Meet the "Pea Party"

They're more upset over Grandma's Social Security than bonuses for bailed-out bankers -- and they have Obama's ear

Published July 19, 2011 11:01AM (EDT)

Michael Bloomberg, Robert Rubin and Pete Peterson
Michael Bloomberg, Robert Rubin and Pete Peterson

On Feb. 19, 2009, during the program "Squawk Box," CNBC's Rick Santelli gave the newly formed Tea Party movement its first major publicity, with an epic on-air rant: "We're thinking of having a Chicago Tea Party in July. All you capitalists that want to show up to Lake Michigan, I'm gonna start organizing."

In a news conference last week, President Obama, in a style far more mild than that of Rick Santelli, called on both sides in congressional negotiations to raise the debt ceiling to compromise in a deficit reduction plan: "Pull off the band-aid. Eat our peas."

Without intending to, Obama gave a name to a movement that to date had been without one: the Pea Party.

What I am calling the Pea Party has been around for decades, of course. Paul Krugman has described this coalition as the "austerians." It consists of the public figures who have claimed for decades that budget deficits and the national debt, rather than other problems like insufficient innovation or inadequate middle-class wages, are the greatest threat to the future of the country. For decades, too, members of the Pea Party have insisted that we can no longer afford Social Security and Medicare for middle-class retirees. Since the Great Recession began, many members of this group have argued absurdly that a program of austerity, which further contracts demand in the economy, is the best cure for a near-depression caused by a lack of demand.

By virtue of his visibility, President Obama has now become the most prominent spokesman for the Pea Party. Despite his favorable references to public investment, his speeches on the economy show the influence of the erroneous economic philosophy of the Pea Party. For example, on July 11 the president told the American people in a radio address:

"Government has to start living within its means, just like families do. We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs."

Every one of those statements is wrong. Unlike individuals or families, governments are immortal and can roll over debt forever, as long as the costs of servicing it are reasonable. And don’t individuals and families take out long-term debt for investments like homes, cars and appliances, anyway?

At a time when there is insufficient consumer demand, business investment or foreign demand for U.S. exports, prematurely cutting government spending or raising taxes or both would be likely to tip the economy deeper into recession or worse, not "put the economy on sounder footing." That is exactly what happened when Congress and the Roosevelt administration prematurely tried to balance the budget in 1937, plunging the U.S. back into depression.

To compound the damage, the president endorsed the false claim of his right-wing opponents that the source of inadequate business hiring and investment is not the low demand caused by consumers who are saving and paying down their private debt overhang, but rather a supposed lack of business "confidence" about America’s ability to pay its debts in the future. This alleged lack of confidence is not shared by the investors, institutions and foreign central banks that continue to buy U.S. debt at historically low interest rates.

According to President Obama, now in full Clintonian triangulation mode, both Democrats and Republicans are equally bad, when it comes to the budget:

"I continue to push congressional leaders for the largest possible deal. And there's going to be resistance. There is, frankly, resistance on my side to do anything on entitlements. There is strong resistance on the Republican side to do anything on revenues."

Are progressive and centrist Democrats who oppose cutting Social Security and Medicare really just as obstructionist as Republicans who oppose all tax increases, forever? Of course not. The short-term deficit is largely a result of the Bush tax cuts and the wars, which most Republicans supported, along with the effects of the worst economic crisis since the Depression -- falling revenues, increased unemployment insurance payments and (inadequate) stimulus spending. Meanwhile, the long-term Social Security financing problem is a minor one, while the more serious long-term Medicare problem is driven not by excessive demand -- Americans consume about as much health care as members of other First World countries -- but by the grotesque overpayment of politically powerful American doctors, American hospitals and American drug companies.

But the Goldilocks rhetorical strategy of finding the sensible middle between the extremes is a favorite of Pea Party members, who like to pose as the sober, rational alternatives to the equally extreme left and right. The budget-obsessed, socially moderate elitists of the Pea Party overlap largely in their membership with billionaire New York Mayor Michael Bloomberg’s "No Labels" movement, a kind of mild-mannered Perot campaign on behalf of those elements of the American oligarchy that are less troubled by huge bonuses for bailed-out investment bankers than by the size of Grandma’s Social Security check.

