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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Lux: Obama, Dems Should Unite Against Ryan Budget, Wall St. Abuses

The following article, by Democratic Strategist Mike Lux, author of “The Progressive Revolution: How the Best in America Came to Be,” is cross-posted from HuffPo:
I am thankful each and every day that Barack Obama won the 2012 election, and that he is our president instead of Mitt Romney. The current version of the Republican Party is the most extreme, cynical, and utterly heartless group of people I have ever witnessed in American politics- and I have witnessed a lot in my 30-plus years in politics. I am proud of the president for the good things he has done on many different issues, and for many of the fights he has chosen to take on. But on economic policy, and especially on fighting for the middle class, this President has two blind spots the size of a Mack truck.
The first is Wall Street. Obama’s first term Secretary of the Treasury Tim Geithner believed that the most important thing in making the economy work better was to help the biggest banks on Wall Street, and Obama’s current Attorney General openly admits in official testimony to Congress that he is hesitant to prosecute criminals who are executives at big banks because it might hurt those companies, and therefore, apparently, the broader economy. These policies are bad economics, bad morality, and bad politics. This allegiance to Wall Street’s interests has drained vast amounts of money out of productive investments in the real economy, put millions of homeowners underwater on their mortgages or into foreclosure, made big bank execs feel free to commit financial fraud, and allowed continued dangerous speculation in our financial markets that could lead to another financial panic in the not too distant future. These pro-Wall Street policies have slowed the economy down dramatically. Favoring the biggest banks over the rest of the economy is terrible policy if you want to help the middle class.
The other huge blind spot is on Obama’s great desire to strike this “grand bargain”, including cutting Social Security and Medicare benefits. He seems obsessed with the idea, offering it up to the Republicans over and over and over again no matter how many times they say no. He is dead wrong on this issue, and Democrats in Congress should fight him on it tooth and nail.

On Medicare, there are plenty of ways to save serious money without hurting seniors. Negotiate drug prices, for example. Bring younger, healthier people into the Medicare pool. Ask hospitals, who cut a sweet deal in the health reform negotiating process, to find more cost savings. Squeeze the medical equipment industry more. Re-orient health care toward paying for good outcomes rather than fee for service. There’s a ton of savings to be had if we would take on the big health industry special interests, but Republicans have no interest in doing that. They want to squeeze those old people Paul Ryan describes as the “takers” in society. And because Obama wants to have a grand bargain with the Republicans, he has at various points offered up raising the retirement age (although he seems to have backed away from that offer, which is good given that the blue collar folks helped by Medicare and Social Security don’t enjoy the benefits of longer life expectancy nearly as much as high income people) and means testing Medicare. Do these proposals make good sense? Do they help the middle class? Who cares, we have to be bi-partisan!
On Social Security, the president keeps suggesting a benefit cut called Chained CPI. The theory is that when inflation goes up, people can always substitute lower cost items- you know, if the cost of Ferraris heads north you can always switch to buying a Cadillac. The problem is that most seniors these days are retiring without pensions, their houses are worth less than used to be, and they don’t have the kind of savings that earlier generations of seniors did. They aren’t choosing between Ferraris and Cadillacs, they are choosing between cottage cheese and Velveeta at the grocery store. The product substitution thing on inflation that economists theorize about just doesn’t work with people on low fixed incomes.
When you look at what is happening with middle income workers’ jobs and wages, when you look at housing prices, when you look at the pension system and retirement savings, this is the worst possible time from a policy perspective to be cutting seniors’ Social Security incomes. But Obama wants to do it anyway because it is bi-partisan, and offering seniors up like this might get him his long sought after grand bargain.
So I am happy to give Obama credit where credit is due. He says the deal he is offering would lessen the hurt because the cut would not apply to the poorest seniors or those over 85 years old. He also is determined to preserve Medicaid funding. And just to be clear, one of the reasons he wants a budget deal is to try and lessen the budget hit on good programs for the poor and middle class in the federal budget, the kind of programs hit very hard in the sequester. All of that is highly appreciated. But making an almost certainly permanent cut in Social Security to help on this year’s budget fight isn’t a good trade-off, and preserving money for the poorest and oldest while hurting hard-pressed seniors just above the poverty level isn’t either.
What Democrats should do instead is stay united in eviscerating the Ryan budget and in showing the pain of the sequester. We have the political high ground on those issues, and we should keep hammering away on them until either the Republicans fold or we beat them in 2014. This is a far better political and policy strategy then cutting Social Security.
Ever since President Obama made the political turn in his Teddy Roosevelt-invoking speech in Osawatomie, KS in the fall of 2011, he has embraced the idea that he was the President running to help the hard-pressed middle class. And on many issues, that has been the kind of President he has proven to be. But his blind spots on Wall Street and the so-called grand bargain are tarnishing his legacy, messing up his politics, and hurting the cause of the middle class he claims to be fighting for. Mr. President, it is way past time to change direction on these two huge issues.

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