The
Wall Street Journal is reporting today that President Obama's "budget may include plan to restrict inflation adjustments for Social Security, other programs, along with new revenue."
Setting aside the bargaining problems with this, when did Democrats decide the Social Security was an acceptable bargaining chip? Is it a function of deficit hysteria?
In the New York Times today, Paul Krugman wrote:
Maybe it wasn’t that significant when President Obama declared that we don’t face any “immediate” debt crisis, but it did represent a change in tone from his previous deficit-hawk rhetoric.
If that is so, then why is the President offering up cuts in Social Security benefits? There is no political logic, there is no fiscal logic (even if there was a need for immediate action on the deficit, Social Security is decidedly not the place to start) nor is there a fairness logic to support offering cuts.
Follow me to the other side to discuss why Democrats are wrong on all levels to offer up Social Security to the Pete Peterson contingent.
Is Social Security broken? No. Indeed, if Social Security is considered broken, then the entire federal government is in shambles. Dean Baker explained this morning:
In 20 years average output per worker is conservatively estimated to be more than 40 percent higher than it is today. This means that even if workers were to see an increase in their payroll tax of 2 or 3 percentage points (almost certainly more than would actually be the case – we can also raise the cap on taxable wages) they would still have much higher after-tax wages in 2033 than they do today.
Furthermore, the longer-term story looks even brighter. After 2030 the demographic picture actually improves slightly as us pesky baby boomers die off and then is projected to worsen very gradually through the rest of the century as the life expectancies continue to rise.
This means that the gains of productivity growth will be able to go to active workers in these decades with no additional burdens due to demographics. That would mean wages could rise by another 15 percent by 2043 and another 15 percent on top of this by 2053. There is nothing close to the story of impoverishing our children pushed by the VSPs.
There is no generalized public policy logic to the push to cut Social Security. Is there a specific fairness logic? Would imposing Chained CPI make Social Security more fair? the answer is
no, as Roger Fox explains:
But what may not be well known is that Chained CPI would be used not just for calculating Social Security and Veterans Benefits..... If the Government adopts Chained CPI for adjusting Income Tax Brackets, & wages grow more than the Chained CPI, your income rises faster than the Income tax brackets would. Over time many families would be bumped into the next income tax bracket. Currently the Income Tax Brackets are adjusted to CPI-U.
So does it make sense politically? For Republicans to have Democrats undermine Social Security is the opposite of making political sense for Democrats. It is a huge win for Republicans. As I wrote a few weeks ago:
Chained CPI has a constituency of 1 at this particular bargaining table - the president himself. The idea that the president is giving on Chained CPI to a demand for it from the GOP is not borne out by the facts. He is making a concession to Pete Peterson, who is not at the bargaining table and can deliver nothing for the president here.
Here's my point-- even if you can live with Chained CPI (and I think it is a terrible idea)
in exchange for revenue concessions from the GOP, as The People's View is advocating, the bargaining approach the president has adopted will not forward that result. To get revenue concessions from the GOP, the president will have to give up something else to the GOP (Medicare eligibility age? Pelosi has indicated that one would be real pain in her view, as opposed to Chained CPI.)
Of course, it could be that the president is merely trying to look good to the Pete Peterson crowd in hopes of some good commentary from them. My own view is that good commentary from that crowd is pretty worthless politically and otherwise.
But even if it was worth something, it is not and will not be forthcoming. They will not take sides, even if one side is arguing for what they say they want.
All in all, there is no real logic to the approach the president has taken on Chained CPI.
Instead of being "Social Security Defenders," President Obama and some Democrats have chosen to be the ones who want to bargain away Social Security. It is inexplicable.
But that leaves us with the role of being the "Social Security Defenders." I'm proud to have been a part of the effort.