An Open Letter re: A National Day of Action Against a Grand Bargain

Dear Democrats:

We, like you, are ecstatic about the reelection of President Barack Obama and what it means for American growth and prosperity.

However, as fellow progressives, we were disappointed to learn that you will be leading an effort against the President to impede a balanced grand bargain. How we resolve the fiscal cliff in the next two months will set the tone for the next four years and define how, and if, America will grow and prosper. As the President and Members of Congress work to find a balanced solution to the scheduled tax increases and spending cuts, it is a huge mistake to draw ideological lines in the sand.

For nearly a century, progressives have fought to construct a secure and comprehensive safety net. With the passage of the Affordable Care Act in 2010, this mission is essentially complete. Now our challenge is to maintain the safety net as we approach the most consequential demographic aging in the nation’s history. Any responsible approach to fixing the safety net must include a balance of measures that make the programs healthy and solvent—new revenue, modest reductions in benefits to some recipients, and a commitment to working class people that we will not raise payroll taxes on them in the future.

Some in your coalition contend that Social Security and Medicare don’t contribute to the deficit and that the programs are solvent today. Yet, in 2008, Medicare began to spend more than it takes in. Social Security will do the same in 2015, and the picture gets worse in the next two decades. Retiring baby boomers will bankrupt Medicare in 2024 and Social Security nine years later. As they spend down their trust funds, both programs will contribute to the deficit and will be insolvent—unable to fulfill the mission for which they were created.

In addition, it is undeniable that, as the cost of these programs soar, spending on public investments that progressives have long favored will suffer. Already, public investments represent a rapidly declining share of our budget. In the future, we are doomed to spend less and less educating kids, building roads, and curing disease. There is a limit to how much the voting population will allow the government to spend—even on worthy items.

Others in your coalition argue that we can simply tax the rich to fix our deficit problem. Taxes need to be part of the solution, but only raising taxes on the wealthy will not deliver the revenue needed to solve long-term deficits and maintain the safety net. Even if taxes went well beyond Clinton-era levels, top rates at 50% and the capital gains rate near 40%, revenue alone can’t solve our problems. A plan like this one would allow annual deficits in 2040 to exceed $3 trillion, in today’s dollars, and the federal debt, as a share of the economy, would be twice the size of today’s debt.

Finally, the consensus in your coalition suggests that we should wait to address Social Security and Medicare with a different president and Congress. There’s nothing more risky for these two vital programs. Social Security and Medicare need fixing. The only question is whether it is done with a Democratic president and Senate who care deeply about these programs or future leaders who may have completely different visions for the safety net—visions that include privatization, vouchers, or a pure benefits-cut solution. This is the now or never moment to deal with these pillars of the safety net.

Together, we have fought to ensure the progressive movement is strong. But absent a serious fix, Social Security will become social insecurity, and Medicare will become pinched. We hope you will join us in seeking a responsible and balanced long-term fix to our entitlements. It will be good for progressives, good for the middle class, and good for future retirees.

Sincerely,

Jim Kessler
Senior Vice President for Policy
Third Way