By Bryan Jones, UW professor of political science

A few days ago, Washington Mutual, the nation’s largest savings and loan, announced bonuses for its top executives. During the year, the management team had managed to lose almost $2 billion and engineered a stock price drop that cost shareholders two-thirds of the value of the company. The bonuses were substantially less than the year before, but bonuses are bonuses—supposedly pay for exceptional work.

This happens all the time. There is a safety net for the paid managers of America’s companies—they benefit no matter how poorly they perform. Conservative economists are fond of saying that if you reward bad behavior, you’ll get more of it. So in effect, today’s crony capitalism in America is building in the guarantee that we will get more poor-quality capitalism.

I am really not sure why the issue of gross inequality has not come to the fore in the presidential campaign. All the Republican candidates save Huckabee think things are hunky-dory. Obama wants to avoid such talk because he fears making anyone mad, especially the independents and Republicans he courts. Hillary raises money from them. Only Edwards, who has found little traction, is courageous enough to talk about the class warfare that the rich have mounted against the rest of us.

By Bryan Jones, UW professor of political science

The Congressional Budget Office has just released its estimate of the Fiscal 2008 federal budget deficit—about $220 billion dollars. In August, the CBO estimated $155 billion, but the slowing economy has altered the equation. The Office of Management and Budget, based on slightly different assumptions, estimates a budget deficit of around $250 billion. Neither agency includes the cost of the wars in Iraq and Afghanistan (almost $120 billion), nor the cost of the proposed stimulus package (estimated currently to be around $150 billion). This would yield an estimated budget deficit of around $500 billion.

These deficits add up to the national debt, what we as a nation owe. Along with explicit liabilities, such as military retirements, the government owed $10.4 billion in 2006, up 52% since Bush took office.

But wait! There’s more.

Comptroller General David Walker reports that the government’s fiscal balance sheet is in dire straits. In 2000, the government’s accumulated obligations were about $20 trillion; by 2006, that has ballooned to over $50 trillion—an increase of 150%. Much of this is due to the drug benefit that was added to Medicare; the rest is due to cost escalations in Medicare. Walker is so concerned that he has gone on tour to publicize the problem. A summary of Walker’s Fiscal Wake Up Tour may be found at: http://www.gao.gov/cghome/d08353cg.pdf .

There are two components to the balance sheet. The first is the national debt --what we have borrowed and owe to specific individuals, organizations, or governments. The second consists of promises the government has made for future commitments, particularly Social Security and Medicare.

So Social Security is one major component of the dismal federal balance sheet, but the Medicare (including the new drug benefit provision, Part D) accrued obligations are more than five times the obligations under Social Security.

In 1983, the federal government made a bargain with working Americans—those who pay payroll taxes and rely on Social Security for their retirements. At the time, the Social Security system was bankrupt, not able to make payments in literally a few months. President Reagan and Congress in effect told working Americans that if they would pay higher taxes and tolerate delayed benefits, we will make Social Security solvent forever. They actually came close; the system is solvent until 2041.

The bargain worked like this: Workers would pay enough in taxes to allow the Social Security Administration to pay retirees and save a lot of money--basically by buying US savings bonds--for the future, especially when the huge Baby Boom generation retired. When they did, the Social Security Administration would sell its bonds, and continue to pay its obligations. That will happen in 2017, according to the Report of the Social Security Board of Trustees. [I have reproduced the two key charts from this report below. You can read the full report at: http://www.socialsecurity.gov/OACT/TRSUM/trsummary.html].

If George W. Bush had run a responsible fiscal policy, this would be a non-event. Balanced budgets, continuing the fiscal policy established by Bill Clinton, would have provided the cushion when the Social Security Administration needed its money. Instead, he worked to undermine the bargain Government made with working Americans, basically blaming them for his fiscal irresponsibility.

President Bush preferred fiscal deception, claiming in 2005 that the Social Security System was somehow broken and would not be able to pay its obligations to future generations. Indeed, as Walt Williams and I have shown in our new book, The Politics of Bad Ideas, Republican economic policies in general have been built on a set of claims that, like the Social Security bankruptcy claim, are false. The Social Security claim is part of a pattern of deception on economic policies.

What has happened is that Bush borrowed the Social Security surpluses and spent it, mostly through his massive tax cuts. Then he blamed working Americans for simply acting responsibly… basically for contributing to their retirements through Social Security and planning to use it when they retire. Because of his irresponsibility, 2017 looms as a critical date.

