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Dean Baker: The Biggest Myth in Obama-GOP Spending Showdown is the "Fiscal Cliff" Itself

Economist Dean Baker explains that "there’s an endless number of myths, but the first and foremost is that we face any sort of cliff."

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DEAN BAKER: Well, starting with the Medicare issue, yeah, I mean, I think going to 67 would be a major step in the wrong direction. We know that would substantially raise the costs for these people, people who are 65, 66. They have very expensive health insurance on average. Not all of them are sickly, but, you know, many of them do have bad health conditions. And the private sector does not work well for older Americans. That’s why we created Medicare in the first place. So, I think it’s a very, very backward step, and I have heard reports that they’ve moved away from that position, because obviously they are getting a lot of pressure. It’s just a really bad policy and, you know, frankly, very bad politics. That’s what all the polls show.

In terms of the issue about raising—you know, ending the payroll tax holiday, I regretted that that was ever tied to Social Security. We could have given the exact same tax cut—if we wanted to give a 2 percent—2 percent of wages up to the first $110,000, we could have done that and had no link to Social Security. I just wish we had done that. We do need the stimulus. The economy is very weak. And again—this is the point I was making earlier—the private sector is not generating the demand. You know, I can go into that in detail, but the point is very simple: It’s not generating demand. And as much as, you know, the Republicans like to yell about the job creators, this and that and that, no businessperson in their right mind goes out and creates jobs because they see the government is laying off workers. That doesn’t make any sense. So, at the moment, we do need additional stimulus. I’d hate to see that payroll tax cut expire without something else to offset that, because there’s no doubt, it would be a drag on the economy.

AMY GOODMAN: Dean Baker, why don’t Republicans consider the huge military expenditures for the military, big government?  Salon — according to  Salon, the Pentagon runs a staggering 234 golf courses around the world at a cost that’s undisclosed. The  Washington Post says the Pentagon also spends half-a-billion dollars annually on marching bands. What about the Pentagon?

DEAN BAKER: Well, you know, I think this whole debate over big government has always been silly, because it’s not about big government. It’s about who your friends are. And in this case, you know, the friends of the Republicans are defense military contractors, so they don’t want to see them cut. I mean, you know, this whole notion of big government, small government—one side’s for one, one side’s for the other—it’s literally nonsense.

I’ll just give you, you know, one very simple example. We spend somewhere close to $300 billion a year on prescription drugs, because the government gives drug companies patent monopolies. I’d get arrested, you know, if I tried to produce, you know, Pfizer’s drugs. They have a patent monopoly. They get to charge whatever they want. If you didn’t have those monopolies, we’d spend about a 10th as much, somewhere around $30 billion. So that difference is close to $250 billion a year. That’s not entered on the budget, but the government is requiring us to spend extra money for drugs. That’s really big government, but the Republicans never, ever talk about that, because the pharmaceutical industry are big contributors. So we aren’t arguing about big government or small government; we’re arguing about who gets the money.

AMY GOODMAN: Dean Baker, we want to thank you very much for being with us, economist and co-director of the Center for Economic and Policy Research.

 
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