The President released his budget today, and it includes the promised benefit cuts to Social Security that the White House has tried to conceal by claiming it wants to institute a supposedly “more accurate” measure of cost-of-living, the Chained CPI. Of course at this point, anyone who is paying attention knows that the change will result in the average senior getting $1,000 less per year after 20 years. It’s a benefit cut pure and simple.
What many people don’t know yet is that switching Chained CPI will result in a significant tax increase for working poor and middle-class Americans.
Here’s your soundtrack for this post. Perhaps the great Aretha Franklin can make Obama’s budget slightly less nauseating. I’m also going to try to ease the pain with cartoons and visual aids.
Luckily, Grover Norquist and the folks at Americans for Tax Reform know darn well that Chained CPI amounts to a tax increase for people on the lower end of the income scale. This is right from their website.
The proposal in question is known as “Chained CPI.” The term is a Beltway euphemism for measuring inflation at a different, slower pace. Many tax and budget items are indexed to inflation, so slowing inflation’s measured rate of growth has both spending cut and tax increase implications.
On the tax side, all income tax brackets are subject to inflation. Slowing down the inflation rate slows down the annual rate of growth in all income tax brackets.
This means the Obama budget contains a tax increase on 100 percent of middle class taxpayers—anyone who pays the federal income tax.
Many other tax provisions—the standard deduction, the personal exemption, PEP and Pease, IRA and 401(k) contribution limits, and many others—are also tied to how CPI is measured.
Chained CPI as a stand-alone measure (that is, not paired with tax relief of equal or greater size) is a tax increase and a Taxpayer Protection Pledge violation. Various reports peg the tax increase amount as exceeding $100 billion over the next decade.
Ted Rall explains Chained CPI:
Dylan Matthews broke it all down (with charts) in a December 2012 post. Here’s the gist:
The group getting the biggest tax hike is families making between $30,000 and $40,000 a year. Their increase is almost six times that faced by millionaires. That’s because millionaires are already in the top bracket, so they’re not being pushed into higher marginal rates because of changing bracket thresholds. While a different inflation measure might mean that the cutoff between the 15 percent and 25 percent goes from $35,000 to $30,000, the threshold for the top 35 percent bracket is already low enough that all millionaires are paying it. Some of their income is taxed at higher rates because of lower thresholds down the line, but as a percentage of income that doesn’t amount to a whole lot.
All told, chained CPI raises average taxes by about 0.19 percent of income. So, taken all together, it’s basically a big (5 percent over 12 years; more, if you take a longer view) across-the-board cut in Social Security benefits paired with a 0.19 percent income surtax. You don’t hear a lot of politicians calling for the drastic slashing of Social Security benefits and an across-the-board tax increase that disproportionately hits low earners. But that’s what they’re sneakily doing when they talk about chained CPI.
That’s why watchdog groups like the Center for Budget and Policy Priorities argue that the only fair way to do chained CPI would be to pair it with an increase in Social Security benefits, and to exempt Supplemental Security Income, which provides support for impoverished elderly, disabled and blind people. Otherwise, it’s just a typical “raise taxes, cut benefits” plan, and an arguably regressive one at that.
So basically if you work for a living or depend on Social Security, you’re getting screwed coming and going.
Here’s another cartoonist’s evaluation of the situation:
Chained CPI will disproportionately affects women, according to the AARP (3/6/2013).
The Social Security benefit cut known as Chained CPI remains a piece of the deficit puzzle for reasons that baffle conservatives, veterans, progressives, and almost everyone in between. The $85 billion in sequester cuts for 2013 have begun and many in Washington have still said they’re willing to cut the modest Social Security benefits we’ve earned by $127 billion over 10 years, even though Social Security by law remains separate from the budget and its deficit. Let’s give every woman and anyone who has or has ever had a mother, sister, daughter, grandmother, aunt or girlfriend a reason to despise this wretched proposal.
