The "Entitlement Problem": Racing ourselves to the bottom

by: Paul Rosenberg

Sat Nov 14, 2009 at 12:30


All this talk about Democrats worrying over deficits in the midst of a recession (forget the GDP, FDR got the GDP going up by the end of 1933, and nobody claims the Great Depression ended the year he took office) is so crazy one scarcely knows where to begin.  (The 1937/38 recession, perhaps?) And targeting Social Security and Medicare? So almost at random...

On Friday, I stumbled across an early October  blog post by Stephen Levy--one of the leading experts on California's economy, particularly in terms of the role of government spending and investment. In it, he wrote:

Most current public pension and health care benefits were negotiated at a time when private sector pay and benefits were growing. In recent years many private sector employees have seen their pension and health benefits decline as companies went out of business or changed benefit arrangements. As a result, public employee retirement benefits now seem high in comparison to what is happening in the private sector.

In fact, it's not just public employee retirement benefits.  Perhaps the main reason we have an "Entitlement Problem" is because private wages and benefits stopped growing for the bottom 90% of income earners about 30 years ago. (And even the next 9% hasn't done well by historic standards.) The lack of broadly-shared economic progress in the era of conservative Voodoo Economics is the great unspeakable truth of our times.  And this great stagnation makes taxes, public employee benefits and social insurance--such as Social Security and Medicare--seem like much bigger factors than they would be if we still had the sort of broad economic prosperity that "socialists" like FDR and Harry Truman gave us, and which persisted until around 1973--as could readily be seen from the following pair of charts from my earlier diary, "The One Percent Economy--Part One: The What"

First, the "socialist" economy of the New Deal Party System Era (plus a few extra years of spillover):

Note how the slowest growth rates were from the top 1%.

Then, the economy we've had since Democratic dominance gave way to divided government:


Levy was trying to make a relatively modest point in trying to achieve a relatively modest goal of rationality and civility in dealing with the economy we've got.  Me, I want to change that economy.  But first, let's hear Levy out:

Paul Rosenberg :: The "Entitlement Problem": Racing ourselves to the bottom
Most current public pension and health care benefits were negotiated at a time when private sector pay and benefits were growing. In recent years many private sector employees have seen their pension and health benefits decline as companies went out of business or changed benefit arrangements. As a result, public employee retirement benefits now seem high in comparison to what is happening in the private sector.

If you feel that public employee retirement benefits should be cut, how should that happen? Should we change benefits for current employees retroactively (is this even legal except through negotiation?) or for new employees? If you favor reducing public employee retirement benefits, do you favor cutting Medicare and Social Security benefits for people who have paid into the system and planned for these promised benefits?

Or we could raise taxes to cover these promised benefits or adopt some combination of benefit cuts and tax increases.

These budget challenges are really social contract challenges. The social contract under which these promises were made no longer works in terms of budget arithmetic.

We need a new social contract about public employee retirement benefits and how they are paid for. We need a new social contract about Medicare and Medicaid benefits if health care cost savings do not solve the problem. Social Security choices are simpler but also reflect the need for a new social contract that reflects the new arithmetic of these programs.

My own opinion is that we can devise better solutions if this discussion proceeds with respect and in acknowledgement that existing arrangements reflect valid promises and social and legal contracts and treat this as a serious arithmetic challenge without blame or heated rhetoric.

Well, that's certainly a nice fantasy, that "without blame or heated rhetoric" part, at least. (The rest, not so much.) But historically, the blame and heated rhetoric are a big part of how we got here.  Indeed, blame and heated rhetoric lie at the very core of the culture wars used to accomplish the transition from the economy of 1945-1973 to the economy of 1973-2007, and while it might be nice to fantasize about putting an end to them, it should be noted that Barack Obama has not put an end to the culture wars.  Indeed, with figures like Sarah Palin, Glenn Beck, Joe "You Lie!" Wilson and the Teabaggers, the culture wars are pretty much the only thing the GOP and right wing generally has left.  Obama himself appears to have no inkling what the culture wars are all about.  He appears to believe they are an array of "social issues" that get in the way of solving our "real problems."

But to a very large extent, the culture wars are a war of constructed tribal identity, fronting for elite corporate interests, and their primary historical achievement has been to transform an economy of broadly-shared growth into one of stagnation and diminished prospects for the many.  The various issues that are involved are far less significant in the long run than this overarching effect in terms of the upward redistribution of wealth, power, opportunity and possibility.

The anger that the rightwing culture warriors are feeding on is not going away--particularly not with combined under- and un-employment figures of between one in five and one in six. What's needed now is not for folks to just calm down.  What's needed is for that anger to be turned against the prime beneficiaries of the culture wars, the elite 1% whose stranglehold on the economy leaves the rest of us scrambling for crumbs year after year, decade after decade.

