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The most interesting thing you don’t know about the deficit

In Legislation Today, Political world on April 14, 2011 at 2:41 pm

Washington scaremongers talking about the deficit have put the fear of China into the American psyche, but does China really “own” the U.S. deficit?

In a revealing article, former Senator Don Riegle and Social Security expert Lori Hansen Riegle let us in on a secret — the largest debt owed by the federal government to any one entity is to Social Security.

We owe it to ourselves. Literally.

Here’s how that works: when the federal government needs to borrow money, it issues Treasury bonds — a special form of IOU. Treasury bonds are considered a very safe investment; many Americans hold them in their retirement accounts. As Riegle and Riegle show with numbers from the U.S. Treasury Department, the largest single holder of Treasury bonds is Social Security. And Social Security is earning interest on those bonds, just like any other investor would. That’s the Social Security “trust fund” you’ve heard so much about.

So, what’s with all the talk about the “bankrupt” trust fund? And what does Social Security have to do with the deficit?

Imagine if you suddenly didn’t have to pay your house mortgage anymore. Wow, that would erase a large chunk of debt from your personal finances. It’s a lovely dream, but that’s all it is — wishful thinking. The bank is relying on you to make good on your loan, and as the foreclosure debacle has shown, you’ll face dire consequences if you don’t.

I can only assume that there are some politicians who are engaging in wishful thinking about the Treasury bonds held by Social Security. Gee, wouldn’t it be great if we didn’t have to make good on those loans… After all, no one less than Timothy Geithner pointed out that “that’s where the money is.”

Well, yes, that’s where it is and a good thing, too. The American workers have been paying into Social Security, their money was invested in Treasury bonds, and when it comes time to retire and rely on their Social Security benefits, that money will be there.

And the interesting thing is, while Social Security doesn’t contribute to the deficit — by law it can’t pay out more money that it has — it holds a large chunk of the debt owed by the federal government.

So, perhaps the deficit hawks are confused. Or maybe they want us to be confused.

Here’s what Riegle and Riegle have to say:

Another argument made by Social Security opponents to raise fear about the national debt is how much our government has borrowed from China. They never mention how much our government has borrowed from Social Security. In fact, the government has borrowed more from the Social Security surplus than it has from any other source in the world, including China. As a result, Social Security now “owns” nearly 18 percent of the federal debt, making it the largest single holder of US debt. The government owes almost twice as much to Social Security as it does to China and Hong Kong.

Why aren’t the opponents worried about paying back Social Security — why aren’t they talking about repaying this debt to the American people?

According to the U.S. Treasury Department’s “Monthly Statement of the Public Debt of the United States” (9.30.10), the total debt was $13.562 trillion and was held as follows:

US Holders of Debt

42.1 % — US Individuals and Institutions

17.9 % — Social Security Trust Fund

6.0 % — US Civil Service Retirement Fund

2.1 % — US Military Retirement Fund

Foreign Holders of Debt

11.7 % — Oil Exporting Countries

9.5 % — China and Hong Kong

6.3 % — Japan

1.4 % — United Kingdom

1.3 % — Brazil

1.6 % — All other foreign countries

The deficit is a concern. All U.S. debt must be covered. There’s no question about that. But let’s be clear. We can’t make China the bogeyman here.  The federal government has overspent in the last decade, thanks to two wars, a huge tax cut for the wealthy, and an unregulated banking industry that led to a global recession. The deficit came about because of a schism between two views of what the government’s (i.e. the people’s) responsibility is. As President Obama said in his speech yesterday:

Part of this American belief that we are all connected also expresses itself in a conviction that each one of us deserves some basic measure of security. We recognize that no matter how responsibly we live our lives, hard times or bad luck, a crippling illness or a layoff, may strike any one of us. “There but for the grace of God go I,” we say to ourselves, and so we contribute to programs like Medicare and Social Security, which guarantee us health care and a measure of basic income after a lifetime of hard work; unemployment insurance, which protects us against unexpected job loss; and Medicaid, which provides care for millions of seniors in nursing homes, poor children, and those with disabilities. We are a better country because of these commitments. I’ll go further – we would not be a great country without those commitments.

