Delusional Paul Ryan Bases New Budget on Repealing Obamacare
Posted: March 10, 2013 Filed under: U.S. Economy, U.S. Politics, 2012 presidential campaign | Tags: medicare, Paul Ryan, Medicaid, Chris Wallace, Fox News Sunday 20 Comments »
Oh man, this is too much!
Paul Ryan appeared on Fox News Sunday with Chris Wallace today and admitted to that the new “Ryan Plan” budget is based on the assumption that the Affordable Care Act will be repealed along with the planned Medicaid expansion.
Here’s the transcript of the interview.
Ryan explains that he plans to turn Medicare into a voucher program and Medicaid, food stamps, and “49 different job training programs spread across nine different government agencies” into block grants and let the states decide what to do with the money. Wallace had some questions.
Let me ask you about a couple of the specific cuts that you made last year, and tell me if they’re not in the new budget — I assume that they are. You cut Medicaid by $770 billion, over the next 10 years. You cut $134 billion from food stamps. You cut $166 billion from education, training and social services.
….
WALLACE: Can you honestly say by turning Medicaid into a block grant and giving it to the states that you can cut $770 billion –
RYAN: Yes.
WALLACE: — out of that program, over the next 10 years, and that’s going to have no impact on legitimate recipients?
RYAN: These are increases that have not come yet. So, by repealing Obamacare, and the Medicaid expansions which haven’t occurred yet, we are basically preventing an explosion of a program that is already failing.
So, we’re saying don’t grow this program through Obamacare because it doesn’t work. Prevent that growth from going because it’s not going to work, it’s going to hurt people who are trying to help, it’s going to hurt hospitals and states and, give the states the tools that they are asking for.
I’m kind of surprised Wallace didn’t do a Ricky Ricardo-type double take after that.
WALLACE: I’m going to pick up on this because I must say I didn’t understand it. Are you saying that as part of your budget, you would repeal, you assume the repeal of Obamacare?
RYAN: Yes.
WALLACE: Well, that’s not going to happen.
RYAN: Well, we believe it should. That’s the point. That’s what’s — but this is what budgeting is all about, Chris. It’s about making tough choices to fix our country’s problems.
And here’s the really crazy part. Wallace points out that, you know, Obama won the election and Medicare was a huge issue during the campaign and the voters rejected the Romney/Ryan plan.
Ryan doesn’t buy it:
I would argue against your premise that we lost this issue in the campaign. We won the senior vote. I did dozens of Medicare town hall meetings in states like Florida, explaining how these are the best reforms to save the shrinking Medicare program and we are confidently this is the way to go. It has bipartisan support. It’s an idea that came from Democrats in the first place.
Wha– ?! Has this guy gone around the bend or what? Haven’t the House Republicans already tried to repeal Obamacare more than 30 times?
Here’s the video from Think Progress:
This is a completely wacko, insane, what-is-he-smoking open thread!
It’s Finally Happened: Obama Has Driven the Pundits Insane!
Posted: March 4, 2013 Filed under: U.S. Economy, The Media SUCKS, U.S. Politics, Barack Obama, 2012 presidential campaign | Tags: tax cuts, Ronald Reagan, George W. Bush, Dean Baker, John F. Kennedy, Bill Keller, Robert J. Samuelson 54 Comments »
Sure, these two guys were a little nutty to begin with, but now they’ve gone around the bend.
First up: Have you seen the latest drivel from Robert J. Samuelson? Seriously, even the Washington Post should be ashamed to publish this guy. Get this — Samuelson says that sequestration is John F. Kennedy’s fault!
How so?
Fifty years ago, President Kennedy made a decision that, with hindsight, ranks as the biggest mistake of domestic policy since World War II. In many ways, it led directly to today’s “sequester” debacle.
Good Grief! What’s he talking about? The Bay of Pigs? The Cuban missile crisis?
No silly, President Kennedy decided to stimulate the economy.
In early 1963, he proposed a $13.6 billion tax cut (today: about $320 billion) even though the economy was not in recession and the tax cut would enlarge the budget deficit. Kennedy adopted the theory that government could, by manipulating its budgets, increase economic growth, reach “full employment” (then a 4 percent unemployment rate) and reduce — or eliminate — recessions.
