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The Schrader Amendment

By Robby Stern

Several weeks ago we learned that Washington Congressional Representatives Smith, Heck, Kilmer and Larsen joined with 52 additional House members to vote for what was called the Schrader amendment. The amendment called on the President to submit a budget that stabilized the federal debt in the long term by following the “principles” of the Simpson-Bowles plan.

The “principles” advocated by Morgan Stanley director Erskine Bowles and former Republican Senator Alan Simpson, call for significant cuts to our earned benefit programs. Bowles and Simpson issued a statement strongly commending the sponsors of the amendment and urged their colleagues “to follow their leadership in pushing for a bold, bipartisan plan to bring our debt under control.”

Have these Washington state representatives and their colleagues learned nothing from the European Union’s turn to austerity? Unemployment grows and deep recessionary times with even higher unemployment seem inevitable in many European countries where austerity has been imposed.

Respected progressive economists like our recent visitor Dean Baker, and Nobel Prize winners Paul Krugman and Joseph Stiglitz strongly criticize this approach. They argue that an austerity agenda will likely drive us into a double dip recession and increase our already too high unemployment. They argue that while we may need to address our debt in the long term, the immediate need is to stimulate the economy, not cut earned benefit programs that pump billions of dollars into the economy. Significant revenue can be achieved by ending the Bush tax cuts for the wealthy and creating new revenue streams, like a financial transactions tax, that address the growing wealth gap in our country.

I contacted the offices of each of the Washington Representatives. They all defended their positions on the Schrader amendment. Quoting a statement from Rep. Smith, he stated:

“With an annual deficit running over 30 percent of our yearly budget, even rolling back many of the tax cuts and using a slower approach to deficit reduction will not be enough. Mandatory spending is nearly 60 percent of our yearly budget, and savings must be found in this part of the budget even to achieve the modest goal of deficit reduction….

“The Schrader Amendment is a non-binding proposal that requests the President consider the Simpson-Bowles plan as a framework while creating his budget. I supported this legislation because it is important that we use a balanced approach that gets our deficit under control over the long-term by increasing revenue, making strategic cuts to spending, and implementing efficiencies wherever possible…”

Rep. Smith’s reference to “mandatory spending” and a “balanced approach” is code for cuts to Social Security and Medicare. Despite the fact that Wall Street and the richest 2 % created the fiscal crisis brought on by the great recession, we are being told that we must pay for their avarice.

Rep. Smith’s statement is consistent with the echo chamber that surrounds Washington D.C. Dean Baker discussed how Simpson and Bowles have become almost god-like in the chambers of our elected officials. The reality is that these two and those who support their “principles”, like the “Fix the Debt” CEOs, have an agenda to cut our earned benefit programs.

This is not paranoia. In his recent visit, Dean Baker provided us a perfect example. In their 2010 report, Simpson- Bowles called for $300 billion in cuts to Medicare over the decade. Since then, the Congressional Budget Office has reduced its Medicare spending projections by more than $500 billion. We already achieved more savings than Simpson-Bowles targeted, but in their most recent update of their principlesthey continue the drumbeat of cuts to Medicare as an “entitlement program”.

Reasonable savings can be achieved in Medicare. Authorize Medicare to negotiate the cost of prescription drugs. Change the reimbursement mechanism so we are not paying per procedure but rather for quality of care. (This approach is piloted in the Affordable Care Act.) Lower the age of eligibility for Medicare, allowing a healthier cohort to voluntarily pay premiums to Medicare rather than private insurers. Compare these approaches to Simpson-Bowles that calls for raising the age of eligibility for Medicare.

The Seattle Times recently ran a front page article from the Washington Post recounting the “grim” financial outlook for future retirees. According to the research, 54% of private sector workers have NO retirement plan through their employers. 40% of personal wealth was destroyed by the Great Recession and most of the recent stock market gains are flowing to the well-off.

Workers are suffering long periods of unemployment. There has been a large loss in home equity value, which is often considered part of the plan for retirement. Well over 50% of workers over 30 have no plan for retirement because the American economy is simply not affording the opportunity to make such a plan. For these workers, Social Security will be THE source of economic survival when they are no longer working for a wage.

A recent poll by the National Academy of Social Insurance asked Americans about Social Security and how they want to change it. More than 2 in 3 wanted to raise their own payroll tax rate as well as lift the payroll tax cap so all Americans pay the same Social Security tax rate. (Scrap the Cap!)

Simpson-Bowles ” principles” call for reducing Social Security benefits by adopting the Chained CPI. They also want to slowly increase the retirement age beyond 67!

Representatives Smith, Kilmer, Heck and Larsen took a bad vote on the Schrader amendment. Let them hear from you!

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