Fighting over the scraps

When you consider how corporate profits now dwarf earnings by labor, the current "solutions" to Social Security's and Medicare's coming shortfalls that are being discussed by the pundit class seem remarkably beside the point.

Take, for instance, Thomas Edsall's Opinionator piece in the New York Times a couple of days ago, "The War on Entitlements". If you're of the opinion that "entitlements" is a right-wing dog-whistle code word for "undeserved and redistributed money", the title of his piece alone may antagonize you. But read it and see the options he puts on the table.

Cutting benefits is frequently discussed in the halls of Congress, in research institutes and by analysts and columnists. The idea of subjecting earned income over $113,700 to the Social Security payroll tax and making the Medicare tax more progressive – steps that would affect only the relatively affluent — is largely missing from the policy conversation.

The Washington cognoscenti are more inclined to discuss two main approaches that are far less costly for the affluent: means-testing of benefits and raising the age of eligibility for Social Security and Medicare.

To the Heritage Foundation's argument that "punitive tax rates" lie in store if "entitlements are not reformed", Edsall counters:

Federal tax revenues in 2009, 2010 and 2011 have been 15.1 percent, 15.1 percent and 15.4 percent of Gross Domestic Product, lower than any level since 1950.

I had to mention this point because it's here that Edsall's arguments, progressive though they are, raised my hackles. Completely absent from his treatment is any mention of the fact that, according to the final chart in Derek Thompson's recent piece in the Atlantic, corporate profits represent more than twice the share of GDP as labor's. Any shortfall in worker benefits clearly cannot and should not be made up by taking a larger share of labor's smaller slice of GDP. Corporate profits, after all, have reached their historically high share of GDP on the backs of workers, who have been squeezed as they haven't been in eighty years.

Edsall and likeminded thinkers are arguing over how to apportion a smaller slice of pie, ignoring the outsized wedge that corporations have tied up. As they say on cop shows, follow the money.