It was a disaster.
High inflation was the first shock. An initial boom (by 1969, unemployment was 3.5 percent) spawned a wage-price spiral. With government seeming to guarantee 4 percent unemployment, workers and businesses had little reason to restrain wages and prices. In 1960, inflation was 1 percent; by 1980, it was 13 percent. The economy became less stable. From 1969 to 1982, there were four recessions, as the Federal Reserve alternated between trying to push unemployment down and prevent inflation from going up. Only in the early 1980s did the Fed, under Paul Volcker and with Ronald Reagan’s support, crush inflationary psychology.
A disaster? Really? I was a kid in the 1960s. The economy was great in those days–until 1973, those were the best economic times I’ve experienced in my lifetime. Unemployment was low, wages were good, people like my parents were movin’ on up to the middle class. But don’t take it from me–let’s see what an actual economist has to say about this. Here’s Dean Baker at the Center for Economic Policy Research (CEPR):
Samuelson’s economic history is even more striking than the linking of Kennedy to the sequester. He notes the fiscal stimulus that was sparked by the Kennedy tax cuts (and the Vietnam War and Johnson’s Great Society programs) and the boom that resulted, and tells us that “it was a disaster.”
….
Before looking at Samuelson’s horror story here, it is worth noting what happened in the boom, which can be treated as going through 1973, in spite of the recession in 1969. Growth over the 10 years from 1963 to 1973 averaged 4.4 percent, by far the most rapid stretch in the post-World War II era.
The unemployment rate hovered near 4.0 percent for most of this period, as Samuelson complains. This led to large gains in real wages and sharp declines in poverty. The overall poverty rate fell from 19.5 percent in 1963 percent to 11.1 percent in 1973, an all-time low. For African Americans the poverty rate fell from 55.1 percent in 1959 (annual data is not available) to 31.4 percent in 1973. I suspect most folks wouldn’t mind a few more disasters like this one.
As far as the recession story, Samuelson might have told readers that we had the same number of recessions in the 13 years following 1969 as we did in the 12 years preceding 1961. I suppose those recessions were also due to the Kennedy tax cut.
There’s lots more at both links. But you have to read Samuelson’s column to believe it. He goes on to claim that because of JFK’s tax cut, we developed “the loss of budgetary discipline,” and we’re still suffering from that 50 years later. So how does he rationalize the deficit spending under Reagan and W. Bush? He doesn’t.
And over at The New York Times, Iraq War propagandist Bill Keller disagrees with Samuelson: he thinks sequestration is “Obama’s Fault.” And of course he’s still droning on about “entitlements.” Keller admits that both parties agreed on the sequestration cuts, but it’s still really Obama’s fault because he hasn’t completely destroyed the safety net yet. And here’s the best part: Obama refuses to enact Simpson Bowles.
In December 2010 the commission, led by Erskine Bowles and Alan Simpson, delivered its list of spending cuts and revenue increases, plus the entitlement reforms necessary to fortify Medicare and Social Security for the surge of baby-boom retirees.
The Simpson-Bowles agenda was imperfect, and had plenty to offend ideologues of the left and right, which meant that it was the very manifestation of what Obama likes to call “a balanced approach.”
Ummm…no, Bill, the Commission never issued a report. They couldn’t agree on a unified agenda, so Simpson and Bowles wrote up their own report which was never approved by the commission members.
Now here’s where Keller really goes off the rails:
If Obama had campaigned on some version of Simpson-Bowles rather than on poll-tested tax hikes alone, he could now claim a mandate from voters to do something big and bold. Most important, he would have some leverage with members of his own base who don’t want to touch Medicare even to save it. This was missed opportunity No. 1.
That’s really funny. If Obama had campaigned on Simpson-Bowles, Mitt Romney would be president now. Because if you campaign on really really unpopular issues, people have a tendency to like, not vote for you.
There’s much more at the link, but you get the idea.
Gene Sperling: “A mix of entitlements and revenues was part of the DNA” of the Sequester “from the start.”