Levy's call for a rational discussion is both more humane and more progressive than Obama's repeated hinted openness to the bipartisan catfood commission route, where all pain apportionment is done behind locked doors, by those who will feel none of it themselves.  But the end result is likely to be much the same.  Which is why civility is not the answer.  Civility would be just fine, if accountability were for the wealthy and powerful and not just exclusively for the rest of us, along with more than our fair share of blame.

Rather than civilly adjusting our public expenditures to the private penury of the post-1973 world, we should be quite rudely fighting to restore--and even improve upon--the broad prosperity of the pre-1973 era.  Nothing less than that deserves to be called "progressive."  Nothing less than that deserves to be "justice."  Nothing less than that deserves to be "humane."  Nothing less than that should be our bottom line.


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oh gawd. the 'my favorite thing$' approach to life (4.00 / 1)
work$ for the affluent who don't worry about re$ource$ cuz they have re$ource$, and singing happy songs kind of works for those who want everyone to be selfless and mother theresa and ghandi ... as long as you keep your eyes closed.

so, let's suppose that YOU had a surplus of money sitting on your kitchen table in piles - a pile for your retirement, a pile for your future retraining / unemployment, a pile for your future health problems, a pile for your kids and elderly parents, a pile to pay for the roads you use and the electric grid keep up ...

and someone was kicking in your door to come TAKE as much as they could from each pile, or TAKE every pile, you'd open the door and sing "My Favorite Things" and they'd turn around and run away, cuz, like, what they were doing wasn't positive and community building! OR

suppose you had to hand over little pieces of each pile EVERYDAY cuz those rich f'king pigs running the road construction company and the defense company and the banking company and the health "care" oligopolies ... wanted an even BIGGER house than you have and they have, cuz they pigs wanted MORE cool food to eat than you ever get, cuz the rich pigs wanted MORE cool trips in 2 years than you'll get in your lifetime ...

suppose you had to hand over these little pieces of your piles by LEAVING your door open AND not knowing when whoever came in ...

so you'd stand out front of your house singing "My Favorite Things" cuz that would stop THE PIG$ from showing up whevever they wanted to take ANOTHER piece of your piles!

IF you want the world to be good, you gotta be good yourself. HOWEVER, someone either puts effort into STOPPING the doubleplusungood, or someone supports those putting out the effort, or doubleplusungood is gonna whomp your goody goody ass.

A lot of as little kids learned that if you hum and close your eyes and plug up your ears at night, then the monsters can't get you - it is a great stratergery when the monsters are in your head, and it is a waste of time when there are REAL monsters.

rmm.  



It is too full o' the milk of human kindness To catch the nearest way


I like the way your mind works (4.00 / 1)
Yes, let's stop theorizing and figure out a concrete plan.
Correct me if I'm wrong. Thanks.

[ Parent ]
Unfortunately (4.00 / 1)
One of the points of this diary is that the monsters are both REAL and in our heads.

It's a regular two-front war we've got on our hands.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
Last I checked (0.00 / 0)
You can't get into people's heads. So, it's a waste of time.

An important part of any culture is the way people think about things, and this can certainly be manipulated - advertising, political campaigns, etc., but don't put the cart before the horse.

You can't change what people think. You can only change the things they might think about. The answers are not in people's heads, IMHO.


[ Parent ]
Everything You Say Gets Into Someone's Head (4.00 / 1)
So I'm quite mystified that you claim otherwise.

You can't change what people think. You can only change the things they might think about. The answers are not in people's heads, IMHO.

You really should read McLibel: Burger Culture on Trial by John Vidal.  It's just an incredible book overall about an incredible legal case, but it also has some very pertinent info about how much McDonalds depends upon getting into the heads of kids who can't even form full sentences yet.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
Only slightly on topic (4.00 / 2)
but how frustrating is it that Republicans have successfully turned words with positive connotations (entitlement, welfare, protectionism) into ones so fraught with negative connotations.  

Politics is the art of the possible, but that means you have to think about changing what is possible, not that you have to accept it in perpetuity.

Oh, My Poor Soul! (4.00 / 2)
I'm afraid you have no idea what an off-topic comment looks like!

Equally frustrating is how they twist positive words like "freedom" into pretzel-like shapes that cover the freedom to lose your home & your job, but not the freedom to control your own body.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
Bluntness (0.00 / 0)
It is our fault. Our rational counter discussions are just words, words and more words.  

[ Parent ]
It would sure help (4.00 / 2)
if everyone who's supposedly on the side of the non-rich would at least acknowledge the obvious, that this is first and foremost a class war, an extremely vicious one, and Obama is aggressively waging it from above.

It's sad how so many who can correctly analyze the self-destructive socioeconomic fallacy of the teabaggers' position can't do the same for their own identical fallacy.

