A Billionaire-Funded Campaign to "Fix the Debt" & the Illusion of a Moderate Middle
Thursday, October 24, 2013 7:46 AM
Last Wednesday, October 16, as Congressional leaders worked out a last-minute compromise to avert a catastrophic default of the nation's debts over the objection of a radical band of right-wing, anti-government zealots in the House of Representatives, a familiar group swooped in to be the voice of "moderation, bipartisanship and reason." If by moderation they mean cutting social programs for average people while providing more tax breaks for the wealthy.
At a press conference in Washington, leaders of the self-described "non-partisan" group Fix the Debt called on lawmakers to come up with a long-term plan to address the country's $11.1 trillion national debt by raising $1 trillion through the elimantion of certain tax breaks along with $3 trillion in savings from spending cuts to earned benefit programs like Social Security and Medicare (referred to by some as "entitlements").
"It is incredibly disheartening that we are once again relying on last-minute deals that merely delay the real issues instead of addressing them," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt. "Playing with default was an incredibly dangerous game, but continuing to delay confronting our debt is letting a fire burn that could get out of control at any moment."
For critics of this non-partisan group of reasonable moderates, this kind of panicky, inflammatory rhetoric is what started the reckless brinksmanship that led to the government shutdown and near debt default in the first place. And whether the situation is really as dire as the debt hawks predict is certainly open to debate. After all, the deficit has been cut in half in recent years and in spite of the political drama, Fitch Ratings agency still gives the US a 'AAA' rating. According to the agency, growth is expected to pick up to an average of 3 percent over 2015-17 and gross government debt is set to stabilize over the next year and the remainder of the decade.
Furthermore, it's becoming increasingly clear from recent academic research and empirical evidence from Europe, that the justification for austerity is based on flawed data and austerity actually makes an economy worse.
Nevertheless, next to the scorched-earth policies of right-wing hard-liners like Texas Senator Ted Cruz, the Fix the Debt plan seems pretty reasonable on its face. That is, until you get into the details.
The Most Influential Billionaire in National Politics
Bankrolled by 87-year-old Wall Street billionaire Pete Peterson, Fix the Debt was founded by a group of CEOs of several major corporations to support the $4 trillion austerity plan developed by the National Commission on Fiscal Responsibility (AKA: the "Simpson-Bowles Commission"). The bipartisan group - headed by former Republican Senator Alan Simpson and Democrat and Morgan Stanley investment bank director Erskine Bowles - was created in 2010 by President Obama to find potential solutions to the nation's debt. The plan never got off the ground because Democrats didn't like the cuts to safety net programs and Republicans didn't like the elimination of tax breaks.
However, Peterson, who has long been a fierce opponent of Social Security and Medicare, has continued to breathe life into the unpopular plan by financing town hall meeting tours, TV ad campaigns and other events to gin up publicity for his pet cause. Since founding the Pete Peterson Foundation in 2008, Peterson has reportedly committed $1 billion to a range of political organizations including the right-wing Heritage Foundation (one of the key architects of the government shut-down) and the Committee for a Responsible Budget (CRB), the parent group of Fix the Debt. When the Simpson-Bowles Commission failed to receive support in Congress, Peterson continued to keep Bowles and Simpson as the spokesmen for his crusade. The Los Angeles Times has dubbed him "the most influential billionaire business figure in national politics."
The Maine Connection
Peterson's influence has also spread into Maine with a state chapter launching last year by a group representing various business and financial interests and chaired by State GOP Chair Rick Bennett and former Congressman and Governor John Baldacci. Last October, right before the election of Sen. Angus King, Bowles made a special trip to Portland to endorse the former governor. At the time, Bowles said he had 47 senators from both parties to support the plan and hoped King would help deliver the plan home.
"I could use a bridge like this guy who could go between the parties," Bowles said of King to an audience at the University of Southern Maine. "It would make such a difference."
Governor Baldacci, who now works as a government relations advisor for the corporate lobbying firm Pierce Atwood, said in an interview late last week with The Free Press that his focus in the group is to help bring down the debt by raising tax revenue and lowering health care costs. He said he would not support budget changes that would "hurt poor and middle-income people," but he said everything would have to be on the table.
"All I want to see is a plan moving forward that is bipartisan," said Baldacci. "I want to see one that talks about increasing revenues. I want to see one that talks about being able to rework the cost increases in health care across the spectrum of programs we have. The only way we're going to be able to talk about revenues is to be able to look at everything."
His co-chair Rick Bennett on the other hand has predictably maintained his focus on reforming entitlement programs, which he has claimed in an interview on the WCSH program In the Arena are "outrageously, exponentially growing."
"A Milk Cow with 310 Million Tits"
While Fix the Debt claims to want to "strengthen health and retirement programs for future retirees and generations" and "save Social Security," the actual Simpson-Bowles Plan reveals another story. Under the proposal, which features predominantly on the organization's website, the retirement age to receive Social Security benefits would gradually be raised to 69 and it would prevent workers from receiving reduced early retirement benefits until they reach 64.While advocates for raising the retirement age cite statistics that Americans are living longer, the reality is that many workers, particularly in the manual trades, are forced to leave the work force earlier due to age, illness or to care for a sick spouse. According to the Center for Economic and Policy Research, in 2009, 45 percent of workers age 58 and older had physically demanding jobs or jobs with difficult working conditions. In 2008, half of Social Security beneficiaries began to collect benefits early at the age of 62 in spite of having to take a financial penalty. Currently, a person becomes eligible for full retirement benefits at 66, but anyone born after 1959 must wait until they turn 67 to receive full retirement benefits.
