Warren Buffett once said:
"There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning," Obama's deficit-cutting agenda the latest battle.
On May 4, Hugo Radice, Life Fellow of the University of Leeds School of Politics and International Studies, headlined an article, "Cutting Public Debt: Economic Science or Class War?" asking:
"Is cutting the public debt really an objective economic necessity, or is it actually a deeply political stance, reflecting the interests of the business and financial elites?"
Analyzing historical public policies, he explained the shift from earlier Keynesianism to "the unchallenged hegemony of free-market neoliberalism since the early 1990s." In fact, over the past three decades, it was notable, beginning under Britain's Margaret Thatcher and America's Ronald Reagan, establishing practices that succeeding administrations hardened. As a result, Britain's New Labour governs like Conservatives while American Democrats mimic Republicans, especially on imperial and pocket book issues.
Radice calls it class warfare, pitting private wealth against public good, "a new common-sense" based on property rights, individualism, and notion that free markets work best so let them, including the right to demand massive public spending cuts, ones Radice says "are not, repeat not, economically necessary."
Nonetheless, for over 30 years, they've been ongoing. Since the mid-1970s, real wages haven't kept pace with inflation. Benefits have steadily eroded. High-paying jobs disappeared. Improved technology forced wage earners to work harder for less. More than ever, "free" markets work only for those who control them.
As a result, the class struggle between haves and have-nots escalated. A handful of powerful winners emerged. Wealth disparity extremes became unprecedented. Exploitation increased and successive crises, busts following speculative booms. Easy credit fueled them by excess lending and spending as well as high public and private debt levels. To heal, officials now call for "shared sacrifice," their sharing, our sacrifice.
Richard Wolff calls mainstream economics "faith-based." For Michael Hudson it's "junk economics," a Wall Street power grab, holding industrial America and wage earners hostage, debt peonage the final solution, benefitting only a powerful, elite few.
Today's buzzword across Europe and America is austerity, Obama's deficit commission declaring war on ordinary workers. Targeted are their jobs, benefits, standard of living, and retirement futures from draconian cuts. A scam to transfer greater wealth to the rich, trillions more than already looted, the grandest of grand theft, class warfare of the worse kind, a bipartisan scheme to wreck the economy and working Americans for profit.
After endorsing deficit commission proposals, a second New York Times editorial headlined "Waiting for the President," saying:
There's "no way to wrestle the deficit under control without both cutting spending and raising taxes." Everything "must be on the table," Obama out in front promoting it. Watching from the sidelines increases odds "it will never go anywhere." Strong White House leadership is needed to support "the commission's plain truths."
The Times editorial, other mainstream opinions, and Obama's deficit cutters avoided constructive alternatives, the right way to address high debt, foster economic growth, and lift all boats equitably. Obvious ones include:
-- waging war on concentrated wealth and power;
-- an across-the-board populist agenda, elevating social justice as issue one;
-- slashing the defense budget, minimally in half, ideally much more, including closing overseas bases, reducing force levels, ending foreign occupations, and renouncing imperial wars;
-- a progressive income tax replacing today's dysfunctional one;
-- removing the payroll tax ceiling, taxing all earned income at the same rate;
-- empowering workers to bargain collectively with management on equal terms;
-- a guaranteed living wage, adjusted by urban, rural, state and local considerations;
-- a guaranteed income for the indigent;
-- real regulatory reform, reinstituting vital ones eroded or lost;
-- abolishing monopoly and oligopoly power;
-- strengthening public education;
-- enacting universal, single-payer healthcare, excluding predatory insurers, except as a voluntary option;
-- returning money creation power to Congress as the Constitution mandates;
-- a Tobin Tax to make Wall Street and rich investors pay their fair share; and
-- establishing government of, by, and for the people for real.
Benefits of a Tobin Tax
Besides discouraging speculation, economist Robert Pollin estimates that at one-half of one percent, about $350 billion annually can be raised. A one-tenth of one percent tax on the estimated $500 trillion in annual derivatives trades could bring up to $500 billion a year. Depending on volumes and taxable trading threshold levels, those figures might be greater or smaller but nonetheless considerable. Most important, they'd help grow the economy productively, cut the deficit, and raise everyone's standard of living equitably, especially working Americans left out of bipartisan equation thinking - corrupted for America's aristocracy, Wall Street giants most of all.
Instead ordinary Americans are sacrificed on the alter of capitalist excess, their pain the price for its gain, a shocking indictment of a broken system - venal, depraved, degenerate, and criminal, deserving a dagger in its heart to kill it before making workers serfs, including destroying their retirement security.
America's Growing Retirement Crisis
In the May 2006 issue of Monthly Review, Teresa Ghilarducci titled her article "The End of Retirement," saying:
"Scarcely a day passes without a new pension nightmare: Social Security privatization," corporations ending private pensions, declining household savings, cancelled retirement healthcare benefits, and "401(k) accounts becoming '201(k)s,' " having replaced traditional pensions, defined benefit obligations fast disappearing.
These developments reflect a nightmarish reality. Today's "ownership society" forces everyone to manage their financial futures, leaving them vulnerable to marketplace uncertainties, a task few have enough expertise to handle, especially during hard times, eroding years of built up resources savagely, what older workers may be unable to recoup.
