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Posted at 10:07 AM ET, 12/21/2010

Cuts or investments at the State of the Union?

By Ezra Klein

Bob Kuttner says the White House is planning to propose Social Security cuts -- alongside a variety of other deficit-reduction efforts -- in the State of the Union. The political rationale is twofold: "to pre-empt an even more draconian set of budget cuts likely to be proposed by the incoming House Budget Committee chairman, Rep. Paul Ryan," and "to give Obama 'credit' for getting serious about deficit reduction."

I don't know who Kuttner's sources are, but the report is plausible. You might even add that the White House's reasons aren't just political: Many in the administration worry about the medium-term deficit and think it important to get started on deficit reduction, and on the specific case of Social Security, feel it's better to get the system back into balance when a Democrat is in the White House and Democrats control the Senate than in a world where Republicans hold more power.

I'm pretty hostile to most forms of Social Security cuts, for reasons I've explained previously. But that's not even my biggest worry here: If the Republicans are talking cuts and the Democrats are talking cuts, that means we're just talking cuts. Someone, however, needs to be talking investment. As Andy Stern has argued, we've got both a budget deficit and an investment deficit. Our infrastructure is crumbling. Our schools were in bad shape before the recession and they're in much worse shape now. R&D isn't where it needs to be, and nor is America's broadband system, or its energy grid.

It's important to avoid a fiscal crisis in the future. But it's also important to lay the foundations for continued growth. I can see the argument for the White House making some moves on the deficit in the State of the Union, but I'd feel a lot better if those moves were paired with an aggressive strategy for national investment. Putting aside the politics for a moment, the country itself needs more than the Republican agenda is willing to offer over the next few years. So pitting the Republican agenda against a kinder and gentler version of the Republican agenda just isn't good enough.

By Ezra Klein  | December 21, 2010; 10:07 AM ET
Categories:  Budget  
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Comments

". Our infrastructure is crumbling. Our schools were in bad shape before the recession and they're in much worse shape now. R&D isn't where it needs to be, and nor is America's broadband system, or its energy grid."


Really? Because they're building $500 million schools in Los Angeles.

US education spending across all government levels is $1026 billion. That's more than the GDP of many nations. What a joke.

Posted by: krazen1211 | December 21, 2010 10:10 AM | Report abuse

". Our infrastructure is crumbling. Our schools were in bad shape before the recession and they're in much worse shape now. R&D isn't where it needs to be, and nor is America's broadband system, or its energy grid."


Really? Because they're building $500 million schools in Los Angeles.

US education spending across all government levels is $1026 billion. That's more than the GDP of many nations. What a joke.

Posted by: krazen1211 | December 21, 2010 10:10 AM | Report abuse

I will buy someone getting serious about the long term deficit when I see that person trying to address the rate of inflation in health care. As you have noted, that is far more substantial and far less sustainable an issue in its effect on Medicare than the COLA is in its effect on Social Security.

Broader question, do we want to maintain the standard of living we aim to provide for seniors? If so, how do we fairly divide the burden among current workers, people who pay payroll taxes, and seniors themselves? I'd rather pay higher taxes than see us reenter the time prior to Social Security where seniors were the poorest segment of society.

Posted by: rcd2 | December 21, 2010 10:18 AM | Report abuse

The Democrats sure are stupid. We just sat through an election where Republicans portrayed themselves as the saviors of Medicare. Here in Missouri, Blunt hammered Carnahan in the Senate race and walked to victory on the senior vote. Now McCaskill, led by Obama, is going to walk into the SS trap.

Posted by: drtalc2004 | December 21, 2010 10:27 AM | Report abuse

The administration seems to believe that it will keep the center -- and win re-election -- by governing as moderate Republicans. That calculation reflects their apparently unshakeable faith that the Democratic base will suck it up each and every time they kick it in the face. But if the president targets SS cuts on the heels of, say, that estate tax cut and a freeze on COL increases for government workers, the base will say enough.

