The Great Debt Deception

One Cent’s Worth
By MARC MEWSHAW  |  December 26, 2012

As the country hurtles, Thelma and Louise-style, toward the fiscal cliff, there's been a steady drumbeat of calls for the two parties to join hands in the name of "shared sacrifice." We're told a deal — a "grand bargain" — needs to be struck lest the tax hikes and spending cuts set to kick in on January 1 drag us back into recession. Such is the potential economic fallout of "going over the cliff" that "everything should be on the table," including entitlement reform.

But all of that hysteria misses the point — and, if heeded, might just send us into an austerity tailspin.

Its purveyors would have us believe that the ultimate goal of any so-called grand bargain should be to balance the budget, when the real threats to the economy are mass unemployment and sluggish growth. So why all the alarmism over the debt? Simple: it's the bogeyman conservatives have ginned up to wring concessions from Obama, the juiciest of which would be the gutting of Social Security, Medicare, and Medicaid.

Thank goodness, then, that Obama isn't falling for it. Or is he?

In mid-December, after months of vacillating, he took a hard line, ruling out any cuts to Medicare that couldn't be paid for by renegotiating bulk deals with health-care providers.

But more recently, he's sounded worryingly like an apostle of austerity. There's been talk of raising the Medicare age. He's even offered to switch to a much stingier formula for calculating Social Security benefits in exchange for Republicans agreeing to higher taxes on the rich — playing right into GOP hands (not to mention reneging on his campaign promises).

Obama's willingness to surrender the high ground in search of common ground is downright baffling. He has a mandate and he should use it. Naysayers who claim he won reelection by too narrow a margin to speak for the people are plain wrong. A recent Quinnipiac poll showed that a whopping 70 percent of Americans oppose cuts to Medicaid as part of a fiscal cliff deal. Sixty percent want to see taxes go up on the rich.

So let's hope that as the pressure to reach a deal ratchets up, the president doesn't go in for any eleventh-hour backsliding. Because slashing the already frayed social safety net wouldn't just be a betrayal of the American people who reelected him — it would also be bad policy.

For starters, too much deficit reduction at this delicate stage in our recovery is likely to backfire. Just look at Europe. Its experiment in mismanagement has proven that cutting government spending in a weak economy wipes out jobs and slows growth. In turn, a smaller workforce means less in tax revenues and greater demands on social welfare services, which only adds to the deficit. This is the infamous "debt trap" that the ailing southern Eurozone countries have fallen into, a death spiral we'd rather avoid stateside.

The real imperative for 2013, then, should be job creation, not deficit reduction. True, social welfare programs are growing unsustainably. But putting people back to work will go a long way toward making them more affordable, since entitlement programs draw most of their funding from paychecks — and people who earn more need less welfare.

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  Topics: News Features , Politics, Medicaid, Obama
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