Conditions are far worse today than in May 2006. Yet Ghilarducci said "For the first time in US history, every source of retirement income is under siege: Social Security, personal savings, and occupational pensions." Also Medicare for retirees, their dependents, and the disabled, as well as Medicaid for the nation's poor - vital income-equivalent plans without which millions would be uninsured or underinsured, leaving them vulnerable to the catastrophic illness costs.
In July 2010, Professor James W. Russell, writing in Socialism and Democracy, titled his article, "Retirement Crisis in the United States," saying:
"The great 30-year experiment in 401(k) and similar retirement financing schemes that depend on stock market investments has failed. Even before the" 2008 crash, it was clear, the signs "everywhere that very few workers would be able to accumulate enough wealth through these accounts to insure" their retirement futures.
Like Russell, economist Richard Wolff explains that until 1980, each generation since the 19th century was better off financially than previous ones, including more retirement security. No longer, workers since victimized by institutionalized inequality. Examples include eroded union representation, mostly in commerce and industry, stagnant wages, weakened or lost benefits, and high-risk defined contribution plans replacing secure defined benefit ones.
By 1935, during the Great Depression, 34 European nations and America established social insurance programs. It was a watershed time, "consistent with the socialist value of solidarity through socialization of support for children, the elderly, the disabled, and others unable to" to work productively for a living.
Social Security in America As Amended
The Social Security Act became law when Franklin Roosevelt signed it on August 14, 1935, perhaps his finest hour, a measure during hard times against the 50% poverty rate. It still is when US poverty rates are soaring, perhaps heading for Great Depression levels or higher.
The program works well as mandated, taxing active workers and their employers to support eligible retirees, their dependents and the disabled. As Russell explains: "It is a formula that has worked remarkably well since its inception, producing the federal government's most successful and popular domestic program."
Employers also began offering pensions in a package of other benefits. It worked the same way, they and workers contributing for retirees, "a pay-as-you-go formula" - simple, effective, and assured, based on employment tenure under individual company plans.
The Revenue Act of 1978, however, changed things, its sections 401(k), 403(b), and 457 letting retirement plan contributions be made with pretax dollars. Though intended to encourage workers to participate in defined benefit plans, employers used it advantageously, increasingly switching them to defined contribution ones, providing no assurance of enough income at retirement.
In contrast, "defined benefit plans are progressive reforms within capitalist societies that are consistent with guaranteeing old age support as worker or social rights." Today, they're fast disappearing, victimized by neoliberal "reforms" for business, especially financial industry predators, not employees.
Russell cites two reasons why 401(k)s failed:
-- by falsely assuming worker investments (mostly stock market ones) will provide a secure retirement; given other lifetime obligations, including medical expenses, home purchases and mortgage payments, and college tuitions, it's not possible for most people; and
-- the financial services industry profits hugely from private investment plans, siphoning off large commission amounts that add up through the years; as a result, American workers have subsidized the industry's expansion while jeopardizing their own futures.
In contrast, government or business provided plans are "dedicated purely to supporting retirement instead of creating private wealth," often more for investment firms than their customers, and therein lies the problem. Instead of secure retirement income, having enough depends on marketplace uncertainty that in crisis times can be ruthless, destroying years of savings quickly, savagely, and unfairly.
As a result, for millions, 401(k)s and similar plans have been poison, failing to deliver on promises. Three arguments were made to sell them:
-- they'd way outperform traditional pensions - untrue;
-- retirement income would "owned" - true, but it hardly matters; and
-- they'd be portable - importantly true in a highly mobile society, jobs and careers today changed more often than earlier.
A major problem is how commonly these plans are used - for home purchases, medical expenses, college tuitions, other needs, or discretionary ones, depleting funds intended for retirement.
In contrast, Social Security works as intended by financing it, not private wealth or profits for industry predators. Bogusly, critics claim it's going bankrupt when, in fact, it's sound and secure if properly administered, needing only modest adjustments at times to keep it that way.
Moreover, as explained above, simple revenue enhancement methods exist, including a progressive income tax; removing the payroll tax ceiling, taxing all earned income at the same rate; and instituting a Tobin Tax - combined they might keep Social Security flourishing for a millennium, for sure a century or two, and more.
"They could and should be (ways to expand) Social Security benefits and (begin) phas(ing) out employment-based retirement plans" that don't deliver on promises. Retirement plans should have fundamental goals - to provide predictable, adequate income amounts, adjusted for inflation, delivering as much annual working lifetime earnings as possible. Achieving it depends on replacing today's "three-legged stool" - "Social Security, employment-based benefit(s), and personal savings - with a national system in which Social Security accounts for the" lion's share of income, "topped off by personal savings" that for most people are meager.
A Final Comment
For American workers, achieving retirement security is simple and achievable, but not with opposition from powerful, destructive forces - financial giants complicit with government, willing bipartisan majorities plotting to jeopardize the future of millions. A previous article explained how, accessed through the following link:
Only mass outrage can stop them from slashing Social Security, Medicare, Medicaid, and other social benefits on the way to ending them - a venal plot to make America another banana republic, its working millions oppressed serfs, their present and future security destroyed. Obama and congressional majorities support this in league with big money backers, largely Wall Street racketeers profiting hugely from sucking public and personal wealth to themselves. The die is cast. It's their future or ours. There's no in between. Grassroots activism only, or lack of it, will decide.
Stephen Lendman lives in Chicago and can be reached at email@example.com. Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.