Wednesday, January 19, 2005

January 18, 2005

Reforming Bush's Reform Agenda

I was thinking this morning about Bush’s agenda for his second four years at the wheel of our bus. In his first four years his driving skills were more akin to those of Mr. Magoo than Dale Earnhardt. All we can do now is hope he learned something the first time around the track.

Nevertheless, I am not suggesting that Democrats should simply discard Bush’s stated second term agenda out of hand, but to embrace it. Well, not as currently written, of course. Democrats need to make these issues their own – take them away from the Republicans by first acknowledging the problems, embrace Bush’s desire to fix these ills, then rewrite Bush’s prescriptions so they do good rather than harm.

Reform Social Security

Republicans never liked Social Security or Medicare, both of which they see as little socialist tumors festering in our capitalistic body. And now, for the first time in half a century, they have majorities in both houses and a President in the White House. Now is the time to begin cutting out that tumor, one piece at a time. The first step is to sell Americans on privatizing a portion of Social Security. Their argument is that, by letting people invest a portion of their Social Security withholding in the stock market workers will get a better return on their money than they do in the government run Social Security Trust Fund.

What Democrats need to say is, “Fine. If you Republicans in Congress really believe that then let’s do it today. If you Republicans are right that there are higher returns just waiting to be harvested in stocks and bonds, then let’s simply cut to the chase and pass a law today that allows the Social Security Trust Fund to be invested in stocks and bonds. What are we waiting for? If that’s true then we are violating our fiduciary responsibilities. We must remedy that immediately. So let’s just cut to the chase and start investing in the markets.”

You will hear a pin drop in the room as Republicans stare in wide-eyed terror. Because, the last thing they want is their fingerprints on the body. By proposing that workers be saddled with the responsibility to make stock and bond investments with this money if they win or lose becomes their problem, not Washington’s. If the market crashes or returns fail to meet expectations, well, you made poor decisions. But, if the government is investing the money then that’s a different matter.

Democrats need to push this hard, as though they really want it. And, then let Republicans explain why they do not want to pass a law that begins harvesting all the stock and bond profits they claim are just there to be had.

That is not an argument I have heard Democrats make yet. And they should, because it would prove the lie that private accounts will somehow generate better returns for future Social Security recipients.

It’s not like no one has tried this. We learned when Great Britain tried the same thing that the only people whose returns grew were financial institutions that skimmed up to 15% in fees off this high pressure stream of revenues suddenly flowing into their hands. Compare that to the average half a percent it costs for Social Security to manage that money today and you can see that those private accounts Bush wants would have to out perform the historical average of stock and bond returns by several percentage points to pay off.

So, cure what ills Social Security really has? Sure go ahead. But make sure the prescription is written by Dr. Welby, not Dr. Kavorkian.

Reforming the Tax Code

In his first four years in office Bush already reformed a portion of the national tax system by cutting taxes in ways that provided a few crumbs to working Americans and cake and caviar to the already wealthy. All that extra money dumped on those at the top was supposed to trickle down. Some did. Yacht sales have skyrocketed, luxury resorts, hotels and restaurants were forced to add a sixth “Star” level of luscious service, and private jet services are booming. The rest of us are still waiting for the trickle, staying at Motel 6, eating at one-star Denny’s and flying coach – if we’re lucky.

If Bush really wants to use tax policy to spur domestic economic growth there is no better or faster way to do that than to cut the payroll tax. But, since he shot our national wad giving nearly $2 trillion in tax cuts to the rich, the only way he can cut the payroll tax now is if he would agree to repeal some of his earlier tax cuts to the rich.

That’s where Democrats need to come out swinging. When you cut the payroll tax you put dollars in the pockets of working Americans, many with families to support. The big selling point here is that there is no need to wait for some questionable “trickle down” affect to materialize. This money goes right to people who spend it as fast as it comes in, not because they are spendthrifts, but because they no discretionary income. What they do have are fundamental human expenses that need to be met each month and which they struggle to make on their shrinking hourly earnings. So they spend those extra dollars the same week they get their hands on them. And, they spend them on the kind of stuff that really does create new jobs – furniture, clothing, cars, TVs, and other durable goods.

Of course none of that spending will create many US jobs unless we reform one more thing:

Reforming Trade
Democrats need to really dig their heels in on trade. If all those working American dollars end up going to firms producing goods in China and India all that will do is deepen our already horrendous trade deficit. While we must never go back to protectionist trade policies, we must insist on fair trade.

What is fair trade? It’s easier to explain what unfair trade is, because that’s what we have now. While the Bush administration feels it has every right to tell other countries what form of government they should have, they seem to believe they have no right to tell them how they should treat their workers or the environment.

American manufacturers must – rightly - toe the line, at great expense when it comes to worker pay and safety. And, they comply with expensive methods to dispose of hazardous materials. Meanwhile in China and India and other developing countries workers have no such protections and hazardous materials are cheaply dumped on the ground, into rivers or released into the atmosphere.

There’s no way an American manufacturer of widgets can compete with a Chinese widget company if the Chinese factory can simply dump its toxic widget wastes, pay its workers peanuts and, as for worker safety well, if a worker is gets his or her hand eaten by a widget press, it’s just too bad – for the worker. Workman’s Comp? Are you kidding?

Since Americans are not about to go back to the bad old days of worker mistreatment and polluting factories, we have to insist that any foreign manufacturer that wants to sell their goods in America adhere to some fundamental standards of environmental responsibility and treatment of workers. Otherwise we will continue to lose jobs here and despite all our environmental rules here, the world environment will grow increasingly toxic.

Let’s review:

Reform Social Security: Private accounts are a smoke screen. If higher returns are really available someplace then it should be the responsibility of Social Security administrators to go get those returns – right now. And, unless they are lying, why shift the responsibility for making winning choices on the backs of 60 million American workers? Make the bastards answer that question.. in public. And, if more money is needed to keep the fund solvent into the next century the fastest way to do that is to simply remove the income cap and start tapping all income. The retired rich get Social Security checks every month too, even though they hardly need the money. So take the caps off. Then if that still leaves a gap, start means testing benefits. And if the Republicans scream that that's "redistribution of wealth," remind them about the Bush tax cuts. If that wasn't the biggest redistribution of wealth in our history I don't know what it was.

Tax Reform: Give tax breaks to people who actually need a few extra bucks a week, not to those who will only pile that money up in some family trust fund, offshore accounts, or both.

Trade Reform: If a foreign manufacturer wants to sell his products and services to the lucrative American market, make them following the same rules American manufacturers must follow. If they think that’s a bit pushy, tough. Take it or leave it.

Jesus, I’m getting crotchety in my old age.

By Stephen Pizzo
Raconteur at Large

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