Riegle and Riegle close their article with a view from the other side:

 House Republican Majority Leader Eric Cantor (R-VA) provided some insight to their Social Security views in a recent NPR interview when he was talking about Social Security and said, “We are going to have to come to grips with the fact that these programs cannot exist if we want America to be what we want it to be.”

Luckily, poll after poll shows that Americans of all political persuasions do not want Social Security to fail. Let’s be vigilant and make sure that tax investments that each and every one of us pays at work into the Social Security system are well managed and cashed in for full value as mature U.S. Treasury bonds.

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Don’t mess with Maine artists!

In Political world on April 6, 2011 at 10:12 am

Rep. Ryan’s budget a disaster — according to CBO report

In Economics, Political world on April 6, 2011 at 10:08 am

The Congressional Budget Office (CBO) has issued a report on the budget written by Rep. Paul Ryan, chair of the House Budget Committee. (Read the report here: http://www.cbo.gov/doc.cfm?index=12128.)

Here’s the CBO’s mandate:

CBO assists the House and Senate Budget Committees, and the Congress more generally, by preparing reports and analyses. In accordance with the CBO’s mandate to provide objective and impartial analysis, CBO’s reports contain no policy recommendations.

However, they do the numbers and write reports. This particular report contains the interesting facts that the Ryan plan would reduce federal spending on health programs roughly by two-thirds by 2050, more than double the share of total spending that Medicare recipients must pay out-of-pocket, and would raise he total cost of health care for Medicare enrollees by 25-45 percent. (Thanks to Henry Aaron of Brookings for that.)

And, according to Dean Baker of the Center for Economic and Policy Research, those Medicare enrollees, under the Ryan plan, by 2030 would end up spending most of their TOTAL INCOME on health care costs (see http://www.cepr.net/index.php/blogs/beat-the-press/representative-ryan-proposes-medicare-plan-under-which-seniors-would-pay-most-of-their-income-for-health-care).

Resolution of labor historians regarding the missing mural

In Political world on April 1, 2011 at 3:27 pm

To Whom It May Concern:

On behalf of the Labor and Working-Class History Association, I would like to bring to your attention a resolution that the LAWCHA board passed on March 31, 2011, regarding recent events at the Maine Department of Labor:

The resolution:

“The Labor and Working-Class History Association, the largest organization of labor historians in the United States, supports efforts to preserve public art that represents the nation’s labor history in local, state, and federal buildings. We deplore Maine Governor Paul LePage’s removal of the labor history mural from Maine Department of Labor offices over the weekend of March 26-27, 2011. In eleven panels painted by Maine artist Judy Taylor and installed in 2008, this mural depicts the working people who were central in the making of Maine’s rich industrial history. The panels portray diverse groups of working-class Mainers, including colonial-era artisans; nineteenth-century loggers and child laborers; shoe workers on strike with the CIO in Auburn and Lewiston in 1937; and women workers riveting ships at Bath Iron Works during World War II. Together with the renaming of department conference rooms previously named after important figures in the nation’s labor history, such as Frances Perkins, the first female secretary of labor, whose family has Maine roots, this act constitutes an attempt to erase the historical memory and heritage of Maine’s working people. LAWCHA urges Maine’s elected officials to reinstall the mural in its original location and to return the names of distinguished labor activists to the rooms where they belong.”

Labor and Working-Class History Association

Executive Committee

President, Kimberley Phillips

Vice President, Shelton Stromquist

Secretary, Cecelia Bucki

Treasurer, Thomas Klug

Immediate Past President, Mike Honey

Executive Assistant, Ryan Poe

Board

Randi Storch, SUNY – Cortland

Moon-Ho Jung, University of Washington

Laurie Green, University of Texas – Austin

Franca Iacovetta, University of Toronto

Erik Gellman, Roosevelt University

Thavolia Glymph, Duke Universityn

Ruth Milkman, University of California, Los Angeles

Joan Sangster, Trent University

Emilio Zamora, University of Texas, Austin

Francisco Barbarosa, University of Colorado, Boulder

Eileen Boris, University of California, Santa Barbara

Brian Kelly, Queen’s University

Clarence Lang, University of Illinois, Urbana-Champaign

Priscilla Murolo, Sarah Lawrence

We are urging LAWCHA members and all other historians in the United States to join those individuals and organizations in Maine who are working to restore the mural and conference room names to their original locations.

