What that Letter Should Have Said

By Joe Firestone

On Valentine’s Day, Senator Bernie Sanders sent a letter to the President, authored by himself and signed by 15 other Senators, all Democrats. The letter was a response to the rumors that the President intends to include his Chained CPI proposal to cut Social Security benefits in the budget he will soon send to Congress. It summarized:

“Mr. President: These are tough times for our country. With the middle class struggling and more people living in poverty than ever before, we urge you not to propose cuts in your budget to Social Security, Medicare, and Medicaid benefits which would make life even more difficult for some of the most vulnerable people in America.

We look forward to working with you in support of the needs of the elderly, the children, the sick and the poor – and all working Americans.”

The letter also stated a number of the usual talking points made in arguments against cuts to Social Security. In addition, it also contained praise for the President for his actions in improving the economy, creating jobs, and reducing the deficit, and it mentioned some specifics, including reduction of the Federal deficit to less that half of the $1.4 Trillion deficit he began with. The letter also asserted the need to do much more, especially in the areas of the economy, reducing unemployment and wealth and income inequality, and reducing the deficit “. . . in a fair way.”

It is a positive development that a group of Senators decided to preempt the President’s budget offering stating their disagreement with any proposed cuts to SS, Medicare, and Medicaid, but I think there were a number of ways in which the letter could have been done more effectively. First, It would be great if progressives urging the President not to cut the safety net would stop reinforcing the frame that lower deficits are good and that the President is due praise for cutting the deficit so sharply (CBP projects a 3.0% of GDP deficit this fiscal year). It is not good that he has cut the deficit so much, because in doing so, he has subtracted from Federal Government additions of Net Financial Assets (NFAs) to the economy. These contributions are projected to be so low this year that they will only compensate for the demand leakage due to the trade deficit, leaving no additional NFAs for net aggregate private sector savings.

Given the presence of unequal economic power to collect financial assets in the hands of economic elites, the implication of this is that the lower deficits will only further exacerbate inequality in the United States as well as contribute to continued high and long-term unemployment and stagnation (low growth) in the economy. In short, the austerians, including the President and other Democrats and Republicans who have been insisting on lower deficits are responsible fr the stagnation we see all around us.

Second, the letter would also have been more effective, if it had more than 15 signatures on it. Many Democratic Senators are running for re-election this year. Do they really want to be running as one of the faces of a party whose head is advocating for cuts to Social Security? Is this really good for Kay Hagan, Jeanne Shaheen, Mary Landrieu, Mark Pryor, Mark Warner, Cory Booker, Tom Udall, Mark Udall, Chris Coons, and John Walsh? So why haven’t they signed the letter? Do they really expect to re-elected if they decide to support a budget that contains chained CPI, and, even if they don’t support it, will they benefit if their party leader is proposing chained CPI? So why wasn’t Bernie Sanders able to get these additional signatures from Democrats who face challenges and are running this year?

And third, this letter would have been much, much stronger if the Senators who signed it said to the President directly that they know that there is no short or long-term debt problem and hence no further need to worry about cutting the deficit to achieve fiscal sustainability or ficsal responsibility. And that they also know that any debts that the Treasury has incurred in the past, or deficits that it incurs in the future, can be either paid off as they fall due, or covered completely by revenues from High Value Platinum Coin Seigniorage (HVPCS) used under the authority provided by legislation on denominations, specifications, and design of coins, passed in 1996. (Full details and issues surrounding HVPCS are given in my e-book.) They also should have added that since there is never any need based on the idea that “we’re running out of money,” to cut any safety net programs, that they want the President to know that everyone signing the letter is committed to voting to kill any budget offered by the President including the chained CPI, or any other provision cutting safety net programs.

A letter enhanced in the three ways I’ve just outlined would have been a damn sight more effective in warning Obama off the chained CPI, than the one Bernie Sanders and the other 15 Senators sent. And it also would have been much more effective in getting those Democratic Senators who signed it and are running, elected in November.

6 Responses to What that Letter Should Have Said

  1. The letter would have been even more effective if it had included a call for increasing SS benefits and for a FICA holiday, but I suppose wishes were fishes…..

  2. The Democrats have clearly given up on passing any jobs legislation in this Congress. They’ve decided to just say “raise the minimum wage” until election day.

  3. Thomas Franks writes about how Democrats have lulled them selves to sloth by their “demographic advantage.” So while R’s continue to lose elections–they lost the popular vote for presidential, House & Senate races– they also steer the political conversation rightward without the slightest penalty. D’s simply can’t be bothered to call them to account. They might lose some of their corporate contributors, and besides, there’s that post-office “retirement” that’s proven so profitable for public policy types who go to work for the private sector.

    If we could turn around the Democratic party’s sloth, and even Bernie Sanders’ inability to articulate the MMT line, money would actually serve people rather than vice versa. Concealing this from ourselves is comforting, and understandable. Sort of like that geocentric solar system. It may be too big a myth to bust for now, but blessings on you for trying.

    Now where’s the link to send this story to Sanders?

  4. Robert Goldschmidt

    The letter should have said that attempts to beggar-thy-neighbor between retirees, municipal employees, unions, immigrants, minorities etc. are merely fighting for a larger piece of a shrinking economy and that we continue to suffer from the confluence of three factors:

    Rapid technology advances which are continuing to reduce the labor component of goods and services through automation and outsourcing.

    Industrial and financial consolidation which has eliminated competition and thus blocked the application of these savings to reduce prices.

    CEO’s doing what they have always done — attempt to maximize profits and divert all of the technology-driven savings to the stockholders.

    The result is an unstable economic environment with increasing inequality and flagging wage-based demand. This has been addressed in past technology-driven unemployment periods like 1890 and 1930 by some combination of progressive change and war spending.

  5. How about a call to use CPI-E instead of chained CPI?

    It maybe true that using chained CPI would have reduced Social Security and Medicare costs, but that is no surprise. Reneging on your agreement to pay your bills will always save you costs, until you get taken to court.

    • I’m all for CPI-E. But while we’re at t SS benefits need to be radically increased. They’re inadequate for retired seniors who have substantial medical expenses or who want to continue to live in the areas they’ve lived in all their lives.