Obama to seniors: Merry Christmas! I'm cutting your Social Security benefits!

So President and Social Security opponent Obama has gone there. After he let people hope for a weekend that the Grand Bargaining to cut benefits on Social Security, Medicare and Medicaid might at least be on hold until January, on Monday comes the news that he's agreed with House Speaker John Boehner on a "fiscal cliff" plan. (Jonathan Weisman, Obama's New Offer on Fiscal Crisis Could Lead to Deal New York Times 12/17/2012)

The details are overshadowed by the only thing in it that really matters: cuts to Social Security benefits, including current recipients, by adopting the "chained CPI" inflation-adjustment measure. There are various places to find explanations of "chained CPI," e.g., David Dayen, What Chained CPI Means, and Why a Cut in a Time of Inadequate Social Security Benefits Makes No Sense FDL News 12/17/2012; Mide Konczal, A Cost of Living Adjustment for Social Security in the Fiscal Cliff? Rortybomb 12/17/2012; Bryce Covert, In Fiscal Cliff Deal, Don't Chain Grandma to Smaller Social Security Checks The Nation 12/18/2012; Dylan Matthews, Everything you need to know about Chained CPI in one post Wonkblog 12/11/2012.

This AARP video explains the basic concept, Changing Social Security COLA Formula Would Hurt Current Retirees 12/14/2012:


The placing of that critical "detail" in the New York Times article linked above, the ninth paragraph, is a reflection of the success among the Beltways Villagers of Obama's approach to the "fiscal cliff" marketing of concentrating overwhelming on taxes, so that coverage of any such proposal like this would focus on the Social Security opponent Obama's supposed victory on taxes and ignore the very damaging cuts to Social Security benefits. (It's not clear from what I've seen how many other programs might be affected by "chained CPI," but it's my understanding that if Social Security is subjected to it, veterans benefits will also be.)

It's bad enough that we have a Democratic President who is committed to cutting benefits on Social Security, Medicare and Medicaid. If this is adopted, it will be open season on the program. Social Security is the Mississippi River of cash flows and Wall Street wants to find some way to tap into it, ultimately by privatizing it.

It's politically important that this is a cut to current beneficiaries, a boundary that even privatization advocates like Bush II were generally unwilling to cross before now. And if a Democratic President and any substantial number of Democrats support it, the political firewall that has protected the program will be, well, badly damaged. A critical thing here will be how many Democratic members of Congress who support this cut to Social Security benefits are unseated in primaries in 2014.

It also shows that Obama is going to continue his President Pushover act - in dealing with Republicans. We saw early on in the fight over a public option for health insurance that he was willing, even eager to fight "the left," aka, his voting base. Since "the left" now apparently includes everyone who opposes cutting benefits on Social Security, Medicare and Medicaid, it's pretty much the Democrats' entire voting base. The Democrats will need some new approaches in 2014 if this thing goes through:

Raven Brooks of Netroots Nation tweeted:

If the Democrats want 2010 losses X 5 in 2014 they should go ahead and vote to cut Social Security.
— Raven Brooks (@ravenb) December 18, 2012

What's astonishing too is that Obama is willing to have himself and the Democrats be patsies for this. The Republicans will campaign against them in 2014 based on the Social Security cut if it goes through. The idea that they will observe a "Grand Bargain" by not using the Social Security cut against the Democrats is nonsense. Then when they capture both Houses of Congress, they can push Obama for more cuts in Social Security, Medicare and Medicaid and then make the Democrats own those in 2016. Awesome!

Brian Beutler in The Social Security Benefit Cut Obama May Agree To TPM 12/18/2012 reports on several alleged Social Security supporters leaning toward backing this cut which would politically have the effect of throwing Social Security to the Wall Street wolves:

Supporters like to describe it as a technical fix to the way the government calculates inflation. But in practical terms, it will effectuate a genuine Social Security benefit cut. If it’s applied across the board, it will also reduce food stamp benefits and veterans benefits, and function as a modest but regressive tax increase, as brackets grow more slowly and taxpayers find themselves pushed across income thresholds more quickly than in the past.

Chained CPI differs from the way the government currently calculates inflation by taking a broader view of the behavioral changes consumers make when prices rise. It factors in a propensity to substitute cheaper, but similar products for ones that have become more expensive. And it has been criticized by advocates for being a less accurate measure of inflation for the products seniors rely on than Social Security currently uses.

But Obama allies and and some liberal economists have identified it as the least-bad entitlement benefit cut and have given it their blessing provided it's one piece of a broader, balanced debt reduction plan, and includes protections for poorer seniors. Though the Congressional Budget Office has cautioned that indexing Social Security to chained CPI would be technically complicated, the liberal Center on Budget and Policy Priorities backed it under those circumstances. So did the progressive Center for American Progress, which has close ties to the White House.

In Evaluating The Coming Deal 12/16/2012, Beutler added an important aspect: "But even though it’s not as onerous as an increase in the Medicare eligibility age — and even though the Obama administration has never really had a problem with this particular reform — it's still a benefit cut, a real one, up front, with Obama’s fingerprints all over it." (my emphasis) As Sarah Palin might say, you betcha!

I was unpleasantly surprised to see that even Paul Krugman went a little wobbly in writing about this awful proposal. Just the day before in, he Assimilated by the Peterson Borg 12/16/2012 was writing about a "Peterson deficit-scold front group" fear-mongering about the fiscal cliff, and he observed, "The only way we could even get anything pretending to be a Grand Bargain would be for Obama to surrender completely, as he almost did in 2011; and a bargain like that wouldn't even deliver deficit reduction, because you know that Republicans would end up reneging on the revenue parts." And he reminds us of what today's Republican Party is:

So this is ridiculous — and the fact that all these people don’t realize that is in itself evidence of the bubble in which Very Serious People still live. It’s also evidence of the desperation of the deficit scolds, who are evidently horrified that they aren’t managing to exploit the fiscal cliff — which has nothing at all to do with our debt — to ram their agenda through.

This is one of the weaknesses that even sensible economists like Krugman or Robert Reich show on Social Security. For economists, a payroll tax cut looks like a technically efficient way to put more money immediately into consumers hands and one that even enhances the progressivity of the tax, since wealthy people pay a much smaller percentage of their total income on payroll taxes because of the cap and because it doesn't apply to income categories like capital gains.

But politically, the payroll tax is an anchor of the Social Security and Medicare programs because it emphasizes their nature as social insurance and gives people a sense that "I've paid into this program my entire life," and therefore more ownership of the program. Reducing the payroll tax and replacing the lost revenue from the General Fund, which we've been doing the last couple of years, helps Social Security opponents like Obama and the Republicans stigmatize Social Security and Medicare as "welfare."

That's even true of one of the reported elements of Obama's current proposal to cut Social Security benefits: the fact that the cut would be replaced by a subsidy of some kind to the lowest-income seniors. Another big and visible step toward making it "welfare."

Tags: austerity economics, barack obama, chained cpi, fiscal cliff, grand bargain, medicaid, medicare, social security

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