Missing: One Three-Year-Old Labor History Mural, Whereabouts Unknown

In Biography, Political world on March 29, 2011 at 7:56 pm

The Frances Perkins Center deplores the secret removal of the Maine Department of Labor’s mural depicting Maine workers through the centuries and asks that it be safely returned.

March 29, 2011 (Newcastle, Maine)–Frances Perkins, the nation’s longest serving secretary of labor and the first woman to be a U.S. Cabinet secretary, was a supporter of the arts. She was also a daughter of Maine, having inherited a beloved family homestead that has been in the Perkins family since the 1750s. It’s ironic that a mural installed in the Maine Department of Labor, which portrayed Perkins along with the workers whose lives she helped improve through passage of such measures as unemployment insurance, minimum wage legislation, child labor laws, and Social Security, would be removed from view by the Maine governor.

Later this year, a new edition of The Roosevelt I Knew by Frances Perkins will be published by Penguin Classics. In the book, Perkins describes how the WPA art projects of the 1930s came about: a “family member of a Cabinet secretary” suggested that the arts be included in the Works Progress Administration. In fact, that relative was Perkins’s teenaged daughter, Susanna. Perkins recognized the validity of Susanna’s suggestion, and joined with others advocating for the inclusion of artists, performers, musicians, and writers in the WPA, an idea that President Roosevelt also strongly supported. The Federal Art Project was born, and during the Great Depression, it created jobs for more than 5,000 artists. More than 225,000 works of art were created for the American people.

Many of the works were murals in public places. Some still remain, three-quarters of a century later. These often depict scenes from local history; others portray factory workers, or farm laborers. The intent was to show all sorts of people in their everyday lives, to honor the history and work of the nation.

Harking back to those WPA murals, in 2008 the Maine Department of Labor commissioned a mural for its new lobby. Painted by Maine artist Judy Taylor, and paid for by tax dollars through federal funding, the mural depicted the history of centuries of Maine workers. Evidently, after viewing the mural, a visiting businessperson faxed an anonymous complaint. As a result, one week ago, Maine’s governor decreed that the mural would be removed as soon as a new home was found for it.

On Monday, it was gone. Shockingly, the mural was removed over the weekend. There were no witnesses. No new home has been announced. The government of Maine, a state that prides itself on its artistic tradition and knows well the monetary value of its Creative Economy, has now “disappeared” a work of art.

What remains are the questions. Where has the mural been taken? Why is it no longer on public display? What was the urgency for its removal?

Frances Perkins’s grandson and only surviving descendent, Tomlin Perkins Coggeshall, also wonders, “Was the artwork properly removed? Is it in a safe place, suitable for the storage of art?” He is especially sensitive to this issue, as Susanna’s son. His father was the well-known painter, Calvert Coggeshall.

The Frances Perkins Center is a nonpartisan, nonprofit organization based in Newcastle, Maine, at Perkins’s beloved historic homestead. The center celebrates Perkins’s accomplishments and seeks to carry on her commitment to economic security and social justice.

“This is a chilling act,” said Barbara Burt, executive director of the Frances Perkins Center. “We are concerned about the condition of the art. We are also aghast at the message of censorship that this action conveys. Removing this artwork is an attempt to erase the significance of Frances Perkins and the heroic struggles of Maine workers. We believe that the mural should be returned to the place for which it was specifically created, at the Department of Labor.”