Just look at the math from the VA and NJ gubernatorial races in '09 and the mid-terms in '10. The administration can't afford to trade center-left votes for center-right ones. Their single greatest election challenge, going forward, is a turned-off base. The repeal of DADT is a wonderful carrot but only the beginning.

Posted by: scarlota | December 21, 2010 10:29 AM | Report abuse

"Someone, however, needs to be talking investment."

The opportunity to do this was in 2009 during the American Reinvestment and Recovery Act and during President Obama's first budget. It seems to have been missed.

I suspect that the one way you might be able to get "investment" through would be to 100% off set the costs of new projects with eliminations of old programs. Prime example would be to replace ethanol subsidies with something involving wind or solar.

At this point, given the size of the Federal budget deficits I don't believe you are going to be able to convince most Americans that the Federal government isn't spending enough money. You may be able to convince them to shift money to more productive projects by eliminating other ones. President Obama had an opportunity to get out in front of this in 2009, but he failed when his first budget ("A New Era of Responsibility") had cuts equal to just 1/2 of one percent of the total budget, which Congressional Democrats then pared back even further. This showed a lack of seriousness about actually reviewing the Federal budget for outdated and wasteful programs and reordering priorities, which he promised to do in the campaign.

"The news releases began flying as Obama unveiled the long-awaited details of his $3.4 trillion spending plan, including a list of programs he wants to trim or eliminate. Though the proposed reductions represent just one-half of 1 percent of next year's budget, the swift protest was a precursor of the battle Obama will face within his own party to control spending and rein in a budget deficit projected to exceed $1.2 trillion next year."

http://www.washingtonpost.com/wp-dyn/content/article/2009/05/07/AR2009050702001.html

Posted by: jnc4p | December 21, 2010 10:41 AM | Report abuse

This is an insanely stupid idea. Social Security cuts won't make much difference to the long-term fiscal health of the nation--it's medical costs, stupid!--and will hurt the sort of people who need and deserve government help the most. Leave the plutocratic class warfare to the GOP, dammit!

Posted by: bmoodie | December 21, 2010 10:43 AM | Report abuse

This should remove any doubt that Obama is anything but a center-right practitioner.

His call for SS cuts will guarantee he will be primaried.

And rightly so.

Nevertheless, he is unilaterally destroying the progressive brand.

This man has betrayed all Democrats and is clearly a wolf in sheeps clothing.

Posted by: lauren2010 | December 21, 2010 10:44 AM | Report abuse

Haven't they learned anything from the stimulus? There's no point in opening with a fair compromise. The modern Republican party is being run by its most extreme elements--they're characterizing RomneyCare as Socialism, for God's sake!

Why in the world would Democrats propose cuts to the most popular and successful elderly anti-poverty program in American history? This isn't like Medicare, where there are huge opportunities for increased efficiency. I'm sure, of course, you can fiddle around the margins with auto-deposits or anti-fraud measures, but I don't think that's what we're talking about here.

This is just stupid. Stern is right, we need to be investing in America. The idea that tax cuts=growth is false. The idea that flooding more money into the same private Wall Street hands who have invested it so very poorly for the past decade will work out well this time is also stupid. We need more of the stuff that only government makes--bridges, tunnels, schools.

So sick and tired of giving more money to the people who piss it away in bizarre "let's make a fortune building houses and selling them to people we KNOW will default on their loans!" schemes.

Posted by: theorajones1 | December 21, 2010 10:49 AM | Report abuse

Screw the START treaty.

Is there time for the lame ducks to impeach Obama?

Posted by: lauren2010 | December 21, 2010 10:59 AM | Report abuse

I was just getting ready to tell all my relatives at Xmas dinner that Republicans like Ryan were going to end SS as we know it, but now I'll have to tell them it's actually Democrats like Obama.

I'll have to also agree with them Obama is the worst president ever, including BushJr.

Posted by: lauren2010 | December 21, 2010 11:10 AM | Report abuse

"As Andy Stern has argued, we've got both a budget deficit and an investment deficit. Our infrastructure is crumbling. Our schools were in bad shape before the recession and they're in much worse shape now. R&D isn't where it needs to be, and nor is America's broadband system, or its energy grid."

