Thursday Reads: Fiscal Cliff Crashes into Debt Ceiling, Villagers Blame Old People….And Other News

Good Morning!!

The storm has moved into New England, but it’s mostly rain up here–very hard, windy, noisy rain. I’m very grateful it isn’t snow, but I feel for all the people down south of me who are getting hit harder. Take care, everyone!!

Yesterday Tim Geithner announced that the U.S. will hit the debt ceiling on December 31. He sent a letter (pdf) (also posted on the Treasury Department website)to Harry Reid with cc’s to other Congresscritters informing them that the Treasury can fiddle around and keep things going for at the most two months before the U.S. defaults on its debts for the first time in history.

Meanwhile, no negotiations on the “fiscal cliff” took place yesterday. John Boehner appears to have abdicated all responsibility and has announced that it’s up the the Senate to act; but Senators are in no hurry to rush back to Washington DC and clean up the House Republicans’ mess.

U.S. House of Representatives Speaker John Boehner on Wednesday urged the Senate to pass its version of legislation to avert the “fiscal cliff,” in a sign that congressional efforts to avoid a budget crisis are coming back to life days ahead of the year-end deadline.

In a statement issued by Boehner and his top lieutenants, the Republican leadership team said “the Senate must act first” to revive efforts to avert the $600 billion in automatic tax hikes and spending cuts due to be triggered on Jan. 1.

They promised that the House would weigh whatever legislation the Senate produced.

What are we paying these incompetent idiots for anyway? But of course no one is talking about cutting Congresspeople’s salaries–the pressure is all on Social Security recipients. Yesterday, Ruth Markus wrote a column in support of cutting benefits because seniors and disabled people (including disabled veterans) are getting too much money (the average SS check is $1,200 per month). She thinks everyone should gratefully embrace the Chained CPI.

Here’s how the CPI works. When taxes are being calculated, brackets, standard deductions, personal exemptions and the like are ratcheted up with inflation, protecting taxpayers from being forced to pay higher taxes for what is essentially the same amount of income they had previously.

Benefits — everything from Social Security to veterans’ benefits to federal pensions — are similarly adjusted upward to protect beneficiaries’ buying power from being relentlessly eroded.

Such indexing makes eminent sense. The difficulty — and the money-saving opportunity — arises because, in the view of most economists, the current method of calculating changes in the CPI overstates the inflation rate.

It fails to account for what economists call upper-level substitution bias, and what my mother would call plain common sense: If the price rises for a certain commodity in the basket of goods used to measure inflation, consumers will choose a cheaper alternative. In my house, when the price of beef soars, we substitute chicken.

The CPI doesn’t and, as a result, taxpayers are undercharged and beneficiaries are overpaid — a lot. The overestimate is small — less than 0.3 percentage points annually but, much like compound interest, it adds up over time.

What Marcus doesn’t seem to understand is that when your income is that low, beef and chicken are are both too expensive and you substitute peanut butter and dried beans. Except that peanut butter prices have skyrocketed–what’s the next step down, cat food?

Two economists responded to Markus. Dean Baker at the CEPR: Ruth Marcus Is Outraged by Overly Generous Social Security Checks.

Well, who can blame her? After all, we have tens of millions of seniors living high on Social Security checks averaging a bit over $1,200 a month at a time when folks like the CEOs in the Campaign to Fix the Debt are supposed to subsist on paychecks that typically come to $10 million to $20 million a year.

Anyhow, her main trick for cutting benefits is to adopt the chained consumer price index as the basis for the annual cost of living adjustment. This would have the effect of reducing benefits by 0.3 percentage points for each year of retirement. This means a beneficiary would see a 3 percent cut in benefits after 10 years, a 6 percent cut after 20 years and a 9 percent cut after 30 years. This is real money. Since Social Security is more than half the income for almost 70 percent of retirees and more than 90 percent of the income for 40 percent of retirees, the hit to the affected population would be considerably larger than the hit to the top 2 percent from ending the Bush era tax cuts.

But Marcus insists this cut must be done first and foremost in the name of accuracy, since the chained CPI is supposed to provide a better measure of the cost of living. She notes but quickly dismisses the evidence from the Bureau of Labor Statistics (BLS) consumer price index for the elderly (CPI-E), which shows that the rate of inflation seen by the elderly is somewhat higher than the overall rate of inflation.