Robert Rubin, the Wall Street financier who served as Bill Clinton’s secretary of the Treasury, has been a major player in the Pea Party, both through his allies and protégés in key positions in the Clinton and Obama administrations and the Hamilton Project at the Brookings Institution, which he founded. Even more important than Rubin in Pea Party austerianism over the years has been Peter G. Peterson, Richard Nixon's Commerce secretary and the billionaire co-founder of the Blackstone Group, a leading private equity firm.

What Rupert Murdoch’s Fox News is to the Tea Party movement, Pete Peterson’s think tank and media empire is to the Pea Party crusade to spread alarm about Social Security and Medicare. To promote his views, Peterson created the Peter G. Peterson foundation (not to be confused with another of his projects, the more scholarly Peterson Institute) and funded a scare-mongering film, "IOUSA," and an ad campaign called "OweNo." Peterson has also bankrolled a number of astroturf or pseudo-grass roots campaigns, including "America Speaks" town hall meetings across the country designed to raise public alarm about deficits and debt.

To the disappointment, no doubt, of the organizers, members of the public in the America Speaks events, after hearing the evidence, firmly rejected austerity as the solution to our deficit and debt problems in favor of higher taxes on the rich. On June 30, 2010, Thomas Frank wrote in the Wall Street Journal:

According to a preliminary compilation of results, participants supported "an extra 5 percent tax" on incomes of greater than $1 million per year (by 68 percent) and an increase in the corporate income tax rate (59 percent). They thought a "carbon tax" was a good idea (64 percent) as well as a "securities transactions tax" (61 percent). On Social Security, austerity was nowhere in sight as 85 percent backed raising the limit on taxable income, and only a miserable 27 percent thought that we should "create personal savings accounts." Majorities favored cutting defense spending and expressed support for further recovery measures even if they increase the deficit.

 While both are largely astroturf movements, funded by rich donors from different schools of conservatism, the styles of the Tea Party and the Pea Party could not be more different. The Tea Party is a phony populist movement. The Pea Party is an authentic elitist movement.

Pea Party elitists can hardly disguise their disdain for ordinary Americans. Pundits sympathetic to the Pea Party program of imposing austerity on the middle class use terms like "grown-ups" and "adult supervision." Most Americans, it is implied, are greedy children. Sometimes this parental feeling toward mainstream Americans is expressed in more-in-sorrow-than-in-anger this-hurts-me-more-than-it-hurts-you tones. This was the condescending tone in which President Obama declared: "We must eat our peas."

Sometimes, though, the grown-ups lose their temper. Alan Simpson, the co-chairman of President Obama’s failed deficit commission and a longtime Pea Party activist, let his anger get the best of him when he ranted: "Social Security is a milk cow with 310 tits."

(The son of a governor and senator, who inherited his Senate seat from his father, Simpson presumably was never in danger of relying chiefly on Social Security to pay most of the bills in retirement, as most Americans do.)

Although the supply-siders of the Tea Party and the fiscal conservatives of the Pea Party differ on whether higher taxes should be part of deficit reduction, both of these essentially right-wing movements focus chiefly on spending cuts. And while some members of the two movements favor defense cuts or cuts in tax expenditures for the wealthy, the spending cuts these movements emphasize are cuts to the entitlements for the middle class.

It is an article of faith among Pea Party austerians that retired Americans are selfish parasites who are endangering the futures of succeeding generations by receiving Social Security payments and Medicare and Medicaid help. Former Colorado Gov. Richard Lamm expressed his fiscal conservatism and euthanized his political career simultaneously by asserting: "We've got a duty to die and get out of the way with all of our machines and artificial hearts and everything else like that and let the other society, our kids, build a reasonable life."  Simpson denounced "greedy geezers" for opposing cuts to Social Security. In 1994, Peterson wrote: "We will no longer be able to afford a system that equates the last third or more of one’s adult life with a publicly subsidized vacation."

At the beginning of 2011, the average national Social Security benefit was $1,177 a month, or about $14,000 a year.  This is what Peterson, who in 2011 was No. 182 on the Forbes 400 list of the richest Americans, sneers at as a "publicly subsidized vacation."

One of the themes that members of the Pea Party use to try to frighten Americans into thinking that the country cannot afford Social Security and decent healthcare for the elderly is the claim that today’s elderly are bankrupting future generations. Peterson recently told Business Insider, "I’m concerned whether the American dream is going to be there for my children and grandchildren."

