Thursday, December 19, 2013

US Budget Deal: The Good, Bad and Stupid

Mark Weisbrot
The Guardian
Senate Budget Committee chairman Senator Patty Murray (D-WA), right, and House Budget Committee chairman Representative Paul Ryan (R-WI) announce The Bipartisan Budget Act of 2013 on 10 December 2013. (Photograph: Jonathan Ernst /Reuters)There was good news, bad news, and stupid news from the budget deal reached by the US House of Representatives this week.

Probably the best news is that we can have a national day of gloating that there are no cuts to social security. "Grand Bargains" of the sort that would include such cuts seem to be off the table for now, thanks to a lot of grass-roots opposition. This is good news because most senior citizens get most of their income from Social Security. At an average benefit of $1,300 a month, cuts aren't wise. In fact, Senator Elizabeth Warren – a potential Democratic presidential contender for 2016 – has proposed increasing benefits, and that makes a lot more sense.
Most of the baby boomers that will retire over the next two decades have very little savings for their retirement, with many having lost a lot of it when the housing bubble burst in 2006-07. The whole idea that Social Security has any serious financial problems to begin with is an urban legend that has duped millions for decades, including (sadly) many journalists. It's long past time to retire that nonsense.

The lesser good news is that some of the automatic or "sequestration" cuts in non-military (why does anyone use the euphemism "defense"?) spending for fiscal years 2014 and 2015 have been reduced. This should add about 250,000 jobs next year. Unfortunately, the gains from this are about cancelled out by the decision to cut off federal Emergency Unemployment Compensation for 1.3 million workers just after Christmas, since the loss of this spending will reduce growth and employment by about an equivalent amount. (Another 3.5 million are expected to lose benefits during 2014). This is especially mean to the long-term unemployed, since long-term unemployment is currently at twice or more than the level at which federal benefits have been eliminated in any of the previous recessions since 1959. America is a much richer nation today, but not kinder or gentler to the unemployed.

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