Statement at press conference in response to Maine governor’s action

In Biography, Political world on March 25, 2011 at 7:12 am

STATEMENT OF BARBARA BURT, EXECUTIVE DIRCTOR OF THE FRANCES PERKINS CENTER OF NEWCASTLE

March 25, 2011

Augusta, Maine

The Frances Perkins Center deplores the edict handed down by Maine’s governor to strip the Department of Labor of its mural depicting Maine workers through the centuries and to rename conference rooms that currently honor heroes of Maine’s workforce. I am sorry to miss this occasion to stand with artists, union members, and outraged members of the public. Ironically, at this very moment, many of the Frances Perkins Center’s board members and I, along with thousands of people from all around the country, are participating in the commemoration of the Triangle Factory Fire in Manhattan’s Washington Square. One-hundred-forty-six factory workers lost their lives in that fire one hundred years ago today.

Frances Perkins witnessed that tragedy and was galvanized by the experience, becoming a lifelong advocate for working people. As the first woman Cabinet member and the country’s longest serving secretary of labor, she is largely responsible for Social Security, the minimum wage, many workplace safety laws, and unemployment insurance.

Maine can be proud to claim Frances Perkins as one of our own. Artist Judy Taylor included a portrait of her in one of the mural’s panels, and a conference room is titled the Perkins Room. Although she wasn’t born in Maine, Frances spent her summers at her grandparents’ home in Newcastle and eventually came to own the homestead, known as the Brick House, which has been in the Perkins family since the 1750s.

It is shocking that Maine’s governor would want to divorce himself from a leader so significant in the history of our country and so closely allied with Maine. His action is completely misguided. Frances Perkins was no enemy of business. Her concern was that the relationship between employer and employee be fair and balanced, that the need for profit not outweigh the need for safety and reasonable wages.

The workers of Maine built this state just as surely as did their employers. And, as Frances Perkins recognized, they often paid for that work with their lives or disability; they certainly didn’t get rich. We strongly urge the governor to honor their contributions by allowing the mural to remain in its current location at the Department of Labor.

Maine Governor “Disses” Frances Perkins

In Biography, Political world on March 23, 2011 at 4:26 pm

Believe it or not, the governor of Maine wants to remove a mural depicting the history of Maine workers — which was commissioned by the Maine Arts Commission and painted by Maine artist Judy Taylor — from the lobby of the Department of Labor because it’s “not friendly to business.” (In the excerpt above, the eighth panel depicts Frances Perkins.)

The Maine Department of Labor has also been ordered to rename the meeting room now known as the Perkins Room.

We are aghast at this action. It is an attempt to erase history and a direct affront to the millions of workers in Maine and the country who built thousands of businesses. It’s also misguided. Frances Perkins wasn’t opposed to business; she simply wanted the drive for profit to be balanced by workplace safety, fair wages, and economic security.

Is this part of a national plan to weaken respect for working people? Add the Maine governor’s action to that of Wisconsin, Indiana, Ohio, Michigan…

For more about the Maine issue, read this article in the Lewiston Sun Journal.

Holding Social Security hostage

In Legislation Today, Political world on March 16, 2011 at 2:50 pm

A report on Politico today tells of 22 GOP senators who have signed a letter to the president threatening to vote against raising the debt ceiling unless he “concedes to cuts in Social Security, Medicare and Medicaid in the current budget negotiations.”

Social Security has nothing to do with the current deficit. It is self-financing and currently has a more than $2.4 trillion surplus. It is true that this year, due to the financial hardships of workers and a resulting increase in beneficiaries who are forced to take early retirement, the program will pay out more than it takes in in payroll taxes. However, the surplus will more than cover the difference, and has been set up for just that purpose. Actuaries estimate that the program has total financial stability through 2037, after which, with no adjustments, it would be able to pay out at a rate of approximately 78 percent of promised benefits. Experts suggest that, with small, relatively painless modifications such as raising the salary cap to its original level (covering 90 percent of paid wages), the program could be extended far into the future.

Yet there continues to be this obsession with cutting benefits, fueled by misinformation coming from huge Wall Street interests (who just can’t bear to see all that money and those potential fees not flowing their way) and policy wonks who are simply opposed to the idea of social insurance and government programs. These well-financed Social Security foes speak with weighty pseudo-authority, claiming all the while that they are “saving” Social Security. (As if, in order to “save” it, they must eviscerate it.) Luckily, the vast majority of Americans know that Social Security works for them and for the country’s economy, as is shown in poll after poll.