Posted: February 28, 2013 Filed under: U.S. Economy, U.S. Politics, Barack Obama, Social Security, Medicare, 2012 presidential campaign, Medicaid, Austerity | Tags: Robert Kuttner, Gene Sperling, digby, Bob Woodward, Jon Walker, the sequester, entitlement cuts 38 Comments »
Gene Sperling and Barack Obama
I want to call attention to some rather startling statements in Gene Sperling’s e-mail to Bob Woodward, which I posted earlier. Please note the highlighted sections.
From Gene Sperling to Bob Woodward on Feb. 22, 2013
Bob:
I apologize for raising my voice in our conversation today. My bad. I do understand your problems with a couple of our statements in the fall — but feel on the other hand that you focus on a few specific trees that gives a very wrong perception of the forest. But perhaps we will just not see eye to eye here.
But I do truly believe you should rethink your comment about saying saying that Potus asking for revenues is moving the goal post. I know you may not believe this, but as a friend, I think you will regret staking out that claim. The idea that the sequester was to force both sides to go back to try at a big or grand barain with a mix of entitlements and revenues (even if there were serious disagreements on composition) was part of the DNA of the thing from the start. It was an accepted part of the understanding — from the start. Really. It was assumed by the Rs on the Supercommittee that came right after: it was assumed in the November-December 2012 negotiations. There may have been big disagreements over rates and ratios — but that it was supposed to be replaced by entitlements and revenues of some form is not controversial. (Indeed, the discretionary savings amount from the Boehner-Obama negotiations were locked in in BCA: the sequester was just designed to force all back to table on entitlements and revenues.)
I agree there are more than one side to our first disagreement, but again think this latter issue is diffferent. Not out to argue and argue on this latter point. Just my sincere advice. Your call obviously.
My apologies again for raising my voice on the call with you. Feel bad about that and truly apologize.
Gene
Really? Does anyone recall President Obama saying that at the time the sequester was proposed and voted on in 2011? Did President Obama discuss these plans for entitlement cuts during his campaign for re-election? I’ve always suspected he did plan cuts in Social Security, Medicare, but when did he publicly state this? I’ve done a somewhat cursory search, but I can’t find anything.
There is no mention of these agreed-upon cuts in the Wikipedia entry on the Budget Control Act of 2011. There no mention of “entitlement” cuts in this extensive article at The Bipartisan Policy Center. This analysis (pdf) notes that the Supercommittee was authorized to cut Social Security:
The “Super Committee” deficit reduction plan: BCA also creates a new, special joint committee of Congress charged with finding at least $1.2 trillion in deficit reduction to avoid any potential sequestration. This “Super Committee” can cut spending (including Social Security and Medicare), raise revenue, or propose a combination of both. If the committee cannot agree on a plan, or Congress fails to approve it, automatic cuts of $1.2 trillion will be triggered through sequestration. To assist the Super Committee with its task, Congress also provided for an accelerated review of the Super Committee recommendations, provided that the Super Committee followed specific timelines, as outlined in the text.
But I think it was generally assumed that the Super Committee would not be able to agree on anything, and if they did that the Senate at least would not vote for Social Security cuts.
So now the truth has come out. Certainly no one from the White House has come rushing out to deny that cuts in Social Security, Medicare, and Medicaid are what is supposed to balance any new revenue. A few other bloggers have written about this.
Digby is always alert for any mentions of Obama’s seeming obsession with cutting Social Security, and she didn’t miss this one.
I don’t know that anyone’s ever admitted that in public before or that the president was completely, shall we say, honest when he ran for his second term about that specific definition of “a balanced approach”. I haven’t heard anyone say publicly that the sequester “deal” as far as the White House was concerned was to cut “entitlements” in exchange for new revenues. I wonder how many members of congress were aware of this “deal” when they voted for the sequester? The public certainly wasn’t.
I wish I could understand why it is so important to Barack Obama to cut these vital programs before he leaves office. It seems to be his obsession. But there you have it. It’s not just in the DNA of the sequester, it seems to be in the DNA of this White House.
In this sense, it seems that Sperling and Woodward–and by extension Obama–do “see eye to eye.”
At FDL, John Walker gets right to the point in his headline: Sperling: Obama Wanted Sequester to Force Democrats to Accept Entitlement Cuts.
