This week's failure to communicate centered around an offer by President Obama to slow the rate of growth of Social Security by applying a technique called chained CPI -- CPI being the Consumer Price Index, a basic measure of the cost of living -- to come up with lower numbers for the cost of living increases that automatically kick in to raise the level of Social Security benefits.
A chained CPI says that if steak is too expensive, then people will switch to chicken. In other words, as things get pricier, people adjust what they buy to make up the difference, so they don't need as much money to maintain. Let them eat chicken!
That may indeed be the sort of twisted logic that only an economist could dream up, but it does kind of make sense. We do adjust to what we can afford. The question really is whether Social Security beneficiaries are entitled to keep on eating steak, metaphorically speaking.
The president's critics on the left answered with a resounding Yes, reacting as if he had stuck a dagger into the heart of Social Security. My God! Slow the rate of benefits growth? The horror! The reception among Republicans wasn't much warmer. Speaker Boehner, looking like he had just swallowed a lemon, brushed off the president's proposal the way one might swipe at an annoying fly that just won't go away, replying that if cutting the rate of growth was such a good idea then it didn't need to be linked to cuts in taxes, and did I mention that you can forget about any tax increases? Oh yeah, the mess in Washington is very much alive and not so well.
Into the middle of this debate comes an unlikely bomb thrower in the form of David Stockman, who was the budget chief under Ronald Reagan. He recently wrote an op-ed piece in the New York Times that pretty much took down the entire Washington establishment. Here's a sample:
With only brief interruptions, we’ve had eight decades of increasingly frenetic fiscal and monetary policy activism intended to counter the cyclical bumps and grinds of the free market and its purported tendency to underproduce jobs and economic output. The toll has been heavy.
Well, I guess that pretty much covers it. Stockman traces the rise and fall of the American dream from Roosevelt to Regan and beyond. Everyone is to blame. No one escapes his harsh indictment of a cozy alliance of politicians and Wall Street that has left Main Street crucified on a cross of fool's gold.As the federal government and its central-bank sidekick, the Fed, have groped for one goal after another — smoothing out the business cycle, minimizing inflation and unemployment at the same time, rolling out a giant social insurance blanket, promoting homeownership, subsidizing medical care, propping up old industries (agriculture, automobiles) and fostering new ones (“clean” energy, biotechnology) and, above all, bailing out Wall Street — they have now succumbed to overload, overreach and outside capture by powerful interests. The modern Keynesian state is broke, paralyzed and mired in empty ritual incantations about stimulating “demand,” even as it fosters a mutant crony capitalism that periodically lavishes the top 1 percent with speculative windfalls.
The only things worse than the problems he describes is the fix he proposes, "a solution so radical it can’t happen." Paul B. Farrell, writing in MarketWatch, lists Stockman's eight steps:
Stop all government subsidies of capitalism: “a sweeping divorce of the state and the market economy” ending “crony capitalism.”
Eliminate incumbency: A “sweeping constitutional surgery” with
“amendments to give the president and members of Congress a single
six-year term, with no re-election.”
No more elected officials as lobbyists: “Prohibiting, for life, lobbying
by anyone who has been on a legislative or executive payroll.”
Overturn Citizens United: End the fiction that corporations are humans.
Balanced budgets: “Mandate that Congress must pass a balanced budget.”
Close all Wall Street derivatives casinos ... Purge “corrosive
financialization that has turned the economy into a giant casino since
the 1970s.” No cheap Fed loans, no bailouts, no deposit insurance.”
Reenact the Glass-Steagall.
- Stop Fed micromanaging the economy: No more cheap money. No debt buybacks. No investing in private companies. Fire the Fed’s central planners. Restore “The Fed’s original mission: to provide liquidity in times of crisis but never to buy government debt or try to micromanage the economy. Getting the Fed out of the financial markets is the only way to put free markets and genuine wealth creation back into capitalism.”
This isn't rocket science. It is hard. It requires everyone losing their privilege and doing their fair share, from the bottom 1 percent to the top 1 percent. We lived high on the hog for a long time. Now the bills have come due, and we need to cut back and throw a little more into the pot. The stuff that Stockman talks about is complicated, but the aim is simple: Fix what we all know is broken.