In another example of how badly Congress is out of touch and mis-informed, Social Security is on the table for cuts by the budget chickenhawks.

Are they going to cut our bloated and wasteful military budget?  Hardly.  Are they going to clean up our convoluted and unfair tax system?  Not very likely.  Are they going to end lopsided and misguided corn subsidies?  Slim and none are the chances there.  How about the employer tax breaks on health care?  Yeah, right.  Or the home interest deduction?  Of course not.

Nope, they’re going to cut SS benefits, or withold them altogether until you’re older. 

From Felix Salmon over at the Washington Post:

“ Lurking beneath this conversation is an unquestioned assumption: We live longer, so we should work longer. That’s pretty intuitive to members of Congress, who seem to like their jobs and don’t seem to like the idea of retiring. It’s also pretty intuitive to blogger/columnists, who spend their time in air-conditioned rooms opining about pension programs. But most people don’t work in Congress or in the media. They work on their feet. They strain their backs. They’re bored silly at the end of the day. By the time they’re in their 60s, they want to retire.

You see that reflected in Social Security. Age 66 is when you get full benefits. But most people begin taking Social Security at age 62. They get less, but they can retire earlier. To them, the trade-off is worth it. And remember, the country is much richer than it was in 1935. Adjusting for inflation, our gross domestic product in 1935 was $865 billion. In 2009, it was more than $12 trillion. We have more than enough money to buy ourselves some leisure time at the end of our lives. At least if that’s one of our priorities.”

So how expensive would it be to ‘fix’ SS and maintain the current age benchmarks?  Again, from Salmon.

“As Stephen C. Goss, the system’s chief actuary, has written, Social Security projects an imbalance “because birth rates dropped from three to two children per woman.” That means there are relatively fewer young people paying for the old people. “Importantly,” Goss continues, “this shortfall is basically stable after 2035.” In other words, we only have to fix Social Security once.

The size of that fix is significant, but not astonishing. Over the next 75 years, the shortfall will be equal to about 0.7 percent of gross domestic product. How much is 0.7 percent of GDP? To put that in perspective, the Center on Budget and Policy Priorities calculates that it’s about as much as George W. Bush’s tax cuts for the rich will cost over the same period. Saying we can afford those cuts — which is the consensus Republican position — but not Social Security’s outlay is nonsensical. Coming up with 0.7 percent of GDP isn’t a crisis. It’s a question of priorities.”

Keeping tax breaks/cuts for the wealthy is a priority?  It is for Republicans, apparently.  But it sure isn’t for most Americans.  Again from Salmon.

“An August survey from Greenberg Quinlan Rosner Research tested reactions to a variety of Social Security fixes. One of the options was raising the retirement age to 70. Two-thirds of respondents opposed it. Another option was eliminating the cap on payroll taxes so that well-off workers pay the tax on their full income, just as middle-income workers do now. A solid 61 percent supported it.”

Beezer again.  Democrats should make hay about this.  SS not only provides some badly needed retirement income, it also provides disability insurance and survivor’s benefits.  And with private employers withdrawing from defined benefit plans, SS is a major chunk of retirement funds for more and more workers.

The real difference between Democrats and Republicans isn’t about how much the government spends, it’s about where the government spends.  Democrat priorities are aimed at labor and the middle class.  Republicans cater to the wealthy class.   Democrats should remind voters of this most important distinction.

Once again, thanks to economist’s view for highlighting Salmon’s column.

A lot of hand wringing is being done about the $13 trillion in government debt.  Deficit hawks warn this number is becoming too large and will soon make the country insolvent.

But the real problem, the one that caused this financially induced recession, is the private debt.  That debt is more than $42 trillion.  Put the two together and you have a total US debt, public and private, of more than $55.7 trillion.

But it’s not just the size of these numbers that’s important.  It’s what we did with the borrowed money that may be more important.  If we had used the borrowing for something productive, like a new machine, or an extension to mass transit, or to build solar equipment or upgrade our base electric power grid then the borrowed money would have a return good.  We’d have spent the borrowed money wisely.  We’d have created jobs and income, as well as public goods that lowered the cost of doing business in America.

Unfortunately, that’s not what we did with the borrowed money.  We bought a lot of overpriced homes, apparently.  And we bought a lot of consumer goods, including cars and trucks.  We also bought a lot of personal technology like mobile phones, computers, wi fi accessories and the like. 

Buying these things does create jobs, of course.  Unfortunately, those jobs mostly reside outside the United States because that’s where the manufacturing facilities were built.  We may have gotten slightly cheaper underwear, but we didn’t get much productive capital investment in the United States.

So we traded a lot of borrowed money for cheaper goods produced by labor in other countries.  And we traded a lot of higher paying jobs in manufacturing and related industries as a consequence. 