The way Obama has handled basically every manufactured crisis from the debt ceiling, to the Bush tax cuts expiration, to the sequester has been about trying to force both Democrats and Republicans to embrace his version of a “grand bargain.” While it is clear this has been the driving force behind Obama’s decisions, if you pay close attention to his actions is is rare than an administration official will directly admit this. This is actually what I think it most interesting about the recently leaked email exchange between Bob Woodward and Gene Sperling up on Politico…..
Obama wants to cut Social Security and Medicare benefits. Obama also wants to raise taxes, but he only wants to do these unpopular things if he can get bipartisan cover to destroy basic democratic accountability. If everyone is to blame than no one is to blame.
What has sometimes been viewed as incompetence on the part of Obama during negotiations is actually Obama trying to weaken Democrats’ hand to “force” them to accept entitlement cuts while being able to blame it on the mean Republicans.
That is why even now Obama isn’t calling for the sequester to be simply repealed or delayed. Obama still wants to use this manufactured crisis to force congressional Democrats to betray their base by adopting Social Security cuts and get Republicans to accept revenue increases.
Finally, thanks to JJ for sending me the link to this piece by Robert Kuttner at The American Prospect: Dear White House, You’ll Regret This.
[Gene Sperling's] e-mail is pure confirmation that Obama’s position, dating back to at least 2011, has been to try to trade cuts in Social Security and Medicare for new revenues. It confirms that Sperling and his boss have been channeling the likes of Robert Rubin, Pete Peterson, the corporate-sponsored Fix the Debt campaign, et al., who have been promoting exactly this grand bargain. Sperling confirms that the sequester was designed to force exactly such a dismal deal.
But even worse, writes Kuttner, is what the e-mail demonstrations about Sperling’s–and Obama’s–pathetic negotiating skills.
The Woodward-Sperling exchange is far more interesting for what it reveals about Sperling/Obama’s propensity for giving ground on core issues and getting almost nothing in return. I supposed we should be grateful that Sperling is only wrecking the economy, the Democrats, Social Security, and Medicare—and not negotiating nukes with the Ayatollah.
I’ve said ever since I read The Audacity of Hope back in 2007 that Obama wanted to cut Social Security. Actually, he made it clear in the book that he wanted to privatize it, but he must have realized that wasn’t going to happen. It’s time for those of us who care about these issues to start screaming bloody murder again. We need to get on this ASAP. So tell your friends and call your Congress critters.
The floor is open for discussion.
Maybe the deal isn’t as bad as I thought.
Posted: January 1, 2013 Filed under: U.S. Economy, U.S. Politics, Barack Obama, Social Security, Medicare, 2012 presidential campaign, Medicaid, Congress, Mitt Romney, Fiscal Cliff | Tags: Chained CPI, 2012 presidential debates, "please proceed governor" 47 Comments »
Chess Master or Pawn?
So I went and watched a silly movie (and thoroughly enjoyed it). I calmed down and decided to get back online for a bit. I read some reactions to the fiscal cliff deal from a different perspective, and now I think maybe I was wrong. Sure it’s a lousy deal, but it’s not over yet and at Obama did manage to preserve the social safety net programs, extend unemployment benefits, hold onto the earned income tax credit and child credits, and got some minimal revenue increases.
Look, I’m poor, but I’m not on unemployment. I was willing to go “off the cliff” in order to force the Republicans’ hand. But there are millions of poor and working class people out there would would really suffer if they lose their unemployment and those tax givebacks. Now those have been extended for a year at least. Yes, there will be another fight in two months, but there was going to be a battle royal in two months anyway. Now they will kill two birds with one stone–the debt limit and the sequester will be wrapped up in one fight.
Have I drunk the Koolaid? No, but I admit I really do want to hang onto some hope for the future. So beat me up in the comments all you want. I’m going to hold off judging this deal for two more months. Then if Obama completely sells out the poor and elderly, I’ll admit I made a big mistake. But for now, I’m willing to give Obama a chance.
My changed perspective came from reading a couple of diaries at DailyKos (so shoot me!) and then rereading pieces by Paul Krugman and Noam Scheiber. First up, a Kos diary by ban nock: “Obama’s Deal From a poor Person’s Perspective.”
