Building an Economy that Works for Everyone

A call for apathy in the face of attacks on Social Security and the middle class?

A recent article by James K. Galbraith in Mother Jones News is in one respect a call to arms – a powerful reminder of how public decisions made by those we elect to office affect our lives and jobs, houses and health, and paychecks and wealth. But it is also a (perhaps unintentional) call for apathy in the face of mounting attacks on Social Security and middle class economic security.

Galbraith is spot on, for example, in ringing the alarm bell about emerging plans to cut Social Security and Medicare right after the November elections:

The attack will come right after the election, when the Bowles-Simpson commission on deficit reduction issues its report. It will almost surely recommend deep cuts in Social Security, probably in the form of an increase in the retirement age. This is a direct cut in benefits, targeted in an especially nasty way at minorities and all others who work harder, earn less (PDF), and live shorter lives (PDF) after retirement than, say, college professors or senators.

The cochairman of that commission, former GOP senator Alan Simpson of Wyoming, has made his views clear. In an August email (PDF) to the head of OWL (née the Older Women’s League), he called Social Security “a milk cow with 310 million tits.” He wants you to think of Social Security as welfare, not something you’ve earned—a boondoggle, rather than a program that puts money into the economy every day.

The fact is, even if you were never an autoworker, were never in a union, never owned a house, even if you’ve never been sick and never got anything else from the New Deal – whoever you are, Social Security and Medicare help you right now. They support your business: Spending by old folks is part of the income of small and large companies everywhere, an effective and stable support for the economy. Social Security provides survivors’ benefits that raise children in your schools. It will keep your parents off your back. And when you do get older, Social Security and Medicare will protect you, and they will protect your children from bankrupting themselves over you. That is, if these programs are protected, now, from their assailants.

What’s odd is that while Galbraith ably describes the threat facing Social Security and Medicare, he writes as if the decision Congress is about to make is totally out of voters’ hands. His closing paragraph reads:

The House has agreed to vote on the Bowles-Simpson package – whatever it eventually contains – if it passes in the Senate. So it will come down to the Senate. Will the Democrats hold the line? Or will they give in to this assault on the last bastion of the American middle class?

This notion – of distant deliberative bodies passing down decisions from on high, or more broadly of powerful and inescapable forces shaping our lives – is woven throughout Galbraith’s column. While he ably outlines many of the economic factors and policy choices that got us into our present mess, it doesn’t read as if there are still choices to be made about how we can design our economy to work better.

For example, of the American manufacturing sector he writes:

Total employment of manufacturing workers peaked in 1979, and three decades later, we’re in the endgame. Most of them will never be replaced. Nothing can stop the Chinese, Koreans, Vietnamese, and others from making shoes and ships and sealing wax at wages we can’t compete with. And nothing will.

So we have no choice but to keep sending our manufacturing jobs overseas? No way to rebuild here at home? In fact, there are alternatives to our current trade and industrial policies – and many of those very alternatives are actually in use by the very countries to which the United States is sending those jobs. Stan Sorscher, EOI board member and Legislative Director for the Society for Professional Engineering Employees in Aerospace (SPEEA) outlines how our current “free trade” policies put America at an economic disadvantage:

Free trade advocates accept closing a factory in Indiana, saying the closure frees up resources to invest in something better. We can innovate our way to prosperity through education and productivity improvements, and move up the value chain. In a perfect world, that would be so. In fact, as Fletcher notes, “America’s share of ‘sunrise’ industries continues to drop.”

While free trade advocates imagine that freed up resources could be invested in Indiana, the industrialists who closed the factory are more likely to create the new jobs in Shanghai or Honduras. Nothing in trade theory requires the freed resources to be invested in Indiana. Rather, global mobility of capital makes that outcome unlikely.

It is worth pausing from time to time to recognize a simple observation. No country in the world is pure free trade or pure protectionism. Every country finds its own balance point. Fletcher observes that China, Japan, Korea, England and America all enjoyed strong growth under protectionist policies. No country can show comparably strong growth under free trade policies.

The present-day housing bust gets similar treatment. Galbraith rightly fingers foreclosure and underwater mortgages as a threat to the middle class. But he fails to note there are many policy options for keeping families in their homes and protecting their economic security. As economist Dean Baker (another EOI board member!) has written, those options range from a foreclosure moratorium, to make sure every foreclosure is absolutely legal, to giving foreclosed homeowners the right to stay in their home as renters, paying the market rent for a substantial period of time (e.g. five years) following foreclosure.

These are hard economic times. Politically the nation seems polarized, and Congress – or at the very least, the Senate – appears paralyzed, so making different policy choices certainly isn’t going to be easy. But despite the nation’s past policy mistakes, we still face policy choices today that can make a difference for the better.

A casual perusal of Galbraith’s other articles for Mother Jones about Social Security, climate policy, and economic stimulus/recovery shows he knows that to be the case. With so much at stake in the upcoming election, it’s just too bad this column reinforces the notion nothing can be done.

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