The government at all levels spent ~$6.4 trillion in FY2010.

http://www.usgovernmentspending.com/numbers#usgs302

American government is the 2nd largest economy in the world. It has control of more resources than everything produced by Germany and France combined.

It spends so much that it could simply give every man, woman, and child - citizen, resident and illegal alien - $15,500/yr (more than full time on the minimum wage), and STILL have $1.6 trillion to spend on other stuff.

If infrastructure is in such bad shape, if not everyone has proper access to health care, if seniors are still poor, if our kids are still receiving horrible educations, if there is still hunger and homelessness in this country - at what point do we just throw up our and hands and declare government simply isn't effective?

How many dollars on top of the existing $6.4 trillion would it take to actually fix these problems? Does an actual number exist, or is it always something a little north from whatever current funding levels are?

Posted by: justin84 | December 21, 2010 11:12 AM | Report abuse

"at what point do we just throw up our and hands and declare government simply isn't effective?"

At what point do we stop pretending it's ONLY a gvmt problem and start realizing the entire capitalist system is too expensive and corrupt and imbalanced to maintain?

Laissez faire economics is the problem. And to me that means gvmt is not run by and for the people, but by and for big business, which in turn prioritizes profits above all else. A constant and never ending quest for higher profits means higher costs to people and gvmts at all levels, fewer employees for businesses as productivity increases, lower taxes and lower gvmt revenues and interference, reduced tariffs which has caused industries and jobs to move overseas, and so on.

There's plenty to fix in the gvmt, starting with ejecting undue big business influence from its halls, but there's plenty to fix in business and wallstreet and finance too.

Posted by: lauren2010 | December 21, 2010 11:47 AM | Report abuse

Only an administration bent on suicide would propose cuts in SS. As we have seen before however, this group does have that gene in their DNA!

Why not just make the 2012 campaign commercials now?

Posted by: 54465446 | December 21, 2010 11:53 AM | Report abuse

I'm a fan of the guy but come on. The optics couldn't be any worse.

You pass two giant spending bills, one of which you label a 'Reinvestment' act, then come back to the well and say, 'dang, I forgot to spend on infrastructure, we need another spending bill'? You look pretty dumb. It would be much better if you were advocating for a larger stimulus from the start.

On the other hand, never underestimate the ability of the government to spend money. It's just sooooo much more fun than cutting costs.

"To give Obama credit" for cutting Social Security. Funny one. Think Paul Ryan can't spin his more severe cuts as saving social security? Betcha he can.

I like how everyone on board, across the political spectrum, think this sounds incredibly bad. Is that the clue that it's a good "compromise"? I think it's the clue that it's badly messaged.

Posted by: BHeffernan1 | December 21, 2010 12:22 PM | Report abuse

"At what point do we stop pretending it's ONLY a gvmt problem and start realizing the entire capitalist system is too expensive and corrupt and imbalanced to maintain?"

But it is primarily a government problem. The sectors with the most government involvement have the worst problems - education, finance, health care.

The War on Poverty has raged for over forty years, yet poverty remains near the same as it was in the late sixties. The War on Drugs is responsible for putting hundreds of thousands of nonviolent offenders in prison, destabilizing Mexico, causing violent crime and ruining millions of lives, and yet it is no where nearer to accomplishing its objectives than it was decades earlier. As you would agree, GWOT is nothing but a huge money pit which in the long run will only create new enemies.

Again, the government has control of so much money, that it could give a middle class family of four $62,000/yr and still be able to fund police, fire, the military, roads, pay interest, etc. For FY2011, that's projected to go up to ~$65,000. Take out non-citizens, and it's around $70,000. If someone works and earns $30,000 net of taxes, and we're looking at a six-figure household.

If we were simply able to distribue that money out without the awful work incentives it would create, it would be far more effective than all of the government social programs.

"Laissez faire economics is the problem. And to me that means gvmt is not run by and for the people, but by and for big business, which in turn prioritizes profits above all else."

