Washington, D.C.- Dean Baker, Co-Director of the Center for Economic and Policy Research (CEPR) released the following statement on the proposals offered by Erskine Bowles and Alan Simpson, co-chairs of the President’s deficit commission:
“Senator Alan Simpson and Erskine Bowles appeared to have largely ignored economic reality in developing the proposals they presented to the public today.
“The country is suffering from 9.6 percent unemployment with more than 25 million people unemployed, underemployed or who have given up looking for work altogether. Tens of millions of people are underwater in their mortgage and millions face the prospect of losing their home to foreclosure.
“This situation is not the result of government deficits, contrary to what Mr. Bowles seemed to suggest at the co-chairs’ press conference today. The downturn was caused by the bursting of an $8 trillion housing bubble. This bubble was the basis of the construction and consumption demand that drove the economic expansion through 2007.
“The large government deficits are the only factor sustaining demand following the loss of this bubble wealth. If today’s deficit were smaller, we would not be helping our children; we would just be putting their parents out of work.
“Finally, it is striking that the Co-Chairs felt the need to address Social Security, even though it was not part of their mandate. The commission’s mandate was to deal with the country’s fiscal problems. Since Social Security is legally prohibited from ever spending more than it has collected in taxes, it cannot under the law contribute to the deficit. Their proposal would cut benefits for tens of millions of middle class workers who are overwhelmingly dependent on Social Security for their retirement income. It would also raise the retirement age for lower income workers who have seen little increase in life expectancy.
Here’s the heart of the matter: The folks behind these proposals want to cut Social Security benefits for everyone making more than $25,000 a year. And then lower corporate taxes to just 26%.
The proposed budget cuts are a direct attack on America’s middle class for the benefit of Corporate America.