As usual Obama looked out for us fairly well. All you folks in the financial industry who are weeping and wailing can just pound sand, cash in some stock options, sell your Lincoln, cry me a river.
The biggest thing is earned income tax credit and medicaid, neither of which were touched. Looks like we lost 2% on Social Security contributions but that is more than made up by the earned income credit (EIC)
I should do more to define poor. By poor I mean lower than median income down to, well, to really really poor. Median is around 40K.
The earned income credit is the thing that pulls the greatest number of people out of poverty in the USA. It’s an alternative to raising minimum wages.
You take your adjusted gross income and if you’re a family with a coupla kids making between $13K and $22K Uncle Sam is going to either reduce your taxes by around $5K or reduce them as much as possible and send you a fat check for the remainder. How cool is that? Chart to figure what you get here. http://www.irs.gov/… What is Adjusted Gross Income? That’s how much money you make, but it could come down for things like IRA contributions.
And then, as ban nock points out, there’s unemployment, which is the only thing between millions of Americans and abject poverty.
Now when I first read ban nock’s diary, I was somewhat skeptical. My point of view was that Obama is just warming up for the big kill, “entitlement reform.” But wait a minute. The Republicans were screaming for that in 2011 and again in this last fight. But they didn’t get it. In fact Harry Reid even took the Chained CPI off the table and Obama and Biden didn’t put it back on.
Then I moved on to this diary by Alexander Dukes AKA “Game Guru”: “Umm… We’re playing chess, not checkers. And we’re winning.” You really need to read the whole thing, but the gist is that Obama has been dealing with people who are utterly intractable–they’re actually buttfuck crazy!–so what Obama has done is to keep kicking the can down the road while each time getting something for nothing and at the same time preserving the social programs most needed by the poor and unemployed. Here’s an
First off, lets establish that we’re playing chess, not checkers. Our objective is not to win more battles than the Republicans, its to win the war. In this case its a war against the Republican objective to effectively dismantle Medicare, Social Security, Obamacare, the EPA and every other part of the government that doesn’t leave the people to the whims of the 1 percent. This is chess, so we can afford to lose a few pieces so that we draw our opponent in for the final blow. With every turn we attempt to move toward our ultimate goal, even if that means we take some blows along the way. Chess is a thinking man’s game, it takes a long time to play. Similarly, in these budget fights, Obama’s thinking about the long haul.
Lets examine the President’s strategy: In the first budget fight, Republicans wanted to extend the Bush tax cuts for everyone. The Democrats wanted to extend unemployment benefits and renew the START treaty. There was a great deal of debate… and something happened. What did we end up with? We got START, the unemployment extension, and what else…. what else… oh yeah, DADT was repealed! All for maintaining the tax status quo at the time. Essentially, we offered nothing, and the Republicans got nothing.
Okay, so we gave up the hope for more revenue from taxing the rich, but as Republicans keep pointing out, that new revenue won’t even keep the government going for very long. It’s mostly a symbolic effort to restore some fairness to the tax system.
After that was the debt ceiling fight. Well, Obama almost got to a deal back in 2011, but to no avail. So to raise the debt ceiling congress created the sequester. Nothing for nothing there. Not a bad or good deal, because there wasn’t really a deal at all. But in the sense that there was a deal, both sides agreed to a lame duck rematch, betting that their side would win the election and have the leverage in the sequester fight. Obama won the election, so he had the leverage.
Again, Republicans basically got nothing–just a fake deadline that everyone knew all along was just kicking the can down the road.
Lets discuss what happened (and is still happening) today. Yesterday, Mitch McConnell and Obama reached a deal that did 3 main things: It ends the Bush tax cuts for those making over $400K, it raised the estate tax for those with estates greater than 5 million, and extends unemployment benefits for another year. For this, the Republicans gained… nothing.
That’s right, nothing. Yes, the sequester is extended for only 60 days, but that bumps right up against the debt ceiling… something the Republicans were going to fight over anyway. The media common wisdom is that the Republicans gained “leverage” in this deal. How so? Obama just combined two potential clusterf*cks into one! He gained a years worth of unemployment benefits, tax hikes on the 1%, and an estate tax hike; all for making his job easier in the long term.