The trouble is, they fixate on the "culture war" facade of it themselves. For many, it's enough to dismiss the yahoos as just racist yahoos, and ignore the real economic situation just as much as the teabaggers themselves. That too is sharing the same swindled haplessness while the corporatists get what they want.

http://attempter.wordpress.com


Class war (4.00 / 2)
Class war is one of those jujitsu terms.  It is frequently used by the rich as a pejorative against the rest of uds who are merely trying to defend themselves against the wealth transfers.

One interesting fact.  As wealth becomes more unequal, the educational standards of the society have risen sharply.  During the 20s and 30s the median was an 8th grade education (median = 8.3 grades).  By 1970 it was a high school diploma (46.5% of the population entered college in 1970).  Now it is more. (Data from thre Census Bureau, mostly from the Historical Abstract).  As education becomes more common, wealth should become more evenly distributed.  Instead. it hasd become way more comcentrated.  Contacts, "social skills", and inherited money have become more important.  


[ Parent ]
Yes, But (4.00 / 1)
During the New Deal Party era, wealth did become more evenly distributed.  That's why the conservatives hated it so much.

It's only since the 1970s, as the New Deal order has been undermined, that contrary development--increased wealth concentration--has come to dominate.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
Because of what is happening (4.00 / 1)
in automation and technology, the old social contract of labor for income is dying.

Because of this we are faced with two choices:

1) A more massive welfare state now than ever

2) Totalitarian hell

Yes we consume too much as a people, but the answer isn't unemployment, it is straight-up socialism, where everyone has a economic security but not economic superfluity.

Any attempt to impose an unequal austerity requires a Totalitarian Hell to police.

By the way, this isn't new. In the New Deal we responded to the same degradation of labor by electricity and fossil fuels by creating massive amounts of government jobs. A strategy in place till this day.

America chose the massive welfare state, Germany etc. chose the totalitarian hell.


Mostly Outsourcing Driven By Cheap Labor - with Exceptions (4.00 / 2)
By far the biggest driver for the reduction of blue collar labor jobs in the US is outsourcing for cheap labor rather than automation.  In fact, most US companies are falling behind their foreign  counterparts when it comes to investing in the latest automation and technology.  Often this is due to the "green field" effect (i.e. business building new factories don't invest in yesterday's technology), and often it's due to the lack of a skilled labor base.  It's notable that some countries with high labor costs such as Germany, Japan, and Italy, etc remain price competitive with low labor cost countries in certain manufacturing industries.

My particular industry is both highly automated, and yet also requires quite a bit of skilled touch labor,  My company outsources typically to countries that have HIGHER stabilized labor rates (Japan, Europe), but by outsourcing, my company is getting sweetheart deals from the countries/manufacturers and  avoiding large startup costs (the other countries score state of the art engineering and manufacturing knowledge).  Typically, my peers and I regard outsourcing as an easy out by short sighted management especially since our industry has a track record of outsourcing "failures" due to poor parts quality and high re-work costs.

With regard to the changing "social contract", it's much more interesting to examine REAL contracts.  It was telling that high priced hedge fund managers and bankers had sacrosanct "unbreakable" contracts even as they trashed the world's economy while auto industry union labor contracts were renegotiated by Republicans in Congress despite the fact that the failure of the American auto manufacturers was due to a failure by management (note that US blue collar labor making foreign cars in the US have not imploded despite having US blue collar labor).  It's also telling that people are being warned that their pensions (MORE contracts) are worthless even as worthless loans (MORE contracts) and worthless OTC derivatives (MORE contracts)  for hedge fund managers and bankers are propped up by US tax dollars.

It would have been real capitalism to have let all the bankrupt banks, insurance companies and hedge funds go belly up rather than allowing them to grab trillions in taxpayer dollars.  Obviously, the average Joe is getting shafted on his contracts while the people that caused this mess are skating off with the loot.  So apparently the new "social contract" is that the rich get richer and everybody else gets screwed.


[ Parent ]
Excelelnt COmment, Except... (0.00 / 0)
For this:

It would have been real capitalism to have let all the bankrupt banks, insurance companies and hedge funds go belly up rather than allowing them to grab trillions in taxpayer dollars.

Not exactly.  Capitalism is the political rule of capital.  Getting yourself bailed out when you screw up is what rulers everywhere do.  So this is actually a perfect example of capitalism.

Free markets, not so much.

But "free market capitalism" is an utter and complete oxymoron.

More on this in the next few weeks.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
Free Markets Vs. Capitalism (4.00 / 1)
Ah, thank you.  Didn't know that.

Getting yourself bailed out when you screw up is what rulers everywhere do.  So this is actually a perfect example of capitalism.

I guess we need to make sure everybody understands that "We, the people" in the preamble no longer applies to 99% of the people.


[ Parent ]
Well, We're The Wee People (0.00 / 0)
Betcha didn't know you were a Leprechaun, now didja?