I don't think there are enough profit opportunities. Profit seeking on average leads to the greatest good for the greatest number. It's why America is far far far richer than all of the socialist countries. America generates something like 40% more wealth per person than even the big European social democracies, adjusted for prices.

"There's plenty to fix in the gvmt, starting with ejecting undue big business influence from its halls, but there's plenty to fix in business and wallstreet and finance too."

It is impossible to eject big business influence from big government in a big country. Simply can't be done. If government were small and restricted, it wouldn't matter much what influence business had. However, the big government genie is out of the bottle and might well be impossible to put back in, too.

Corporatism (which you rightly decry) is awful, but it is only possible with a large government.

"reduced tariffs which has caused industries and jobs to move overseas"

Why is this bad? Why should I care more about an American steelworker than a French or Chinese steelworker? Do people in France or China not deserve jobs, even when they can outproduce Americans for a given price?

Why should consumers be forced to pay more to protect people whose productivity is less than their wage?

Posted by: justin84 | December 21, 2010 12:33 PM | Report abuse

"I'll have to also agree with them Obama is the worst president ever, including BushJr."

Even worse than Woodrow Wilson?

Posted by: justin84 | December 21, 2010 12:40 PM | Report abuse

"It's important to avoid a fiscal crisis in the future. But it's also important to lay the foundations for continued growth."

Then we should have spent $800 billion just now on investment not tax cuts, but Obama didn't even try, as he's constantly overly scared of looking too liberal, something that should have been obvious in the primaries but so many people vote based on the superficial rather than what the candidates will actually do that will greatly affect millions and billions.

Posted by: RichardHSerlin | December 21, 2010 2:04 PM | Report abuse

justin:

Nixon, hands down. When you have to resign the office in disgrace, that trumps everything else!

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Posted by: MRjavinbur | December 21, 2010 3:43 PM | Report abuse

54465446,

Whenever I look at Wilson, I see much of what liberals hated about George W. but in amplified form. Nixon was a saint compared to Wilson, in my view.


Foreign military interventions which hurt American popularity overseas? Check.

- Mexico
- Haiti
- Santo Domingo
- Nicaragua
- Soviet Union

Massive unintended consequences of his policies via idealism and hubris? Check.

- Getting involved in World War I, which destabilized the European balance of power - and causing the defeat of the strongest European country - was certainly a primary cause of World War II

- Snubbing Ho Chi Minh arguably led that country down the road to communism (bad for Vietnam) and started the ball rolling to the Vietnam War (bad for all involved)

Assault on political liberties? Check.

- Imprisoned thousands of people for their political views, including Eugene V. Debs, a socialist presidential candidate (would be like Dubya throwing Ralph Nader in jail).

Remember when Kayne West said that George Bush "didn't like black people" because the response to Katrina was weak? Wilson REALLY didn't like black people.

http://reason.com/archives/2002/12/18/dixiecrats-triumphant

Gigantic recession that began in the last year of the Presidency? Check.

- The last year of Wilson's presidency saw the start of the Depression of 1920 (forgotten today because the economy recovered so well on its own), in which industrial production fell over 30% by the time he left office - a decline roughly twice as severe as we saw in the great recession.

By the way, for everyone who says "Bush cut taxes and there was a huge recession after 8 years" should note that Wilson sent income taxes from 0% to 70% during his time in office.

Posted by: justin84 | December 21, 2010 4:40 PM | Report abuse

Social Security benefits will be cut 20-25 percent across the board, starting in 25-30 years, if nothing is done, according to the Trustee's best estimates. So announce the compromise: this is the benefits cut, only partially reduced and postponed via a slight increase in SS revenues (raise the tax rate and/or wage cap gradually over time). And be done with it. In a decade or two, if somebody doesn't like the plan, they still have time to change it. Meanwhile, start dealing with health care as the real long-term budget-buster.

Posted by: pjro | December 21, 2010 4:51 PM | Report abuse

If Barack Obama stands up there and proposes cuts to Social Security in the state of the union, I'm going to be totally convinced he's looking for the exits in 2012, and wants out.