Next time Obama may have to cave on the Chained CPI, which would be horrible, but better than privatization of Social Security. But maybe he won’t have to give that up, who knows? All we know for now is that Social Security hasn’t been changed yet.
Obama wanted the debt limited to be raised with the elimination of the sequester. This is essentially raising the limit along with eliminating the sequester, only now he’s getting more of what he wants when the debate starts because he’s already got the tax hikes and the unemployment extension!
Not only that, but now he has two major speeches between now and then to set the debate squarely in his favor.
It makes sense to me. Frankly, I buy it for now. And you know why I’m willing to string Obama along for another two months? Because of what happened in his second debate with Mitt Romney:
Please proceed, Governor.
Please proceed, Speaker.
Maybe I’m nuts, but maybe I’m not. I’m going to wait two months and find out. Now let’s look at what Krugman had to say about the upside of the deal:
To make sense of what just happened, we need to ask what is really at stake, and how much difference the budget deal makes in the larger picture.
So, what are the two sides really fighting about? Surely the answer is, the future of the welfare state. Progressives want to maintain the achievements of the New Deal and the Great Society, and also implement and improve Obamacare so that we become a normal advanced country that guarantees essential health care to all its citizens. The right wants to roll the clock back to 1930, if not to the 19th century.
There are two ways progressives can lose this fight. One is direct defeat on the question of social insurance, with Congress actually voting to privatize and eventually phase out key programs — or with Democratic politicians themselves giving away their political birthright in the name of a mess of pottage Grand Bargain. The other is for conservatives to successfully starve the beast — to drive revenue so low through tax cuts that the social insurance programs can’t be sustained.
The good news for progressives is that danger #1 has been averted, at least so far — and not without a lot of anxiety first.
Romney lost, so nothing like the Ryan plan is on the table until President Santorum takes office, or something. Meanwhile, in 2011 Obama was willing to raise the Medicare age, in 2012 to cut Social Security benefits; but luckily the extremists of the right scuttled both deals. There are no cuts in benefits in this deal.
And Scheiber’s take on the upside:
I think a reasonable person can defend the bill on its own terms. The fact is that nudging up the tax threshold to $450,000 only sacrifices $100-200 billion in revenue over the next decade (against the $700-800 billion the administration would have secured with its original threshold), while allowing unemployment benefits to lapse would cause real pain to both the 2 million people directly affected and, indirectly, to the economy. Yes, Obama could have gotten the latter without giving up the former had he just waited another few days—at which point what the GOP considers a tax increase suddenly becomes a tax cut. But these things are always easier to pull the trigger on when you, er, don’t actually have to pull the trigger. I can’t begrudge Obama his wanting to avoid some downside risk for only a marginally better deal.
In other words, we are dealing with insane people–the Republicans in the House and Senate–and so far we haven’t given away the real farm, the social safety net. Unfortunately we don’t have enough revenue for a real stimulus either, but we go back to the table in two months and the Republicans are scoring that as a win for them.
But what if it’s not? What if dealing both issues at once–the debt ceiling and the sequester–and sooner, is an advantage for Democrats and the White House? We can’t know for sure until the next fight. But Obama did get a year of unemployment, those tax givebacks, and some symbolic concessions from the super-rich. And he does have the State of the Union and Inauguration speeches to call out the Republicans and make his case.
So that’s why I’m going to give this deal a chance for now. It’s not a great deal, but the important stuff has been protected for the time being. Now go ahead and hammer me in the comments, I don’t mind.
Thursday Reads: Fiscal Cliff Crashes into Debt Ceiling, Villagers Blame Old People….And Other News
Posted: December 27, 2012 Filed under: U.S. Economy, Surreality, morning reads, We are so F'd, U.S. Politics, Barack Obama, 2012 presidential campaign, Fiscal Cliff | Tags: Social Security, John Boehner, Debt Ceiling, Mitt Romney, Tim Geithner, Chained CPI, Piers Morgan, Charles Pierce, Tagg Romney, fiscal cliff 26 Comments »
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.
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