An Open Letter to President Barack Obama on the Need to Increase—Not Cut—Entitlements

Democratic Socialists of America

Today’s White House Entitlement Summit is billed as a frank and honest discussion of federal spending. It is also generating concern among progressives who worry that it is the prelude to efforts to restrict Social Security benefits and other programs. Democratic Socialists of America has not been invited to this meeting, but here are a few of the things we would say were we participants.

Mr. President, America’s problem is not that it spends too much on entitlements, but that it spends too little. Let’s start with the most talked about program: Social Security.  The danger the nation’s seniors face is not the long-term health of the social security trust fund. Rather, the looming crisis comes from the impending impoverishment of a large portion of the Baby Boom generation whose retirement cushions have been wiped out by the collapse of the stock market. The massive shift over the past twenty years by corporate American from defined-benefit pension plans (in which corporations guaranteed a certain level of retirement income based on years of service) to defined-contribution retirement plans (in which companies and individuals funneled contributions into individually managed retirement accounts) means that individuals, rather than corporations, bear all the risk of managing their retirement funds.

Trillions of dollars invested in retirement plans have been lost because of the mismanagement of Wall Street bankers, not to mention the billions lost in outright thefts. Every pension fund in the United States is at risk, and would be in violation of ERISA requirements except for a change in the law signed by President Bush as part of the bailout legislation.

These seniors played by the rules; they saved and put aside money for retirement, just as the experts told them to do. Most have seen their retirement accounts’ plummet by at least 50 percent, and no one expects the markets to return to their previous levels anytime soon. To offset the impact of this disaster, Social Security benefits must be increased by at least 30 percent. The increase will have the added benefit of maintaining overall consumer demand in our economy, as existing low-income Social Security recipients would spend the bulk of the increase on necessities. This increase in Social Security income could be fully funded by removing the cap on income taxed for Social Security benefits, restoring true progressivity to our tax system, and cutting wasteful military spending.

Mr. President, we agree with you that the immediate entitlement crisis America faces is health care. The Medicare and Medicaid systems are underfunded and will run out of money in a few years. The traditional approach to reducing health care costs relies on reducing the number of people covered by health insurance.  This is simply not an acceptable solution. There are 47 million without health insurance now and that number will rapidly increase as unemployment grows. Some of the unemployed will benefit from the money included to subsidize COBRA costs in the stimulus bill. But for many of the unemployed, especially those who lived paycheck to paycheck, even the 65 percent subsidy will not provide sufficient funds for them to maintain their coverage.  Only a national health care system that eliminates the bloated administrative and marketing costs of the insurance companies has a chance of providing the savings to pay for the expansion of health care Americans need. You have said yourself that if you were starting from scratch that a single-payer system is the best model. In this crisis we must go with our best.  Now is the time to pass HR 676, the Conyers bill that would enact a single-payer health system.

Mr. President, our system of supporting families with children is ineffective. Instead of providing tax credits whose value is skewed by income level, we should provide monthly allowances of at least $500 per child to the parent(s) or guardian(s) of every minor child in the United States.

We understand, Mr. President, the need to adequately fund a system of entitlements.  Eliminating the Bush tax cuts is a good first step. So is redirecting the spending on the disastrous war in Iraq to entitlements. Eliminating the wasteful spending in the military budget is also needed.  We have no need for a new generation of fighter planes or for an anti-missile system, to name two of the most obvious targets for elimination.

Mr. President, now is the time to establish a federal capital budget so that taxpayers can distinguish between everyday expenditures that should be paid for out of annual revenue, and long term investments such as infrastructure spending that are so important to our economy. If we restored progressive income tax levels to the rates of the pre-Reagan era and instituted a modest wealth tax the U.S. could readily afford a system of entitlements that supports families, ensures seniors a reasonable retirement income, and offers the best health care to all of us.