to the deep, deep sense of pessimism that pervades the economy and confounds typical solutions to generate more spending.
ReplyDeleteHere's a basic premise: our general sense of economic decline, and the monstrous secular decline of consumer and investor confidence, has closely tracked the process Jacob Hacker has described as “the Great Risk Shift.” No stimulus package will work satisfactorily for long term improvement unless it creates high confidence that the steps taken will begin fundamentally reversing the Great Risk Shift. The rebates earlier in 2008 had no effect of any significance because it was a one-shot gimmick that obviously would make no dent whatsoever in the Great Risk Shift.
Consumer and investor confidence – which is more important than the technical effects of money infusions – needs a genuine paradigm shift. Job creation needs to pursue activities with permanent value to society in order to convince people they are likely to last a decade or a generation; tax reductions need to be a fundamental and permanent re-allocation of the tax burden away from ordinary Americans (even if they are relatively modest change such as Obama was proposing in the campaign) because flattening taxes has been a key aspect of the Great Risk Shift; new regulations must be designed to protect permanently whatever wealth ordinary Americans have accumulated from the charlatans who took advantage of de-regulation; labor must be strengthened in fundamental ways, since we now know that weakening labor was a key part of the Great Risk Shift; and at the core, reversing the Great Risk Shift requires a universal health insurance plan that protects Americans against financial catastrophe from a health problem.
Efforts to promote more spending will fall flat unless Americans see that Obama is truly steering the Titanic in another direction.