Why is the simple truth so hard for "some" to understand? ~ ~ Sooz

AlterNet / By James K. Galbraith
6 Reasons the Fiscal Cliff is a Scam
The so-called "fiscal cliff" is a mechanism for rolling back Social Security, Medicare and Medicaid.

November 22, 2012 | Stripped to essentials, the fiscal cliff is a device constructed to force a rollback of Social Security, Medicare and Medicaid, as the price of avoiding tax increases and disruptive cuts in federal civilian programs and in the military. It was policy-making by hostage-taking, timed for the lame duck session, a contrived crisis, the plain idea now unfolding was to force a stampede.

In the nature of stampedes arguments become confused; panic flows from fear, when multiple forces – economic and political in this instance – all appear to push the same way. It is therefore useful to sort through those forces, breaking them down into separate questions, and to ask whether any of them justify the voices of doom.

First, is there a looming crisis of debt or deficits, such that sacrifices in general are necessary? No, there is not. Not in the short run – as almost everyone agrees. But also: not in the long run. What we have are computer projections, based on arbitrary – and in fact capricious – assumptions. But even the computer projections no longer show much of a crisis. CBO has adjusted its interest rate forecast, and even under its “alternative fiscal scenario” the debt/GDP ratio now stabilizes after a few years.

Second, is there a looming crisis of Social Security, Medicare and Medicaid, such that these programs must be reformed? No, there is not. Social insurance programs are not businesses. They are not required to make a profit; they need not be funded from any particular stream of tax revenues over any particular time horizon. Reasonable control of health care costs – public and private – is necessary and also sufficient to keep the costs of Medicare and Medicaid within bounds.

Third, would the military sequestration programmed to start in January be a disaster? No, it would not be. Military spending is set in any event to decline – and it should decline as we adjust our military programs to our national security needs. The sequester is at worst harmless; at best it's an invitation to speed the process of moving away from a Cold War force structure to one suited to the modern world.

Fourth, would the upper-end tax increases programmed to take effect in January be a disaster? No, they would not be. There is no evidence that the low tax rates on the wealthy encourage them to spend or invest, no evidence that higher tax rates would deter the spending and investment that they might otherwise do.

Fifth, would the middle-class tax increases, end of unemployment insurance and the abrupt end of the payroll tax holiday programmed for the end of January risk cutting into the main lines of consumer spending, business profits and economic growth? Yes, over time it would. But the effects in the first few weeks will be minimal, and Congress could act on these matters separately, with a clean bill either before the end of the year or early in the new one.

Sixth, what about all the other cuts in discretionary federal spending? Yes, some of these would be very damaging if allowed. Simple solution: don't allow them.

In short, Members of Congress: if you can, just pass the President's bill on middle-class taxes, and, if you can, eliminate the domestic sequester. Then, please go home. Enjoy the holidays. Come back in January prepared to extend unemployment insurance, to phase out the payroll tax holiday gradually, to restore stable funding to necessary programs and to start dealing with our real problems: jobs, foreclosures, infrastructure and climate change.

http://www.alternet.org/economy/6-reasons-fiscal-cliff-scam

Another perspective that joins the expanding "fiscal cliff hoax" chorus ~ IMO, this is an informative and exceptionally important read ~ Sooz

Tuesday, Nov 27, 2012 07:44 AM CST
The fiscal cliff is a lie
Only the rich win in a grand bargain on taxes and entitlements. We can afford Social Security, and should expand it.
By Michael Lind

The need for a “grand bargain” involving taxes and entitlements — in the next few years, if not immediately — has moved to the center of discussion in Washington. But it’s the wrong grand bargain — and a very bad deal for Middle America.

According to the conventional wisdom, any grand bargain should be modeled on plans like the Bowles-Simpson plan or the Rivlin-Domenici plan — financing lower tax rates on the rich by closing tax loopholes and cutting Social Security and Medicare. In the aftermath of an election in which the candidates of the rich were trounced at the polls, America’s plutocratic conservatives might be satisfied with merely maintaining existing low tax rates on the rich, while capping loopholes and cutting Social Security and Medicare.