Not all of Peterson’s heirs appear to be worried that they will be bankrupted in the decades ahead by Social Security and Medicare payments for working Americans. In 2009, his grandson Peter Peterson, known as "PC," starred in a reality show about rich kids in New York called "NYC Prep."

According to the Wall Street Journal, "PC is one of six teenagers on the show, who flaunt their family riches as the cameras follow them around NYC’s swankest restaurants and boutiques." So far, the reviews of the show are mixed. The New York Times called it "boot camp in Prada shoes," while the New York Post dubbed it "lifestyles of the rich and bratty." The Journal continued:

"Everything in New York City is about pulling connections," PC explains. (The show identifies him and the other students only by first name). "It’s who you know and how much money you have. It’s really sad. And I am not saying I’m like that. But that’s what New York is: money and power."

Assuming that PC inherits a share of the Peterson fortune, why shouldn’t he and other heirs of billionaires, even the non-bratty ones, pay somewhat higher taxes in 2030 or 2050, in order to support Social Security and Medicare benefits (once healthcare provider costs are reined in) that go to working-class and middle-class retirees?

In addition to invoking children and grandchildren in their propaganda, Pea Party deficit hawks often claim that they want to help the "most vulnerable" of the poor and elderly. Sometimes they even propose slight increases in aid to the poor, to go along with means-testing. Nobody should be fooled by this cynical debating trick. Because means-testing the small number of rich and affluent Americans cannot produce much savings, the only way to obtain major reductions to entitlement costs without raising taxes to pay for them is to cut out much or most of the middle class, so that what little money is left goes only to the poor. Any serious means-testing would force working-class and middle-class Americans to rely in retirement much more on their meager private savings, as in the pre-New Deal era.

As it happens, replacing tax-based social insurance with tax-favored private savings accounts is not only the logical outcome of Pea Party proposals for means-testing but also the explicit goal of Tea Party ideologues like Paul Ryan. Whether the Pea Party or the Tea Party prevails, Wall Street would be enriched by the diversion of a tsunami of money from downsized Social Security and Medicare into 401K accounts, IRA’s and health savings accounts. The sudden rush of money might drive up the cost of existing stocks and bonds, owned chiefly by the rich, who would make windfall profits. At the same time, the diversion of Social Security and Medicare revenues into tax-favored private plans would make new fortunes for many managers of mutual funds. The money managers would have ample opportunities to skim hidden fees from many unsuspecting Americans who, driven by the cutbacks in Social Security and Medicare, would gamble desperately with their paltry savings in the stock market.

Enough with the peas and the tea. What America needs at the present moment is a We the People Party -- a We Party. Instead of trying to dismantle the New Deal, like both the Tea Partyers and the Pea Partyers, the We Party would campaign to modernize and, where necessary, expand the system of middle-class social insurance on which most working families rely. Instead of further slashing taxes on the rich, as the Tea Party proposes, or cutting benefits for the middle class, as the Pea Party proposes, the We Party would raise taxes on the rich substantially, before raising taxes on working families, if that should be necessary. Rejecting the characterization of elderly Americans as "greedy geezers" enjoying a "subsidized vacation," the We Party would maintain or even increase Social Security benefit levels and avoid future shortfalls by means of slightly higher payroll taxes or an infusion of other tax revenue. The We Party would demand that the federal government stand up to the medical-industrial complex and impose fee schedules on doctors, hospitals and drug companies in the U.S., in order to control medical costs the way other democratic nations do -- thereby eliminating the danger that Medicare and Medicaid budgets will wreck the federal budget.

Above all, a We Party that represented Main Street rather than Wall Street would reject the claim, made by Tea Party and Pea Party alike, that the greatest threat facing America is long-term budget deficits, instead of short-term unemployment and lack of growth. The We Party would focus on what should be the real priority of this moment in our national history: putting America back to work.

America doesn’t need the Tea Party or the Pea Party. It needs the We Party.

By Michael Lind

Michael Lind is the author of more a dozen books of nonfiction, fiction and poetry. He is a frequent contributor to The New York Times, Politico, The Financial Times, The National Interest, Foreign Policy, Salon, and The International Economy. He has taught at Harvard and Johns Hopkins and has been an editor or staff writer for The New Yorker, Harper’s, The New Republic, and The National Interest.

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