Posted by: zeppelin003 | December 21, 2010 7:06 PM | Report abuse

Atten: Ezra Klein.Re: Your column of 12-21-010 dealing with
the "State of the Union".
Although I have dealt with this matter before, it seems that it's necessary to deal with it again.
Social Security is not a charity of the Government, but is a repayment of the forcibly extracted payments of the business employees and equally extracted of employers. There is no way that the U.S.Government can revoke that debt, owed to its formerly taxed employees and
payments of employers, during the life time of the working U.S. citizens, except for the miniscule payments they may have received in military service. These payments amount to an annuity, owed by the Government to the retired employees, when they reach retirement age.

Posted by: Cyrano | December 21, 2010 9:51 PM | Report abuse

Here we go again, the juvenile populist rhetoric. "NO CUTS to entitlement programs, EVER."

Grow up, SS can't be left on its current trajectory. Young people in 2050 aren't going to pay 50 percent of their income taxes to Senior citizens can enjoy a far better standard of living than them.

Obama is probably going to propose raising the retirement age way down the road. His proposal deserves serious debate, not childish whining that pretends the status quo is an option.

Posted by: FelipeV | December 21, 2010 10:46 PM | Report abuse

Oh why not, President Obama will just break another campaign promise .... are there any left, that have not been broken??

He is acting like any other career politician ....... the need to stay in power is ego driven .... to hell with the American citizens.


The deficit can be lowered by creating an environment where jobs can be created in this country.

First the U.S. Congress must rescind the tax & tariff reductions plus "breaks," they voted large companies that are taking American jobs over seas. Also, just mirror the tariffs & taxes that countries like China, Japan, South Korea and the European Countries are putting on American exports.

Second, "our" Congress must reenact The Glass-Steagall Act, in order to bring some order into our financial institutions and markets. It will also spin off more American jobs.

THESE MEASURES WILL REDUCE THE DEFICIT ....... by creating jobs for American citizens.

We keep on sending our money overseas and are looking for the middle class to shoulder the burden.
Unfortunately, if this keeps up, there will be almost NO middle class to put that burden on.

PLEASE HOW ABOUT SOME SANITY ....... no more dog & pony shows.
Not all American voters are that dumb.

Also ...... Why does our trade deficit not mentioned anymore??
Guess these multi national companies hold the money reins??

Hello Cashrarocy ....... since we are no longer a Democracy.

Posted by: bkarpus | December 22, 2010 7:05 AM | Report abuse

lauren2010 - Firstly there is no "BushJr" (sic). There is George H.W. Bush, and George W. Bush. Agreed, Obama is the worst president ever - but how do you buy into the NS that President George W. Bush was a bad president? Because he had to battle through his eight years starting nine months after he took office to clean up Clinton's mess that could have been taken care of in 1998? You lefties are so delusional, that if you keep saying something long enough, and other media types agree with you, you actually believe it. Quite pathological. It proves how undereducated you people on the left really are. You are led by so-called "Intellectuals" who have NO practical knowledge of the world outside of a book written by ideological imbeciles, thus allowing the reader to grab persons such as yourself as a minion. Try some independent thought for a change!

Posted by: LOD_MOS | December 22, 2010 9:59 AM | Report abuse

Americans become neurotic when the word 'socialism' is mentioned but tax cuts for the rich are one way to transfer wealth to the rich rather than have them contribute, when times are tough, to the welfare of the nation.

Assistance for the poor makes sense because the money that they receive is stimulus money. They can't save it like the rich can. They have to spend it on the butcher, the baker and the candle stick maker. This money is circulated.

It is ironic. America can afford that which it wants to afford. It wants to prop up the rich. It can't afford to help the poor.

America is in decline. For as long as I can remember politicians have been saying that if the poor receive state assistance that they will become dependent on the state. That may be true of some poor people but poverty is a trap and the poor need assistance in order to escape the trap. This false argument that assistance breeds dependence is not in proportion. It always has currency notwithstanding that it has failed to be convincing forever.

Posted by: robertjames1 | December 26, 2010 11:29 PM | Report abuse

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