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Fiscal cliff notes

Nineteen protestors demanding Senator Richard Durbin oppose cuts to Social Security and other social programs as part of any deficit deal were arrested on Friday in his office and the lobby of the Federal Building, Kari Lydersen reports at In These Times.  (See our previous post for more.)

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The so-called “grand bargain” is a “grand swindle” which ignores the “victory for middle-class populism” that last week’s election represents, according to Roger Hickey of the Campaign for America’s Future.

“Within hours of the election, the austerity posse was fear-mongering around the so-called ‘fiscal cliff’ and pressuring Washington to accept a ‘grand bargain’ before the end of the year that would slash Social Security, Medicare and Medicaid – and plunge us into a double-dip recession.”

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Durbin and other deficit hawks “are hoping that the hype around the budget standoff (aka ‘fiscal cliff’) can be used for a grand bargain that eviscerates the country’s two most important social programs, Social Security and Medicare,” writes Dean Baker of the Center for Economic and Policy Research, noting that “they made a point of keeping this plan out of election year politics.”

But they must act quickly, he points out – because “one of the pillars of their deficit horror story could be collapsing.

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Robo-signing settlement called ‘good step,’ ‘sell-out’

Responses from community groups and advocates to the robo-signing settlement announced Thursday ranged from “good first step” to “sell-out to Wall Street.”

The Woodstock Institute emphasized the significant precedent of requiring banks to write down principals for homeowners who owe more than their homes are worth – an approach lenders have generally avoided taking until now.

The settlement “won’t end the troubles of homeowners” but is a “significant step in the right direction,” said Dory Rand.  She said resources need to be targeted to the hardest-hit communities. She called it “a real victory for homeowners.”

The $1 billion in homeowner relief expected for Illinois “will not suffice to restore all of homeowners’ lost wealth” but “it can potentially turn back the tides of default in hard-hit communities,” she said.

Woodstock estimates that 400,000 Chicago-area homeowners are underwater on their mortgages, together owing nearly $25 billion more than their homes are worth.

Rand reiterated Woodstock’s call on the Federal Home Finance Authority to stop blocking Fannie Mae and Freddie Mac from writing down principals in mortgage modifications.

Paltry restitution

In contrast, a coalition of community groups said the settlement “let banks off the hook.”

“Our elected officials completely sold out the people again to their Wall Street friends,” said IIRON, a regional network including Northside POWER and Southsiders Organized for Unity and Liberation.

IIRON emphasized the paltry sums given in restitution to homeowners who lost their homes due to fraudulent foreclosure practices.  They stand to receive up to $2,000 each.

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Concern over Medicare, Social Security

Advocates for retirees are “keeping a watchful eye” on tomorrow’s White House summit on fiscal responsibility, said Steve Pittman of the Illinois Alliance of Retired Americans.

Concern has been heightened by mixed messages from the Obama administration and especially by a major effort to reduce retirement and medical benefits by groups warning of an impending “entitlement crisis.”

“It’s a good idea to start looking at a long term plan,” Pittman said. “But if it’s to answer the call of people saying we have to cut back programs like Social Security and Medicare because that’s the only way we will have a sound economy, that’s just flat wrong.”

While President Obama has said Social Security’s long-term shortfalls can be addressed by raising the cap on income subject to payroll taxes, his budget director, Peter Orszag, authored a 2005 plan to raise Social Security taxes and reduce benefits.

And while Orszag emphasizes that Socal Security’s problems are decades away and rising health costs are the immediate issue, many of Monday’s participants have worked to conflate the issues and push Social Security cuts.

Most prominent among them is former Commerce Secretary Peter Peterson, who is spending $1 billion of his Wall Street fortune to convince the public there’s an “entitlement crisis.” He’s been joined by a range of think tanks, including the Heritage Foundation and the Brookings Institute, and backed by a Congressional coalition.

With recent losses of stock market and home values by retirees and people nearing retirement, “there’s no way the solution is to cut health care benefits or the one retirement benefit that people can count on, which is Social Security,” said Pittman.

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