Open Left, you learn something new every day.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
bogus (0.00 / 0)
If your theory is true, why aren't the factories HERE instead of overseas? The saveings in shipping would be substantial.

Government by organized money is just as dangerous as government by organized mob..... FDR

[ Parent ]
Can you describe in practical terms what this would mean? (4.00 / 1)
"Rather than civilly adjusting our public expenditures to the private penury of the post-1973 world, we should be quite rudely fighting to restore--and even improve upon--the broad prosperity of the pre-1973 era.  Nothing less than that deserves to be called "progressive."  Nothing less than that deserves to be "justice."  Nothing less than that deserves to be "humane."  Nothing less than that should be our bottom line."

The other day in Chris Bowers' diary about a new jobs program, I argued that the argument would require an industrial policy in the U.S. Do you agree, or do you see the issue as something more than even an industrial policy?  


Industrial Policy Would Be Part of It, Certainly (0.00 / 0)
But also fiscal policy (both taxing and spending) and monetary policy as well.  To do it right will mean using everything we can get our hands on... including a transformation of the moral climate of our country.

This is not something you can easily engineer, but in Wealth and Democracy Kevin Phillips argues that just such a transformation has taken place in the history of the last three dominant world powers that preceded us.  You have to pop the bubble of adoration for wealth in itself and for those who have it.  Once that bubble is burst, it's a whole lot easier to deal with the other ones.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
I have no read the book (0.00 / 0)
However, didn't those things happen after the decline of those countries from being empires?

[ Parent ]
Yes, Precisely. (0.00 / 0)
Actually, Phillips says (though I can't quite find the place just now) that the elite and the masses part ways, with elites growing wealthier than ever, while the masses stagnate, and reactionary politics dominates for a period of around two generations after the very peak of power, when an unexpected setback occurs out of the blue.   (In our case, the loss of the Vietnam War.)

It's only then that egalitarian politics makes a comeback.  So we may be another decade away from the turning point.  However, I think we could see it starting now, if only we had the leadership for it.  Lord knows, we've got the incipient anger at the irresponsible financial elites.

Still, that change came in Britain well past its peak, but before it lost its empire entirely.  In any case, the good news is that though things get relatively hard for the elites with the end of empire, the average folks end up doing better in a relatively short period of time.  The British working class, for example, was much better off by the 1950s than it ever was under the empire--and that was just a decade after the Blitz.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
well I do think there is that possibility here (4.00 / 1)
but as someone else wrote in response to your views, "we are the children of Reagan." I think that it will take a generational shift for this. There is an understanding that something is wrong, but most of the public does not have the language, much less the tools, to address it. Over at Mydd.com, I mentioned how a friend of mine who is a moderate conservative was attempting to describe her problem with plutocracy, but she was calling it socialism because she had no language to describe corporate take over of government. I am not sure how to bridge this lack of language or tools other than 1 on 1. I was able to sit down with her to talk through what she really meant.

[ Parent ]
Plutocracy (0.00 / 0)
That's what it's called.  AKA "capitalism", but that's probably a weeee bit of a stretch for the beginner here.

But, of course, you're absolutely right on the larger point about the need for developing the language.  Which is why it's such a pity that Obama isn't who Lakoff thought he was, because he certainly does have the chops to have done a lot to change the language, if only he'd had the least bit of interest in it.

One last thing, BTW, Kevin Phillips really is a good author to reach these folks with (if they actually read real books) since he was a major GOP guru until around the time that Bush I showed up.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
Elites can survive (0.00 / 0)
Suez killed the self-image of much of the old landed aristocracy, and taxes cut their finances somewhat, but in the scheme of things they probably suffered greater damage from the world wars (where bright young things of ancient lineages made up a high proportion of dead subalterns).

The landed elites began to climb back into prosperity with Thatcher, and nowadays the leader and shadow chancellor of the Exchequer both belong to that class.

Meanwhile, it's worth noting that the progressive moment in Britain lasted from 1945 to 1951, when Churchill got back into power. He couldn't demolish the NHS, but the 1950s combined greater affluence than ever before with the first signs of the economic stagnation that allowed Thatcher to deindustrialise much of the country.

So yes, this is a potential inflexion point, but I don't think we can wait around for inevitable historical trends. We have to force the change and when it comes, we have to get everything we can as quickly as possible. Unless the present course of progress is utterly derailed, it'll soon return to its usual tracks.

Forgotten Countries - a foreign policy-focused blog


[ Parent ]
"And targeting Social Security and Medicare?" (4.00 / 1)
this is one of the things about the 'health' 'reform' bill[s] that's being ignored.

yes, we need to fix medicare and medicaid, but 'reform' is already about cutting 'entitlement' spending. don't look now, but obama has already said that if the proposed cuts to medicare don't rein in spending enough, there will have to be more. or was nobody actually listening to the greatest health care speech evar?


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