“Is the United States bankrupt?”
That’s the title of a lead article in a recent issue of the Federal Reserve Bank of St. Louis Review.
The article’s author, Boston University economist Laurence Kotlikoff, notes that 77 million baby boomers are edging toward retirement, and concludes the country’s Social Security, Medicare and Medicaid obligations are simply too great. There isn’t enough money to cover the boomers, he calculates, and yes, the U.S. is “going broke.”
Finance professor Anjan Thakor of Washington University, writing in the same issue, chimes in by explaining the stages of bankruptcy: as in the airline and auto industries, first come negotiations with the unions to slash benefits, then court-imposed cuts, and so on. This is the model to follow, he suggests.
Thakor also points out that since the “U.S. government’s debt obligations are in dollars,” one way out is “printing more money.” This would devalue Social Security payments as well as the huge dollar holdings of countries like China, “where the savings rate is a staggering one-third of national income.”
Nobel economist Joseph Stiglitz participates by noting various problems with long-term projections. He also cites the market’s historical failure to meet human needs, particularly those associated with old age and natural catastrophes. But he does not challenge Kotlikoff’s theoretical framework, and concedes that “clearly there can and will be adjustments” to Social Security.
New drive to slash entitlements
Kotlikoff’s profoundly reactionary analysis is guiding renewed efforts to “reform” Social Security, Medicare and Medicaid. Federal Reserve chief Ben Bernanke and Treasury Secretary Henry Paulson are leading the reform charge. Medicare and disability payments are likely to be the first targets.
Glaring contradictions escape our bourgeois professors. Since 1980, labor’s productivity has jumped 100 percent to over 300 percent in the food, transport and other key industries. By contrast, the number of people over 65 climbed 45 percent in this period. Surely there’s room to double or even triple Social Security payments.
Kotlikoff and his classmates are blind to other resources. Millions are unemployed in the U.S., particularly among youth and among African Americans. Why don’t the capitalists hire these workers, whose contributions to the Social Security and Medicare funds would presumably solve any alleged shortfalls?
What about cutting the military budget to fund such programs? What about imposing a tax on stock and bond transactions to do the same?
These solutions do not enter the minds of Kotlikoff, Bernanke & Co. Why? Because they are golden prisoners of the exploiting class.
Production is outrunning demand. More than 28 percent of U.S. productive capacity sits idle today for lack of demand. Since capitalism cannot boost demand, labor must be cheapened, they reason. Contracts must be broken. Social Security must be cut. Medicare must be slashed.
Shadowing Kotlikoff is the miserable Thomas Malthus, who predicted 200 years ago that food production could not keep up with the “breeding proclivities of the poor,” whose living standards must necessarily fall.
But capitalism’s obscene problem is with food “overproduction,” not underproduction. Capitalism pays agribusinesses not to grow food. Yet malnutrition plagues over 30 percent of the world’s population living under capitalist rule.
Unable to profit from production, the capitalists turn to speculation to rip each other off. “Investment” in currency and other speculation exceeds $4 trillion a day. By contrast, worldwide investment in producing food and other human needs totals only $25 billion a day.
The other side of the bankruptcy issue is the capitalists’ problems with “too much money.” “Too Much Money” was the cover title of Business Week a few months ago. “Capital keeps rainin’ on my head / So much is out there that the world is out of whack / When will we see balance back?” cried billionaire Sam Zell in a recent ditty, sung to the tune of “Raindrops Keep Fallin’ on My Head.”
In a sense, Kotlikoff is right — capitalism is bankrupt. Marxism alone can counter capitalism’s pessimism with scientific, revolutionary optimism. Marxist parties, like the Communist parties, are essential for the working class to lead all oppressed to liberation from the tyranny of too much money (for the capitalists), too little money (for us), and bring balance to this world.
economics @ cpusa.org
“Is the United States bankrupt?”