Read Baker’s upteenth explanation of why the Chained CPI doesn’t accurately reflect spending for seniors at the link. He argues for continuing development of a CPI that takes into account that seniors spend greater proportions of their income on health care and basic necessities that can’t necessarily be replaced with cheaper substitutes.

Next, Jared Bernstein says he’s “convinced the Chained CPI is coming” and it is a benefit cut. He agrees with Baker that an elderly CPI would be a good thing, but says that Markus’ argument we should cut benefits now and deal with the injustices later makes no sense.

…as Dean notes, it would make a lot of sense to invest in a chained-weighted CPI that accounts for the notably different buying patterns of the elderly. Ruth Marcus critiques this point today but for reasons that don’t make sense to me. For example, she criticizes an elderly price index that would more heavily weight health care spending because “the burden of higher health costs falls unevenly among the elderly. Average costs are skewed upward by a minority who face very high out-of-pocket expenses…”

But a) all the commonly used price indexes use average costs and are thus “skewed” up and down when the underlying distribution is uneven, and b) there’s little question that the ‘old’ elderly—the ones most hurt by the switch to the chain-weighted measure—face high out-of-pocket medical costs.

Marcus goes on to endorse, as do we at CBPP, [immediately switching to the Chained CPI but protecting “vulnerable people from the impact”] and this is clearly the administration’s view as well—in fact, they’ve built in offsetting benefits to the poor, old elderly into their plan. That’s very important and salutary and one reason why I nervously support the switch.

But I’m more concerned than Ruth appears to be with the possibility that the current politics get us the chained CPI without the necessary protections.

It certainly looks like President Obama will go down in history as the Democrat who cut the New Deal off at the knees unless he suddenly realizes his legacy matters to him. Remember way back when Social Security was “off the table” because it doesn’t contribute to the deficit? Oh wait–that was only two weeks ago.

In other news, the Supreme Court yesterday turned down an “emergency” appeal on the Obamacare contraception rule.

Justice Sonia Sotomayor rejected a request for an emergency injunction that would have shielded employers from the mandate.

The request was filed by Hobby Lobby, an arts-and-crafts chain. The company’s Catholic owners say the contraception mandate violates their religious freedom.
Hobby Lobby might eventually win on that point, Sotomayor said, but the company didn’t meet the standard for an injunction blocking the mandate from taking effect.

The administration’s policy requires most employers to include contraception in their employees’ healthcare policies, without charging a co-pay or deductible. Churches and houses of worship are exempt, and religious affiliated institutions such as Catholic hospitals don’t have to cover contraception directly. (Their insurance companies cover the cost of making it available at no cost to the employee.)

But some Catholic employers say they should be able to opt out of the mandate simply because it violates their personal faith, no matter what type of business they run.

Because these days “religious freedom” is for corporations, not individuals. Pretty soon the Supreme Court will have to announce that Corporations are people but individual Americans are not people–especially if they have vaginas.

Linda Greenhouse has a scary piece at the NYT on the NRA’s efforts to install gun-friendly judges: The N.R.A. at the Bench.

Back in 2009, when President Obama chose Judge Sonia Sotomayor as his first Supreme Court nominee, the White House expected that her compelling personal story, sterling credentials, and experience both as a prosecutor and, for 17 years, as a federal judge would win broad bipartisan support for her nomination. There was, in fact, no plausible reason for any senator to vote against her.

The president’s hope was Senator Mitch McConnell’s fear. In order to shore up his caucus, the Senate Republican leader asked a favor of his friends at the National Rifle Association: oppose the Sotomayor nomination and, furthermore, “score” the confirmation vote. An interest group “scores” a vote when it adds the vote on a particular issue to the legislative scorecard it gives each member of Congress at the end of the session. In many states, an N.R.A. score of less than 100 for an incumbent facing re-election is big trouble.

Note that the N.R.A. had never before scored a judicial confirmation vote. Note also that Sonia Sotomayor had no record on the N.R.A.’s issues. (True, she voted with an appeals court panel to uphold New York State’s ban on nunchucks, a martial-arts weapon consisting of two sticks held together with a chain or rope, commonly used by gang members and muggers. The appeals court didn’t even reach the interesting issue of whether the Second Amendment guaranteed the right to keep and bear nunchucks, ruling instead that the amendment didn’t apply to the states – which, before the Supreme Court later ruled otherwise by a vote of 5 to 4, it didn’t.)