The final consequence is that there isn’t enough cash flow created by using borrowed money for these types of purchases, especially if the products are all made offshore.  And the trigger that caused this unwise borrowing and spending to come back to bite us, was the collapse of housing prices — because a large part of the money borrowed for many families and individuals went for homes and condominiums.

And now the assets backing up this borrowing are worth less than what was borrowed. 

And who holds most of this debt?  Our banking sector, which basically went insolvent all at once, particularly the largest banks which are considered too big to fail (TBTF).   Because they are considered TBTF, taxpayers propped them up (are still propping them up, by the way) to the tune of at least $2-3 trillion.

The banks, as every one knows now, really invested heavily in mortgages.  In fact, the investment type of bank borrowed heavily and leveraged even that borrowing several times over the underlying value of the homes themselves.  Needless to say banking hasn’t been lending to any enterprise, productive or not, anywhere near what is needed to keep our economy robust.  How can they?  Their balance sheets look like Swiss Cheese.

Meanwhile, suddenly realizing they’re over-indebted, consumers throttled down their spending considerably.  Many lost their homes.  Quite a few also lost their jobs as the inevitable economic contraction became daily worse and worse and businesses trimmed every possible job they could.

So what to do with all this private debt hanging over everyone’s head? 

It needs to be written down.  And that puts several more, very large and possibly fatal, holes in the bank Swiss Cheese balance.  But banks are unwilling to do this because it could threaten their solvency.

Only Congress can force these credit writedowns.  The Federal Reserve, which has regulatory authority of banks, can urge that banks write down these mortgages, but that’s all they can do.

Pediatrician Margaret Flowers of Maryland is dedicated to the idea that America can afford having a universal, single payer health care system.  Basically, she believes the existing Medicare system for the elderly should be extended to all citizens.

She’s not alone when it comes to physicians, 17,000 of whom have joined with her as Physicians For A National Health Program.

Dr. Flowers found out firsthand about how “broken” our political system has become.  Despite consistent positive public support for single payer, universal health coverage, Dr. Flowers found that  Congress and the Administration are controlled by special corporate interests and decided to exclude any honest debate about a single payer system.   The Administration, said Flowers, decided that single payer simply could not get through Congress and therefore must be shunted aside.

What was left, she maintains, was legislation that was “designed to fail.”  If it had passed as written, she says, it would take five or six years before the public would realize that it was a failure, and the incredible pain and suffering our current system exacts on millions of citizens would continue unabated.

Also interesting in the interview was Dr. Flowers recounting how large insurance bureaucrats warp medical care delivery.  Dr. Flowers was advised by one insurance company to limit herself to one wellness visit per day.  And for any additional problems she found with her patients that were not the reason for their visit, she was advised to schedule another appointment (and thus another fee).

In other words a “churn and burn” medical philosophy where the insurance company was most definitely not interested in saving any money–otherwise they would advise NOT to make a second appointment, which would drive medical bills up.  This is not the advice of someone working in a competitive environment.

If you have any interest in this subject, you can watch Dr. Flowers in an interview with Bill Moyers here.

There’s an old saw about Congress that watching them write legislation is like watching someone make sausage.  There’s a lot of mystery ingredients in sausage, it is believed, and the making of it is messy.  And so it is too for national legislation.

The Health Care Reform being considered in Washington DC, is sausage with steroids.  It is 1,000 pages long (much of it written by lobbyists and lawyers working for those who were to be regulated) and literally incomprehensible even to Congress, much less the public.  The deal making has been scandalous, highlighted by sweetheart deals exempting one state (Nebraska represented by Sen. Ben Nelson) from paying taxes related to reform that all the other states would pay.

So one of the most Democrat controlled states in the Union, Massachusetts, elected a little known Republican to fill the remainder of Sen. Ted Kennedy’s term.   Kennedy, the Senate’s No. 1 supporter of health care reform died from cancer and it was the collective wisdom a Democrat of similar beliefs would be a shoo-in. 

The Republican, state Senator Scott Brown, ran against health care reform and handily beat the Democrat, former Mass. Attorney General Martha Coakley.  It is widely believed his election was a full rejection of health care reform, or at the very least the reform being proposed in Washington. 

Brown thus becomes the 41st Republican US Senator and breaks the 60 vote Democrat majority that, theoretically, could pass anything it wanted, including Health Care reform legislation–The Sausage of all sausages.

The national Republican Party wants to believe the Brown victory is a sure sign that all things Republican have now been endorsed by the Democrat dominated Massachusetts.   That “spin” on the election was rolled out as soon as polls showed that Brown could beat Coakley.

Nah.  Massachusetts just said it was tired of sausage.  And no doubt much of the rest of the nation is tired as well.

