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Tuesday, March 17, 2009

 
Granny Bashers Are Fibbers

by digby

It's long been obvious that the right wing's economic arguments are bogus since no matter what the issue, the answer is always tax cuts. Similarly, the fiscal scolds' varied arguments about "entitlements" always ends up with scare stories that the system is going broke and the kids are going to be left with nothing --- no matter what the evidence says.

Dean Baker demonstrates:

The granny bashers have treated us to three very dramatic examples of this "different facts, same policy" approach in the last 15 years.

The first example is slightly technical. It has to do with the claim that the consumer price index (CPI) overstates inflation.

The CPI is our yardstick for measuring how much better off people are getting through time. If wages grow 4.0 percent and the CPI tells us that inflation is 3.0 percent, then real wages have grown by 1.0 percent. However, if the true rate of inflation is just 2.0 percent because the CPI overstates inflation by 1.0 percentage point a year, then real wages have grown by 2.0 percent (4.0 percent wage growth, minus 2.0 percent inflation).

Fifteen years ago, many economists and pundits (including much of the granny basher lobby) embraced the claim that the CPI overstated the true rate of inflation by at least 1.0 percent a year. If this claim was true, then it undermined the core of the granny bashers' story. It would mean that our children and grandchildren would be far richer than we ever imagined possible and that many older workers and elderly grew up in poverty.

If annual wage growth was 2.0 percent rather than 1.0 percent, then in 40 years, wages will be more than 220 percent of the current level, instead of just 50 percent higher. The granny bashers embraced the claim of the overstated CPI in order to justify cutting Social Security (retiree benefits are indexed to the CPI), but they never followed through the logic of this claim for their generational equity story.

This would be comparable to Al Gore maintaining a drive to reduce greenhouse gas emissions even after new evidence showed that the planet was actually cooling. Honest people don't ignore such evidence.

The exact same issue arises with the speed up in productivity growth in the mid-90s. The granny basher crusade against Social Security and Medicare dates from the mid-80s when productivity growth was just 1.5 percent a year.

Productivity growth determines the rate at which society can, on average, get richer. In the mid-90s, the rate of annual productivity growth increased by a full percentage point - in effect bringing about the more rapid gains in real income that would have been implied by an overstated CPI. However, none of the granny bashers noted how the productivity growth speedup had enormously improved the prospects of future generations. They just maintained their insistence on cutting Social Security and Medicare.

Finally, the recent collapse of the housing bubble and the resulting stock market plunge have reduced the wealth of older workers and retirees by close to $15 trillion. This is a transfer to the young, since they will be able to buy the housing stock and the corporate capital stock for a far lower price than they would have expected to pay just two years ago.

Remarkably, the granny basher crew has somehow failed to notice this enormous transfer of wealth from the old to the young. They just continue their crusade to cut Social Security and Medicare as though nothing has happened.

It should be evident that the granny bashers don't care at all about generational equity. They care about dismantling Social Security and Medicare, the country's most important social programs. It is important that the public recognize the granny bashers' real agenda so that they can give them the respect they deserve.

The conservatives have been doing this for decades. If it isn't the deficit, it's generational warfare or it's fearmongering that "the cupboard will be bare," as Reagan used to claim back in the 1960s. It's always something with these people, with the prescription always the same --- end the government guaranteed pension and health programs.

I think we can also assume that one of the main purposes of the Little Friskies Fiscal Scold Tour is to make health care reform just too scary for the folks. They may not be able to end social security as we know it just yet --- but they might just be able to help the special interests derail universal health care. No matter what the evidence, they'll find something to justify their agenda.


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