Never mind. The N.R.A. had all the reason it needed to oppose Sonia Sotomayor: maintenance of its symbiotic relationship with the Republican Party. Once it announced its opposition and its intention to score the vote, Republican support for the nominee melted away. Only seven Republicans voted for confirmation.

Please go read the whole thing at the link. In other NRA news, you’ve no doubt heard about the petition by a bunch of right wing gun nuts to get Piers Morgan deported for exercising his First Amendment right to express an opinion on gun control and call some right wing gun nut an “unbelievably stupid man.”

There’s now a competing petition started by Brits who don’t want Morgan sent back there. Mediaite:

Piers Morgan is facing another petition regarding his controversial views on gun control, but this time, it’s in support of him staying in the United States. Why do the so-far 69 signers want Morgan to stay? It’s primarily because “no one in the UK wants him back.”

There are two other stated reasons: “The first amendment,” and angering Americans for comic value.

Meanwhile, Morgan has doubled down: Piers Morgan: Bible And Constitution ‘Inherently Flawed,’ ‘Time For An Amendment To Bible’

On Monday, CNN host Piers Morgan invited Saddleback Church Pastor Rick Warren on his program to discuss gay marriage and the bible. Fresh off his feud with Second Amendment rights activists following his full-throated defense of stricter gun control laws in the wake of the Newtown massacre, Morgan inspired further outrage among the religious when he told the pastor he thought it was time for an “amendment to the bible.” In Morgan’s opinion, the bible, like the American Constitution, is “inherently flawed.”

Following a polite exchange between Morgan and Warren over what the bible does and does not condone, Morgan interjected to insist that the Christian holy book needs to be modernized.

“There is still an element of the bible that is flawed,” Morgan told Warren on his program, Piers Morgan Tonight.

“I do not believe the bible is flawed,” Warren replied.

“Both the bible and the Constitution were well intentioned, but they are basically, inherently flawed. Hence, the need to amend it,” Morgan continued. “My point to you about gay rights, for example, it’s time for an amendment to the bible.”

Finally, the Villagers are still talking about the recent Boston Globe article by Romney biographer Michael Kranish that spells out exactly how stupid and incompetent Romney’s campaign actually was–it was even worse than it looked, apparently. The viral quote from the piece was Tagg Romney’s assertion that his father didn’t really want to be President even though he spent ten years campaigning for the job.

“He wanted to be president less than anyone I’ve met in my life. He had no desire to . . . run,” said Tagg, who worked with his mother, Ann, to persuade his father to seek the presidency. “If he could have found someone else to take his place . . . he would have been ecstatic to step aside. He is a very private person who loves his family deeply and wants to be with them, but he has deep faith in God and he loves his country, but he doesn’t love the attention.”

WTF?!! Then why did he subject us to the stupidest campaign in history? Charles Pierce responded to the story yesterday:

…ever since this quote hit the papers, young Tagg has been the subject of much mockery and ridicule, and suggestions that he join that nice Mr. Aesop in the Produce section, over by the grapes. It has been hinted that Tagg has the same largely accidental relationship with the truth that his father so vividly demonstrated over the five years in which he pursued the job he really didn’t want anyway. I choose to believe Tagg Romney entirely. Willard Romney didn’t want to be president. Willard Romney expected to be president, and that was his real undoing.

It has been years, probably, since Willard had to go to all the emotional fuss and bother of actually wanting something. If there was something that caught his eye — a slow-moving company’s fat pension fund, a nice house in La Jolla, the governor’s office in Massachusetts — there would be a deal to be struck and whatever it was that should be his would be his. This is not a man who tolerates disappointment well, not because he burns with ambition and avarice — although he profited for years from very effective simulacrums of ambition and avarice –but, rather, because he rarely has experienced disappointment in his life. He does not want. He expects.

There’s lots more good stuff at Pierce’s blog. I hope he keeps up the pace today. I could use some laughs.

OK, this post is waaaaay too long!  If you slogged through the whole thing, thanks very much.  Now what’s on your reading and blogging list? Please share your links in the comments.