Please could you circulate this excellent blog by Dean Baker from the Centre for Economic and Policy
Research?
http://www.cepr.net/index.php/blogs/beat-the-press/why-is-so-acceptable-to-lie-to-cut-social-securit
y-benefits



Irna Senekal
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School of Health Sciences
University of Fort Hare 
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Why Is It So Acceptable to Lie to Cut Social 
Security Benefits?
Dean Baker
Center for Economic and Policy Research
15 October 2010
http://www.cepr.net/index.php/blogs/beat-the-press/why-is-so-acceptable-to-lie-to-cut-social-securit
y-benefits

We aren't supposed to use the word "lie" in Washington,
probably because the practice is so common, but let's
just use normal English for a moment. NYT Roger Cohen
devotes his column to a tirade against the French for
their opposition to raising the retirement age. This
opposition has taken the form of a general strike that
has seriously disrupted the economy.

Cohen is a huge proponent of the increase -- he calls it
a "no-brainer." This is fine, he is a columnist and this
is his opinion. But how about getting the basic facts
right? The headline and discussion in the article focus
on a raise in the retirement age from 60 to 62. Cohen
argues that this is necessary because life expectancy
has risen 15 years since 1950.

Age 60 is not in fact the age for getting full
retirement benefits in the French Social Security
system. It is age 65. Age 60 is an early retirement age
at which it is possible to retire with reduced benefits.
It is comparable to the age 62 early retirement age in
the U.S. system. Cohen is not alone in failing to make
this point clear, but he certainly does raise this
distortion of the debate to a higher level.

The 15 year increase in life expectancy is also
deceptive. The implication is that the French expect to
be retired on average for 15 years more than in 1950.
Actually, much of the increase is due to reduced infant
mortality rates. This does not directly affect the
arithmetic of the retirement system. Much of the
increase is due to more people living until retirement.
This improves the finances of the retirement system.
Only a portion of the increase is due to people living
longer post retirement. (I don't have the breakdown for
France, but here's the U.S. story.)

Cohen also includes the bizarre assertion that France
has to raise its retirement age because "the Chinese
don't get the notion of retirement." Unfortunately this
sort of junk is often used in arguments for cutting
wages and benefits for ordinary people.

Is Roger Cohen a Neanderthal protectionist? Does trade
make the world poorer? That is not standard economic
theory. If it would have been possible for people to
enjoy early retirement benefits in France at age 60
without trade with China, then it should be even more
possible now that the French have the benefit of low-
cost goods made in China.

Unfortunately Cohen's misrepresentations (we're being
polite again) are the norm in this debate. Billionaire
investment banker Peter Peterson routinely goes around
saying that there is no Social Security trust fund. This
blatant untruth should put Peterson on the top pedestal
of the Economics Flat Earth Society. Instead, he is
treated reverentially in elite DC circles and even wins
himself invitations to the White House.

The world is not getting poorer. Productivity is
improving year by year. (France's productivity level is
only slightly lower than the United States.) It is
perfectly reasonable for a society to opt to take the
benefit of higher productivity growth in the form of
longer retirements.

This does have to be paid for, presumably primarily
through taxes on wages -- in effect workers pay for
their own retirement. In the United States, while Social
Security cuts are talked about all the time in
Washington's elite policy circles, polls routinely show
that workers are actually willing to pay higher taxes to
finance their retirement benefits, and that they prefer
taxes to cuts. This is not a problem of people being
childish. This is a problem where the elites have
arbitrarily ruled out one of the key options.

Of course it is also possible to support a retirement
system in part with more progressive taxation. In the
United States, raising the cap (currently $106,000) on
taxable wage income would go a long way to reduce the
projected long-term shortfall in funding.

It is also possible to raise money from directly taxing
those who have been the big winners in the current
economy. A financial speculation tax could raise as much
as 1 percent of GDP in the United States ($145 billion a
year). This is twice the size of the projected shortfall
in the Social Security benefits.

Financial speculation taxes are almost never discussed
in the media even though they have been widely used.
(The United Kingdom still raises 0.3 percent of GDP [$40
billion a year in the U.S.] from a tax that only applies
to stock trades.) They are politically difficult because
of the power of the financial industry in the United
States and elsewhere.

But talking about cutting Social Security benefits,
rather than raising financial speculation taxes, or
other progressive taxes, cannot honestly be called
making tough choices. It is making a cowardly choice. It
is serving the interests of the rich and powerful at the
expense of the vast majority of the population. That may
be what politics is about, but it should be described
accurately.

_____________________________________________

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