This week AARP began running ads about the impact of what the Chained CPI Social Security benefit cuts would mean to women. Below is a copy of one of those ads.
Here’s what Terri O’Neill, president of NOW had to say about women and Chained CPI.
I’m sure you recall that our previous Republican President (let’s face it, Obama is a Democrat in name only) began his second term with the ambitious goal of privatizing Social Security. It didn’t end well for him. Here’s a cartoon from back then:
And another one:
That’s the kind of reaction politicians tend to get when they attack the most successful and powerful government program in history. That’s why it’s called “the third rail.” Remember in when Texas Gov. Rick Perry attacked Social Security as a “Ponzi scheme?” Look what happened to him?
Obama is already beginning to learn why politicians who step on the “third rail” end up regretting it. He’s out there on a limb all by himself. Democrats hate his budget and so do Republicans, because the vast majority of Americans like Social Security and if it’s threatened they tend to get mad–especially seniors.
Yesterday, Digby recalled what can happen “When seniors get angry …” She referred to an incident in 1989 which Democrat Dan Rostenkowski–the powerful Chairman of the Ways and Means Committee–was chased down the street by enraged seniors.
Andrea Stone told the tale at AOL News in August 2010 after the Illinois Congressman’s death: Rosty’s ‘Catastrophic’ Moment Over Health Care Was a First.
The Medicare Catastrophic Coverage Act, first unveiled by President Ronald Reagan, became law in July 1989. The measure provided seniors on Medicare with protection against catastrophic medical expenses and coverage of prescription drug costs. The benefits were to be paid for exclusively by the elderly receiving them, with high-income seniors paying an extra premium surtax.
Soon after Congress passed the law on an overwhelmingly bipartisan vote, Rosty returned to his district. It was there, after a fairly civil meeting with seniors resentful over having to pay higher taxes for coverage they either already had from a former employer or didn’t want, that he was accosted by an angry mob of Social Security recipients.
As the Chicago Tribune reported the next day, Aug. 19, 1989:
Congressman Dan Rostenkowski, one of the most powerful politicians in the United States, was booed and chased down a Chicago street Thursday morning by a group of senior citizens after he refused to talk with them about federal health insurance. Shouting “coward,” “recall” and “impeach,” about 50 people followed the chairman of the U.S. House Ways and Means Committee up Milwaukee Avenue after he left a meeting in the auditorium of the Copernicus Center, 3106 N. Milwaukee Ave., in the heart of his 8th Congressional District on the city’s Northwest Side.
Eventually, the 6-foot-4-inch Rostenkowski cut through a gas station, broke into a sprint and escaped into his car, which minutes earlier had one of the elderly protesters, Leona Kozien, draped over the hood. Kozien, one of more than 100 senior citizens who attended the gathering, said she had hoped to talk to Rostenkowski, her congressman, at the meeting.
But Rostenkowski clearly did not want to talk with her, or any of the others who had come to tell their complaints about the high cost of federal catastrophic health insurance. “These people don’t understand what the government is trying to do for them,” the 61-year-old congressman complained as he tried to outpace his pursuers.
“This was a setup,” said Jaffe, who can be seen in the video ducking into the backseat of the car. “They were standing with made-for-television signs about how he had sold them out.”
As the Tribune reported, “Kozien was soon on the hood, determinedly holding her sign only inches from the windshield. Except for the glass, she was virtually face-to-face with her congressman. ‘I was a little nervous,’ Kozien said later. ‘But I could see through the car window that he looked more afraid than I was.'”
And there is even video of the incident:
Obama is all alone out there on his limb. The only people who have his back are his apparently not-to-bright advisers. Does he really want to be remembered as the first Democratic President to tamper with Social Security? And BTW, his budget also cuts Medicare significantly. Is this really what he wants as his “legacy?” Is it really good enough to gain the applause of Wall Street and the “Very Serious People” in Washington, DC today but go down in history as a worse president than Calvin Coolidge, Herbert Hoover and George W. Bush? We shall see.