I guess it's childish name-calling time at the NYT. Hence Bill Keller tells readers that if you ask any "credible economist" you will get Keller's preferred solution to the budget. At the top of the list is "entitlement reforms."

For those who don't know, "entitlement reforms" is Washington elite speak for cuts to Social Security and Medicare. They know that these programs are hugely popular, so the Washington elite crew use their little code word "entitlements," since they know that "entitlements" don't have nearly as much support. They also use "reform" since it sounds much nicer than "cuts." Of course the point is to cut Social Security and Medicare; Keller is simply not honest enough to say this to readers.

Anyhow, let me just briefly explain why at least one non-credible economist doesn't support the cuts to Social Security and Medicare that former Senator Alan Simpson and Morgan Stanley director Erskine Bowles proposed. (Keller wrongly referred to their plan as a being a plan approved by their commission. This is not true, to be approved as a commission proposal a plan would have required the support of 14 of the 18 members of the commission.)

The Bowles-Simpson plan would impose substantial cuts to Social Security benefits that would hit people already getting benefits. It would reduce the annual cost of living adjustment by 0.3 percent. This would lower the benefits that retirees receive by roughly 3 percent after 10 years, 6 percent after 20 years, and  9 percent after 30 years.

This will be a serious hit to tens of millions of seniors who rely on Social Security for half or more of their income. Given that the average Social Security check is $1,200 a month, it is a bit hard to accept that these people should be in the center of our gunsights when we turn to deficit reduction.

Steven Pearlstein, the Washington Post business columnist, often writes insightful pieces on the economy, not today. The thrust of his piece is that we all should be hopeful that a group of incredibly rich CEOs can engineer a coup.

While the rest of us are wasting our time worrying about whether Barack Obama or Mitt Romney are sitting in the White House the next four years, Pearlstein tells us (approvingly) that these honchos are scurrying through back rooms in Washington trying to carve out a deficit deal.

The plan is that we will get the rich folks' deal regardless of who wins the election. It is difficult to imagine a more contemptuous attitude toward democracy.

The deal that this gang (led by Morgan Stanley director Erskine Bowles) is hatching will inevitably include some amount of tax increases and also large budget cuts. At the top of the list, as Pearlstein proudly tells us, are cuts to Social Security and Medicare. At a time when we have seen an unprecedented transfer of income to the top one percent, these deficit warriors are placing a top priority on snatching away a portion of Social Security checks that average $1,200 a month. Yes, the country needs this.

The most likely cut to Social Security is a reduction in the annual cost of living adjustment of 0.3 percentage points. While that might sound trivial, the effect accumulates through time. After ten years, a typical check will be about 3 percent lower, after 20 years it will be 6 percent lower, and after 30 years it will be about 9 percent lower.

Social Security amounts to 90 percent or more of the income for one-third of seniors. For this group, the proposed cut in benefits would be a considerably larger share of their income that the higher taxes faced by someone earning $300,000 a year as a result of the repeal of the Bush tax cuts on high income earners. The latter is supposed to be a big deal, therefore the proposed cuts to Social Security are also a big deal.

I don't often disagree with Paul Krugman these days but I do have to take him to task for buying into the "conservatives don't like government" line. In a blogpost he notes that a Republican health care bill in the House would take away funding for the Agency for Healthcare Research and Quality and any economic research funded by the National Institutes of Health. He then concludes by commenting:

"You sometimes hear conservatives saying that the role of government should be limited to the provision of public goods; obviously I don’t agree. But it turns out that they hate providing public goods, like research, too."

Okay, there is a consistent pattern in the behavior of conservatives and it has nothing to do with a dislike of public goods or even a dislike of government intervention in the economy.

What is the quintessential public good? That's right, the military. Do we see conservatives like Mitt Romney and Paul Ryan yelling about waste in the military and the need to pare it back? I surely haven't.

So why are they willing to spend so much money on one set of public goods, the military, but hate the thought of spending relatively trivial sums on the Agency for Healthcare Research and Quality or the economic research funded by the National Institutes of Health?

Let's think for a moment about who benefits. Yes, defense contractors make lots of money selling overpriced and often useless hardware and services to the military. While private contractors may get some nickels and dimes out of the Agency for Healthcare Research and Quality or economic research funded by the National Institutes of Health, you won't find the big bucks there. In fact, one result of the research funded by these two agencies might be that insurers, drug companies, medical equipment suppliers and other big corporate interests may find the usefulness or cost of their products called into question. That could lead to lower profits.

In other words, the most obvious story here is not that conservatives are opposed to public goods. Rather they are opposed to public goods that could have the effect of less income being redistributed upward.

Nicole Woo
Economic Intelligence (U.S. News & World Report), July 20, 2012

Mark WeisbrotDebate Club (U.S. News & World Report), July 20, 2012

Dean Baker
Caixin Online, July 19, 2012