Barack Obama: President Delivers Debt Reduction Plan to Joint Congressional Deficit Committee

As I suspected, in part, President Barack Obama delivered his deficit reduction plan to the Joint Committee on Deficit Reduction.

I have yet to read all of the contents, but one thing I did notice is that the proposal for federal employees to “contribute” more to their pensions is really a giveback of salary (because of the operation of the Civil Service Retirement and Disability Fund). I guess “Third Way” got its way in part (1.2% rather than 5.8%). But knowing how this town works another time that the media whips up the public about federal employees, watch for the so-called contribution to increase. [With all of the givebacks and pay freezes, federal salaries may never keep up with the cost of living in this expensive country.]

Will the plan get a majority vote and get a expedited vote in Congress? I do not know. Maybe some of the very bitter provisions can be tolerated if  (very big “if”) every income class participates in addressing the lack of revenue problem.

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Third Way: Evaluating Group’s Document “Saving Social Security”; Proposal for Benefit Taxes on Higher-Income Seniors, Means-Testing Benefits Unacceptable

Having completed posting on the Third Way benefit-change proposals, I will now begin to evaluate the revenue-increase proposals.

First on the list is the idea to impose benefit taxes on higher-income seniors. Third Way proposes to reduce benefits on this group and then turns around and taxes the all benefits above $50,000. I don’t see anything wrong with the current system.

Social Security is not a welfare program should not be adjusted to become one. The same response is true for the “idea” of means testing benefits—no. This move would be a sure way to diminish confidence in the program and turn it into a welfare program, which it is not. If a person pays into the Social Security program, they should receive proceeds from the program. If outside income exceeds $34,000 (or $44,000 for couples), that amount would be taxable under the current system.

14th Amendment and Debt Ceiling: Amendment’s Applicability to the Current Debt Situation Unclear; Congress Has the Power to Enforce the Provisions of the 14th Amendment

The once routine lifting of the debt ceiling has become a quite a battle of wills. Considering that the United States will continue to issue debt (for federal pensions and Social Security and other purposes), I am unsure whether this is a good place to make a high-stakes stand.

Now, to break the impasse, some commentators are suggesting that the 14th Amendment , section 4 can be used by the President to exceed the debt ceiling.As frustrating and upsetting as the debate has been, the political branches (especially Congress) will finally have to set down and do the work they were elected to do, keeping in mind the real power of a Presidential veto.

Section 4.
The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

It’s compelling, but I don’t think it applies to the current debt debacle. It has more applicability to the Civil War era when it was written. In addition, the Congress has the right to enforce the provsions of the 14th Amendment, section 5.

Section 5.
The Congress shall have the power to enforce, by appropriate legislation, the provisions of this article.

Also, Congress has the power of the purse, Article I, section 8, and allowing the President to set the debt limit on his own may create a separation-of-powers issue.

Barack Obama and Third Way: Nature of Deficit and Debt is Complicated; GOP Stance for No New Taxes Untenable, Unfair

With the collapse of the debt and deficit talks between President Barack Obama and House Speaker John Boehner, the focus again is getting the debt limit raised. Although there is a strong attempt to equate debt with deficit, the terms have quite different meanings. Boehner and the GOP are trying to develop a package of cuts without any revenues; chart 22 shows the futility of that move. The middle and lower classes must not be made to lose services to maintain the extravagant lifestyles of the wealthy. On another note, given the makeup of the group called “Third Way,” I am not surprised that their Ivy League educated analysts do not clearly explain the true reality of debt and deficit.

MPR711_F22

On the chart numbered 22 (charts 22 and 24 are from the Federal Reserve’s Monetary Policy Report , the revenues (receipts) and spending (expenditures) are reflected by line graphs. The deficit is the gap between the two lines on the far right. In terms of revenues, the contributions to federal pensions by employees and agency employers are counted as current revenue (and debt) (see CSRDF, 5 U.S.C. section 8348(b)); the same is true for Social Security. The difference between the lines also directly contributes to the debt.