What can we say about the Federal balance sheet? First, the Social Security system is sound. It has set aside enough money to pay retirees through 2041. It would be better if we made some modest adjustments to make the system solvent forever, but we have plenty of time for this.

Second, the debt the U.S. government owes the Social Security system is sound, unlike what some conservatives claim. The Social Security Administration simply holds U.S. government Bonds, as does the Chinese government, the Federal Reserve, your pension plan, and many British, Japanese, and American citizens. Why would the government pay the Chinese but not its own elderly? A debt is a debt.

Third, the Medicare system is not sound. It is in deep fiscal trouble. Two major reasons are the Bush prescription drug benefit and the Bush tax cuts.

Fourth, the federal government under Bush is out of control. It has shown an inability to control its balance sheet. It has promised grand new Medicare benefits, fought an incredibly expensive war, and passed out huge tax cuts, mostly to the well-off.

Blaming working Americans relying on Social Security was not only wrong factually, it was class warfare—with the working American as the target.

Social Security Trust Fund Balances

By Matt A. Barreto, UW assistant professor of political science

In 2008, the presidential nominating process could be over by February 5^th – a full eight months before the general election in November. Some pundits have argued that shortening the primary season is a disservice to voters, providing less time to get to know the candidates and become informed. However, the buzz among observers of Latino politics is that for the first time ever, Latino voters will have a meaningful say in nominating a presidential candidate.

Yet with such a short primary calendar, can voters – Latino or otherwise – make an informed decision on the leading presidential candidates? They are certainly no worse off than in the past. At the same time that parties have front-loaded the 2008 primaries, the campaign for president has started earlier, almost two full years before the actual presidential election. Indeed, candidates are busy hosting fundraisers and giving stump speeches from California to Iowa to New York.

The point that has been often overlooked in the recent debate about the 2008 primary schedule is the opportunity for more voters, and more diverse voters to weigh in on the potential candidates. In particular, many of the states that have moved their primary date up have sizable Latino populations.

In the 2004 presidential election Latino voters were among the most prized swing voters. More than $10 million was spent on Spanish language television commercials alone, a remarkable figure considering California, Texas and New York were out of play. Researchers have regularly noted that Latinos are not a monolithic group, holding both liberal and conservative viewpoints on important policy issues. When asked to report their political ideology, Latino voters tend to split into equal thirds among liberal, moderate, and conservative. What’s more, Latinos represent the fastest growing segment of the American electorate, growing from 5.9 million in 2000 to 7.6 million in 2004, an increase of 28%. In comparison the non-Latino electorate grew by 15% from 2000 to 2004.

Thus, it makes sense that both political parties could benefit by campaigning for the Latino vote in January and February. In all three of the traditional early primary states, Iowa, New Hampshire and South Carolina, Latino voters account for less than one percent of the electorate. In contrast, Latinos were 8% of the vote in Nevada in 2004; 11% in Florida; 13% in Arizona; 16% in California; 7% in New Jersey; 33% in New Mexico; and 8% in New York. For the first time ever, candidates in the primary election would have to campaign for Latino votes, hire Latino staff and consultants, and air Spanish language campaign commercials. By increasing the diversity of the electorate in the presidential primary, we increase the diversity of ideas and issues that are discussed, and perhaps the diversity of the candidates (as is the case in 2008).

Furthermore, while a majority of Latinos live in non-competitive states such as California, New York, Texas, and Illinois, Latino voters in the southwest could prove pivotal to the 2008 general election. A recent book by Tom Schaller, professor of Political Science at the University of Maryland, has suggested that the Southwest and Mountain West are growing in importance to the presidential election because they are becoming more politically diverse and ethnically diverse. New Mexico has twice been among the most competitive states in the presidential election; in Colorado, Democrat Ken Salazar won the U.S. Senate election by 4 points even as Kerry lost the presidential contest by 5 points; and Nevada was decided by just 20,000 votes in 2004 has seen 20,000 new Latino registered voters in the last two years. Although the 2008 primary schedule will be frenzied and compact, it will nonetheless provide Latino voters an opportunity to evaluate and vote on the leading contenders for president, as opposed to only the finalists.

Early States and Latino Voters in 2008

Professors on Politics blog, (c) 2008.  Professors on Politics is a service of UW News and Information, http://uwnews.org.