The list of Republican senators signing this letter includes Dan Coates (Indiana), Lindsey Graham (S.C.), John Cornyn (Texas), John Ensign (Nev.), Jim Risch (Idaho), Mike Crapo (Idaho), Mike Lee (Utah), Lamar Alexander (Tenn.), Rand Paul (Ky.), Richard Burr (N.C.), Kelly Ayotte (N.H.), Ron Johnson (Wisc.), Tom Coburn (Okla.), Marco Rubio (Fla.), Kay Bailey Hutchison (Texas), Mike Enzi (Wyo.), Bob Corker (Tenn.), Richard Lugar (Ind.), Saxby Chambliss (Ga.), Pat Roberts (Kan.), Roger Wicker (Miss.) and Mike Johanns (Neb.).

Let’s hope they feel some electoral pain for their attack on this hugely successful government program.

Politicians 1 – Press 0

In Legislation Today, Political world on February 18, 2011 at 2:51 pm

When it comes to Social Security and the deficit, you just can’t believe what you hear on the news. And sometimes you can believe what you hear from politicians.

Trudy Lieberman, in her piece, “The Budget Narrative: the press goes astray on Social Security” in the Columbia Journalism Review, spells out just how wrong some of our most respected news sources can be.

NPR:

On Marketplace, after commenting that the president’s 2,500 page budget explanation is “kind of a big yawn,” host Kai Ryssdal turned the program over to John Dimsdale, who noted that the budget freezes domestic spending for five years, cuts help for the poor to pay for heat, and raises interest on student loans. Then he lamented that “there’s no fix in this budget for the big deficit generators like Medicare, Social Security or tax loopholes.” At another spot in the segment, he said Obama’s budget director Jack Lew was asked “why the budget doesn’t reflect some of the dramatic entitlement and tax reforms recommended by the president’s deficit commission.”

And The New York Times:

The New York Times got into the swing of it, too, with a piece by Jackie Calmes. In the fourth graph of her story, she wrote: Neither party has put forward specific proposals to begin grappling with the most pressing long-term budget problem: the huge costs in Medicare, Medicaid and Social Security programs as the population ages and medical costs rise, a bill that could overwhelm the government and crimp the economy if not addressed.

But guess who got it right this week? The politicians–both right and left:

…at his [the president’s] budget press conference when Ben Feller of the AP asked: “Your plan does not address the long-term crushing costs of Social Security, Medicare, Medicaid—the real drivers of long-term debt. Can you explain that?” The president explained: “The truth is that Social Security is not the huge contributor to the debt that the other two entitlements are.” Then it was Wisconsin congressman Paul Ryan’s turn, and he said pretty much the same thing. Paul Ryan, the hawkish, influential chair of the House Budget Committee? In an interview with Politico, Ryan said, with a bit of garble: Social Security is a big part of the problem of future debt. Now as people know—now Social Security is not a contributor to our deficit of any material right now. Social Security is not a big driver of our debt problems. Medicare and Medicaid are the biggest drivers of our future debt problems. Maybe this is one time when the media should be taking their cues from the pols as they craft their stories.

Poll results are consistent: Don’t cut Social Security. Washington, are you listening?

In Economics, Legislation Today, Political world on January 21, 2011 at 2:23 pm

The results of a new New York Times/CBS News poll mirror those found in other polls: Americans are concerned about the deficit but they do not want to cut Social Security. This is true for all respondents, whether they called themselves Democrats, Republicans, or Independents.

Here’s a snapshot of the crucial question:

Now, that should shock the “conventional wisdom” in Washington.

On another positive note, the pollsters found that “aid to the unemployed and poor” ranked just after education as the domestic program respondents were LEAST willing to cut.

Read all the results here: http://www.nytimes.com/2011/01/21/us/politics/21poll.html