The use of federal pensions and Social Security FICA funds as current income questions the legitimacy of any tax cut pledges by the GOP because monies from other groups are used to give money back to the rich while leaving the government without sufficient revenues to satisfy is obligations to repay its debt (chart 24). Also, because of the composition of the revenues, it is unacceptable for the nonwealthy classes to be hit with the numerous service cuts so that the status of the rich (subsidized by the lower classes) can remain unchanged.

MPR711_F24

Barack Obama and Third Way: Press Conference Comment Seems to Have Been Influenced by Third Way; Group Favors Keeping Image Only of Concern and Care for the Nonwealthy

If I needed confirmation that President Barack Obama is tied to the Wall Street-connected think tank Third Way, I would have that confirmation today. Interestingly, in the Third Way publication “The Case for Taking Up Entitlement Reform“, the following are considered “entitlements”–FICA- funded Social Security and Medicare, Medicaid, and federal employee pensions. I found the President’s statement bracing, yet I was not surprised; he is governing as a liberal Republican anyhow.

I do not believe for a second that cutting these programs will allow time to focus on the items that he mentioned. How can you move to cut spending from the lower income classes, and then have the audacity to use that you will be able to add spending with insufficient revenues?  This idea is unwise and fantastical.

A quote at his July 15 press conference appears to have been strongly influenced by a Third Way publication (emphasis for comparision purposes).

And so that’s where I’d have a selling job, Chuck, is trying to sell some of our party that if you are a progressive, you should be concerned about debt and deficit just as much as if you’re a conservative.   And the reason is because if the only thing we’re talking about over the next year, two years, five years, is debt and deficits, then it’s very hard to start talking about how do we make investments in community colleges so that our kids are trained, how do we actually rebuild $2 trillion worth of crumbling infrastructure.

If you care about making investments in our kids and making investments in our infrastructure and making investments in basic research, then you should want our fiscal house in order, so that every time we propose a new initiative somebody doesn’t just throw up their hands and say, “Ah, more big spending, more government.”

It would be very helpful for us to be able to say to the American people, our fiscal house is in order.  And so now the question is what should we be doing to win the future and make ourselves more competitive and create more jobs, and what aspects of what government is doing are a waste and we should eliminate.  And that’s the kind of debate that I’d like to have.

Here’s a quote from a Third Way publication “The Case for Taking Up Entitlement Reform” (compare with bolded words above).

Winning the economic future depends on progressive public investments—in innovation, children’s health, education, pure research, teen pregnancy prevention, space exploration, medical research, infrastructure, school lunches, and the arts and humanities. But left on autopilot, the nation’s budget will be swamped by entitlement and debt obligations that will crowd out everything. Scraps will be left for defense and domestic discretionary spending to fight over, and we know who wins that battle.

Barack Obama and Third Way: Hatred of Federal Civil Service Totally Out of Line; Wall Street that Placed United States in the Financial Crisis Exempt from Scrutiny

A common thread in Third Way publications is that somehow employees of the federal government (also U.S. citizens and taxpayers) should be called to make dramatic sacrifices for symbolic purposes. Yet, the functionaries of Third Way are scions of Wall Street. As the financial sector threw the United States into a recession because of its shady, conflict-of-interest, and casino-like business practices, Third Way does not call for any sacrifices from Wall Street millionaires. Sacrifices are only called for from one group—federal civil service employees (their military service colleagues are exempted from the inane vitriol), a group effectively unable to speak a word in opposition.

Because of this discrepancy, I find Third Way a dishonest and untrustworthy source of advice. Clearly, these opinions sprout from bitter Wall Street types wanting to cast blame for its manifest failures onto innocent people. That President Obama takes advice from this fork-tongued group is galling.

