November 05, 2011
That’s their word, not mine. The lead editorial in the Washington Post complains that AARP is taking out ads against cuts to Social Security. The first sentence tells readers that “the word ‘thuggish’ comes to mind.”
It certainly does, although not in reference to the ads. The elite who manage the economy and deliberate on economic policy (a group that includes the Washington Post’s editors) completely mismanaged the economy over the last decade, allowing a huge $8 trillion housing bubble to grow unchecked. This bubble burst, as bubbles always do, with devastating consequences for the economy.
One of the consequences was to turn the relatively modest budget deficits of the pre-crisis period (1-2 percent of GDP) into much larger deficits on the order of 8-10 percent of GDP. These deficits are of course necessary to sustain demand after the collapse of the housing bubble left the economy reeling.
Now the Post wants to use the deficits created by the mismanagement of its friends and associates as a pretext to take away a substantial chunk of Social Security benefits. (The preferred cut du jour is a 0.3 percent reduction in the annual cost of living adjustment. This would be cumulative so that a retiree would see their benefits fall by roughly 3 percent after 10 years, 6 percent after 20 years and 9 percent after 30 years. It would be a much larger hit to the income of the typical retiree than ending the Bush tax cuts would be to the typical person affected.) Given that most retirees and near retirees have just seen their wealth devastated by the collapse of the housing bubble, leaving them little other than their Social Security, this seems a particularly cruel one-two punch.
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