The Simpson-Bowles plan also calls for using a "chained CPI" to cut the "cost of living" (COLA) increases for Social Security recipients, which would amount to a cut of 3 percent after 10 years and 6 percent after 20 years according to the Center for Economic and Policy Research. The average monthly benefit is currently $1,261 a month (about $15,000 a year).
Although austerity advocates say Social Security was never meant to be the only source of income for retirees, given over 30 years of wage stagnation and the depletion and elimination of 401(k) benefits, pensions, and other savings due to the financial crisis, for many Americans Social Security has become their retirement. As the Center on Budget and Policy Priorities notes, without Social Security, nearly half of those age 65 or older would have income below the poverty level.
The Simpson-Bowles Plan also maintains that Social Security needs to be immediately cut to save itself from insolvency, yet forecasts by the Social Security Administration predict that with no program changes Social Security will be able to pay full benefits until 2033. After 2033 it will still pay 74 percent of full benefits. Even looking ahead to 2086, Social Security could pay 75 percent of full benefits with no changes.
In addition to hitting seniors with cuts in?Social Security, the plan also calls for more out-of-pocket expenditures for Medicare recipients. Currently, a typical Medicare enrollee, often on a fixed income, already spends 17 percent of his or her income on out-of-pocket health spending, according to the AARP Policy Institute.
However, as has been proven time and time again, inside the Washington D.C. Beltway couldn't be further from the lives of average Americans. In a notorious email to Ashley Carson, executive director of the Older Women's League, Simpson revealed his inner Tea Partier.
"And yes, I've made some plenty smart cracks about people on Social Security who milk it to the last degree," Simpson wrote. "You know 'em too. It's the same with any system in America. We've reached a point now where it's like a milk cow with 310 million tits!"
Tax Give-Aways to the Rich
And while the Simpson-Bowles plan calls for $1.7 trillion in unidentified spending cuts in addition to slashing Social Security, Medicare and Medicaid, it actually cuts taxes for the wealthy. Under the most recent proposal, although several tax breaks are eliminated, it also lowers the top income tax rate to 29 percent and reduces the corporate tax rate to 26 percent.
Finally, the plan would include a "territorial" tax system that exempts offshore earnings of U.S. firms from taxation. According to a report by the Institute for Policy Studies titled Corporate Pirates of the Caribbean: Pro-Austerity CEOs Seek to Widen Tax Haven Loophole, 93 of the publicly held corporations involved with Fix the Debt kept profits in offshore subsidiaries at the end of 2012 to avoid paying US taxes. Fifty-nine of the firms that reported the amount of their offshore profits had a combined total of more than $544 billion, up from $473 billion in 2011. The average offshore stash per company rose 15 percent in 2012 to $9.4 billion. Currently, those profits are not subject to U.S. corporate income taxes unless they are brought back to the United States.
If Congress adopted Fix the Debt's proposed territorial tax system, the IRS estimated that these 59 companies would stand to win as much as $173 billion in immediate tax windfalls, which would actually add an additional $1 trillion to the national debt. The report predicted that the biggest potential winner would be General Electric, which could reap a tax windfall of as much as $38 billion on its overseas earnings stash of $108 billion. Many of the Fix the Debt member CEOs represent corporations like GE, Honeywell, Boeing and Verizon, which pay little or no income tax as it is, due to existing generous tax breaks.
The Illusion of Moderation
Speaking to The Free Press, Governor Baldacci was adamant that he was not endorsing the Simpson-Bowles plan as written.
"I'm advocating for a bipartisan plan that's endorsed by both parties that frames the issue," said the former governor of Maine. "I think when you sit down for discussions, things change. I support the framework of being able to look at these things in allowing this new budget committee to look at these things."
In spite of polls that consistently show large majorities of Americans oppose such measures, several key Democrats, including the president himself, have signaled a desire to accept "entitlement cuts" as a way of finding common ground with an increasingly extreme Republican Party.
As history has shown, progressive reforms like Social Security were established during a time when labor unions and progressive parties were able to exert pressure on politicians. However, with the absence of an organized left-wing, radical right-wing groups like the Tea Party can tilt the debate so that cutting popular safety net programs can seem like a centrist idea. The result is an illusion of a "moderate middle" exploited by a small group of millionaires and billionaires, keeping unpopular ideas alive with an elaborate infrastructure of think tanks, astroturf groups and political campaign spending.
Ironically, during Peterson's own town hall tours, the non-billionaire set had a different take on what to do about the debt. Writing in the Wall Street Journal about one of Peterson's "America Speaks" listening tours on the debt in 2010, Thomas Frank found that "participants supported 'an extra 5 percent tax' on incomes of greater than $1 million per year (by 68 percent) and an increase in the corporate income tax rate (59 percent) ... as well as a 'securities transactions tax' (61 percent)." 85 percent favored raising the limit on taxable income for Social Security.
Of course, most of those people don't have a megaphone as loud as Pete Peterson.