Third Way Publication

Statement Against Federal Employees

The Case for Entitlement Reform “Democrats must couple entitlement reform with a credible set of proposals to demonstrate that government is taking the first and the deeper cut. A place to start is the financing of federal pensions, which is completely out-of-kilter with the way private sector retirement works. Voters need to see Washington give its share.” (Page 7)Comment: My question is what “private sector” is being talked about as the sector is not monolithic (it is made of many separate entities). As a result, the federal pension system cannot be compared to the so-called private sector.

Why is it that “Washington’s sacrifice” only consists of federal civil service employees (who are also citizen-taxpayers, a point often forgotten (even by so-called Third Way democrats)).

Frequently Asked Questions about Federal Retirement Reform Doesn’t this amount [5.2% additional FERS contribution] to a pay cut for federal employees?Yes, it does. Federal employees will have to contribute more to a very generous retirement plan. When fully phased in, it would reduce take home pay by 5.2%. The truth is that for the last 25 years, federal employees have gotten a very good deal. In today’s environment, in which everyone is going to have to give something up, it’s a deal the taxpayer can no longer afford.”

Comments:  This point (and the others in the memo) reflect a pervasive use of the author’s self-interested calculations as fact (see, e.g., memo’s footnote 11).

The Third Way point also is not in line with the history of FERS (federal employees contribute 7%, not just 0.8% for their pensions (6.2% to Social Security and 0.8% to the pension (both components of FERS). “This landmark legislation resulted in large part from the need to shore up Social Security system by broadening its base (by mandating coverage of the federal civilian work force), along with pressure from then-President Ronald Reagan to reduce federal spending.” (See Jamie Cowen, “Twenty-Five Years after Federal Pension Reform,” page 3).

Also, there is a special case made to single out the federal civil service for particular and sole scorn, a practice that is underhanded and unbecoming.

Does the proposal affect veterans and military employees?

No, this proposal covers only those in FERS—federal employees, congressional employees, members of Congress, and judicial branch employees. Military retirees are covered under a separate program administered by the Department of Defense.”

Third Way on “Entitlement Reform”– Assumption that Youth Do Not Care about Social Security, et al. to Trash Those Programs Disgusting, Unacceptable and a Breach of Trust

The Wall Street-backed think tank called Third Way has produced a memorandum (“The Case for Taking Up Entitlement Reform”) urging “entitlement reform”. [The word entitlement suggests welfare, but it does not apply to programs that the taxpayer funds through FICA like Social Security and Medicare (and incredibly federal pensions).] I strenuously disagree with the position of Third Way.

Like true scions of wealth, their position is that borrowing the surplus of the FICA-backed funds is essential to keeping the rich from paying their share of taxes. So rather than paying back what the country has borrowed from the lower classes, the theme is to gut the programs such that they continue to collect money from the working classes but remake the programs so that they do not have to pay out as much to those same contributors.

Third Way uses genteel language, but underlying all of those words is the idea expressed above. As such, Third Way is not a group that should be trusted. Higher-level political leadership is also undeserving of any trust to act properly without citizen intervention.

In the Third Way “entitlement” memo, I found all of the assertions to be disingenuous, but the one stating that young voters do not think Social Security will be there for them one of the worst. The use of youth to justify larcenous acts against FICA-funded programs is immoral and contemptible.

  • People from their first jobs pay FICA taxes.
  • Most people do not earn enough to make a comfortable retirement without Social Security.
  • Only the rich benefit from 401(k) programs.
  • Retirement for the college aged is far away. How Third Way could make such a broad assertion is irresponsible. Who can think about what life will be 40 to 50 years down the road? No one.

Simply because some decrepit polls supposedly opine some supposition does not mean that that assertion means to destroy the FICA-funded programs. Regardless of any polls, federal politicians have a fiduciary responsibility to administer the FICA-funded programs for the benefit of the beneficiaries. Proposing ways to reduce payments to beneficiaries (while collecting the full FICA payment) is unacceptable and a breach of trust.

If the country is declaring default on repaying their FICA debt, then the Congress should repay the working class citizenry in full immediately.