While the Neoliberal, free market hacks (like Robert J. Samuelson and John Kass) continue to harp on "entitlements" - and the Tea Bagger terrorists holding the gov't up to ransom have made it clear Social Security and Medicare cuts are on their chopping blocks too (along with the ACA) it appears none of them realize what would happen if granted their wishes. That is, if they get their cuts we could see a progressive reversal of economic growth leading to another recession, or even depression.
How so? First, know that we remain in a parlous, low aggregate demand economic environment which means too little spending to support the financial flows, markets and overall economic vitality. This was made clear in a new report published by the AARP Public Policy Institute and appearing in The AARP Bulletin ('Social Security's Impact', Oct., p. 34).
The report notes that contrary to some myths circulating, seniors receiving Social Security aren't hoarding their money or saving for a rainy day. Instead, they're spending it on goods and services- which means pumping it right back into an ailing economy. They're buying groceries, prescription drugs, paying the 20 percent for medical treatments that Medicare won't, purchasing the dental care that Medicare won't, buying airline tickets for vacations, as well as booking hotel rooms - and helping put grand kids through college. If they have enough left over, they also remodel assorted rooms in their homes, like kitchens or bathrooms (as we just got done doing).
Given this, businesses then use this influx of income to purchase more goods and services, and to hire more employees. These employees, in turn, spend their wages on more goods and services which creates more aggregate demand by more and more people. In other words, Social Security money doesn't just terminate its effect at an elderly person's bank, it has a multiplier effect with ramifications throughout the whole economy.
How much of an effect? The AARP report found that for every dollar in Social Security benefits paid out, roughly $2 in output is generated for the whole economy. In hard numbers, that translates to roughly $1.5 trillion in economic output (adding in the derivative spending by businesses.) This in turn supports more than 9 million jobs in the national economy, with 4 million of them created in ten industries with the major impact accruing to: food services, real estate, health care, and retail industries.
As the author of the AARP piece notes, given Social Security inputs also helped 21.4 million Americans including 1.1 million children, and 5.8 million adults under 65, it means lawmakers in D.C. can't look at the program through a narrow lens of "spending cuts". Indeed, even imposing something as seemingly benign as a chained CPI could have devastating corrosive effects down the road. Major cuts or privatization, meanwhile, would likely usher in a new recession or depression.
Are any of our "patriotic" legislators aware of these stats? Do they even care? Will the Tea Baggers, who purport to be so very concerned about the economy process them? We will have to wait and see.