This entire approach should be rejected. It is based on two fallacies — first, that the existing low (or lower) personal income tax rates on the rich promote growth, and second, that America can’t afford Social Security, Medicare and Medicaid in the decades to come. A number of “astroturf” propaganda groups in Washington and elsewhere will be paid tens of millions of dollars in the next few months by the conservative Republican billionaire Pete Peterson and his allies to repeat these fallacies and get Beltway pundits and journalists to parrot them. But endless repetition does not turn fallacies into facts.

America does need long-term reforms to its entitlement system and tax system — but they have nothing to do with the specious reforms peddled by Alan Simpson, Erskine Bowles, Alice Rivlin, Pete Peterson and allied CEOs. In addition to regulating excessive healthcare costs, the United States needs a middle-class welfare state that is bigger, not smaller. It’s the restricted, elitist private welfare state that needs to be cut, not the universal public social insurance system.

Let’s start with the spending side. As the two charts below demonstrate, the U.S. is unique among advanced industrial countries in relying heavily on private social expenditures rather than public programs to provide economic security to its citizens:





Retirement security provides an example of the mix of public and private benefits in America’s welfare state. As Steven Hill points out, in most similar countries the equivalent of Social Security replaces much more of pre-retirement income than America’s Social Security program does. In the U.S., however, tax-favored private benefits — employer pensions, 401Ks and IRAs — are supposed to make up for stingy Social Security benefits, which today average a mere $1,200 a month. If the deficit hawks get their way, then even this pittance will be cut.

The problem is that America’s tax-favored private retirement benefit system is grossly inferior to Social Security. Everybody gets Social Security, but only a minority of Americans have employer pensions or 401K accounts. The costs of pensions have burdened many companies, while two stock market crashes in less than a decade proved how unreliable 401Ks and similar tax-favored private savings and investment accounts can be.

Even worse, unscrupulous money managers capture many of the returns from private investments for themselves via deceptive fees. With a growing population of elderly Americans afflicted by Alzheimer’s, the fine-print artists peddling deceptive retirement products will have a field day.

Any rational person, with no personal pecuniary interest involved, would conclude that we should expand the stable, efficient, low-overhead public part of America’s retirement security system — Social Security — while cutting back the failed, inefficient and unreliable parts — tax-favored employer pensions and individual retirement savings accounts like 401Ks. Instead, we are barraged with propaganda demanding that we cut Social Security, the successful public program, and expand the private savings alternatives like 401Ks and IRAs that have failed so miserably.

Why? The answer is that Wall Street wants to charge fees on as much of our retirement money as it can get its tentacles on. The well-funded campaign to partly privatize Social Security under George W. Bush failed. But the same forces want to achieve the same result indirectly, by getting Obama and enough conservative Democrats in Congress, along with the GOP, to cut Social Security. Their manifest objective is to compel Americans to try to make up the losses in public benefits by gambling more with their savings in mutual funds, from which hefty profits will be skimmed by overpaid money managers.

Medicare and Medicaid are different from Social Security, because they involve the very structure of the U.S. medical-industrial complex. But the basic policy choice is similar. Is the goal of reform to enrich fee-skimming middlemen belonging to the 1 percent by forcing Americans to channel their healthcare spending, like their retirement savings, through private corporations? Or is the goal to provide universal health security along with universal retirement security by the simplest and most efficient means?

Achieving the latter goal requires somewhat bigger government — but only on paper. Today the actual scale of government is disguised, because politicians and policymakers fail to describe tax-favored private health insurance and private retirement saving accounts as “government” or “entitlements.” In public discourse we need to expand the definition of “entitlements” to include the tax-favored private savings and health insurance that chiefly benefit the few, not just the public spending programs that benefit the many.

If our objective is what is good for most Americans, rather than what enriches parasitic middlemen, then we should reduce inefficient and inequitable tax-favored private spending on retirement and health benefits and use the savings to increase more direct, fair and efficient public spending, including an expansion of Social Security. The alternative of cutting public benefits while favoring private benefits through the tax code means bigger, guaranteed windfall fees for America’s bloated financial industry — forever.

http://www.salon.com/2012/11/27/the_fiscal_cliff_is_a_lie/

It's all about perception and the first thing to do is get rid of the term "welfare state". That implies that somebody is getting a free ride. There's no such thing. I'd suggest "socially responsible state" or similar as an alternative.

Get it down to a bumper sticker:

YOU LOST!
Get over it.