Is Cutting Social Security On The Table For US Debt Reduction?

While deficit hawks declare that cutting Social Security and Medicare benefits must be part of any strategy to protect the US financial security, some analysts believe that it is unnecessary. History has shown that the US can survive high debt to GDP levels; what is really needed is a revamp of the banking system says James Galbraith. See the following post from Economist's View.

Jamie Galbraith says that "the 'national security' case for cutting Social Security and Medicare is bogus":

The national security shell game, by James K. Galbraith, Commentary, LA Times: Deficit hawks are using national security as an excuse to seek cuts in Social Security and in Medicare...

In late May, the Obama administration released its National Security Strategy... A few lines make passing reference to "medium-term deficit reduction." But when Secretary of State Hillary Rodham Clinton appeared at the ... Brookings Institution to discuss the National Security Strategy, three of the six questions she was asked harped on the deficit issue, with one questioner calling it "potentially, if not actually, the biggest single national security threat to the United States."

Clinton agreed, declaring that it is time to "make the national security case about reducing the deficit and getting the debt under control." ... On this, she and the Brookings deficit hawks are wrong. Was World War II, for example, won with balanced budgets? No. Deficits ran about 25% of GDP every year of the war, and the national debt had reached 121% of GDP by 1946. Was the United States weakened by this? Hardly. America had never been stronger than it was in 1946. And afterward, the economy didn't implode. The debt-to-GDP ratio merely declined, year after year...

"Everything must be on the table," we're told, as the Simpson-Bowles commission prepares to explain why Social Security and Medicare must be cut. But why? Social Security and Medicare are ... successful, popular programs that protect America's elderly from poverty. ... Social Security and Medicare are ... the most important bulwarks of middle-class life in America. And we can afford them. A rich nation can always afford modest retirement benefits and decent healthcare for its old. ...

The real cause of our deficits and rising public debt is our broken banking system. The debts our economic leaders deplore were largely due to the collapse of private credit, and to the vast giveaways the federal government made to banks to prevent their failure when credit collapsed. ...

The "national security" case for cutting Social Security and Medicare is bogus. In economic terms, it's just a smokescreen for those who would like to transfer the cost of all those bank failures onto the elderly and the sick.

The relationship between the deficit and defense spending doesn't get enough attention. The question for me is whether we can make cuts in defense spending without compromising security, and it's my view that we can.

This post has been republished from Mark Thoma's blog, Economist's View.