Health care reform?  Massachusetts is the only state in the nation that already has universal health care.  And it’s popular.  Polls show a 70% approval rating.  Nationally, polls show 77% of Americans support health care reform in principal. 

(This just in.  As a state Senator Scott Brown voter FOR Massachusett’s universal health care system!  This wasn’t widely reported during the campaign.  Got to love the mass media.  Asleep at the switch yet again.  So why was Brown so against a national health care progrem modeled on the Mass plan Brown voted for as a state Senator?  Who cares.  He’s versatile apparently.  Just like most of the members of Congress.)

But they don’t like the health care reform being considered in Washington.  Even progressives like Democrat National Chairman Howard Dean didn’t like the bill.  Supporters of reform basically held their noses and supported legislation that satisfies no one.

And it remains to be seen whether Brown will be a lockstep Republican.  For one he’s pro-choice, a Democrat position.  For another he rails against Wall Street, vowing to fight for all taxpayer subsidies to be paid back–a position identical to his opponent Democrat Coakley.

Brown may be against the health care reform being considered by Congress, but polls show that he’s in the majority there across the country.  Whether he will support a different version of reform remains to be seen.

The real question is, can Congress start making steak, or at least a good hamburg?  Enough of sausage.

There are a lot of Congressmen and Senators who sternly admonish the nation that it’s running up large deficits which will impoverish our children and grandchildren.

My answer?  Pay the bills.  If you want something now, pay for it now.

Unfortunately, the same Congressmen and Senators who admonish us the most are the ones least likely to pay the bills.   In fact, they are the first ones to call for tax cuts.  Which is how a government gets the money to pay the bills.

They are the first ones to call for reducing trade barriers and the first ones to proclaim that more international trade creates jobs and incomes.  But is that true?  A recent paper here points out the obvious:  Import penetration into our economy significantly reduces income for labor.   Welcome Wal Mart greeters with college degrees, minimal pay and no health insurance.  Welcome 40-45% of the population not making enough to pay, net, any income taxes.

These are the Congressmen and Senators who ominously warn that if the tax rates are made more progressive then jobs and income will be lost.  Yet no new private market jobs were created during the 8 years of the George Bush presidency even though taxes were cut.   Under President Clinton, who preceeded Bush and when tax rates were higher, millions of private market jobs were created.

Clinton left a budget surplus.   Bush left a $10 trillion deficit.  And a global recession.  In fact, since the Presidency of Truman, steeply progressive tax rates are POSITIVELY correlated with job and income growth.  

Either these Congressmen and Senators are fools, or they are knaves tricking their own populace.

We can all have health insurance.  We just need to pay for it.  Yet we still believe the obviously false promise these fools/knaves offer that, somehow, we can have all these benefits without paying for them.

Raise the tax rates on upper incomes.  It’s that simple and straightforward.  It won’t destroy jobs.  In fact if the past is any guide at all, it will create jobs and broadly raise incomes.  Best of all, it will allow us to pay the bills today.

There’s an old truth that goes “If you want a crime wave, just start enforcing the law.”

Something like this is happening to President Obama.  What’s not got a lot of commentary is one of the changes President Obama brought with his portfolio of changes: Acknowledge spending truthfully, including deficit spending.

Under President Bush deficits weren’t acknowledged, but were pretty much ignored if not hidden outright off balance sheet.  Enter stage left President Obama and he wants more “transparency” as part of his administration. 

Which is exactly what he got, and it amounted to a running annual $1.3 trillion in structural deficit spending.   Of course it was created by and under President Bush, but just like a lot of things including financial regulatory oversight, Republicans under Bush simply ignored it all. 

So a new “cop” took over the beat and he started enforcing the law.  What he got was a crime wave.

President Obama is nothing if not determined, it appears.  He’s acknowledged the deficits created and, while trying to hew to his other “changes” including health care reform and energy transformation, he’s making a strong effort to “bend the curve” of spending.  And the Democrat controlled House has proposed another common sense method to attacking deficits:  Raise marginal tax rates.

The Republicans are crying bloody murder.  These kinds of things were anathema in the Bush administration where the dominant calculus was to give the wealthy tax breaks, to hide deficits from the public and to neuter regulations designed to safeguard American taxpayers from a predatory Wall Street.

Now there’s a new calculus.  Be honest about your bills and pay them.   Reform oligopolic industries like health care and Wall Street to protect the public and improve their lives.  Bring our energy system into the 21st century and protect the environment at the same time.

This is why Obama was elected.  The public is ahead of Congress and understands serious changes are needed now, if not sooner.  If Congress fails to deliver, heads are going to roll and sometimes the public really doesn’t give a damn whose head it is.  Failure to deliver will result in dangerous and very unpredictable results.