Obama hell-bent on cutting Social Security (updated)

President Barack Obama is taking another stab at the "grand bargain" he wants to strike with Congressional Republicans. Yet again, he wants to cut Social Security benefits for low- and middle-income seniors in exchange for token tax increases on the wealthiest Americans. He is offering this deal despite evidence that Social Security benefits are a growing percentage of retired Americans' total income.

Obama's biggest fans need to stop deluding themselves about "eleven-dimensional chess" and acknowledge that for whatever reason, the president wants Social Security cuts to be part of his legacy.

The White House will formally release the president's new budget next week. Jackie Calmes reports for the New York Times that Obama is hoping Republicans will agree to replace the "sequester" federal spending cuts that started to take effect in March.

Besides the tax increases that most Republicans continue to oppose, Mr. Obama's budget will propose a new inflation formula that would have the effect of reducing cost-of-living payments for Social Security benefits, though with financial protections for low-income and very old beneficiaries, administration officials said. The idea, known as chained C.P.I., has infuriated some Democrats and advocacy groups to Mr. Obama's left, and they have already mobilized in opposition.

As Mr. Obama has before, his budget documents will emphasize that he would support the cost-of-living change, as well as other reductions that Republicans have called for in the popular programs for older Americans, only if Republicans agree to additional taxes on the wealthy and infrastructure investments that the president called for in last year's offer to Mr. Boehner.

Mr. Obama will propose other spending and tax credit initiatives, including aid for states to make free prekindergarten education available nationwide - a priority outlined in his State of the Union address in February. He will propose to pay for it by raising federal taxes on cigarettes and other tobacco products.

Changing the annual cost of living adjustment (COLA) for Social Security recipients to the "chained Consumer Price Index" is a horrible idea, for reasons Bleeding Heartland has discussed before. Dean Baker walks us through the problem again today.

Switching the basis for the COLA to the chained CPI is one of the most beloved policies of the Washington elite. The idea is that it would reduce scheduled benefits for retirees by 0.3 percentage points annually. This amounts to a cut of 3 percent after ten years, 6 percent after 20 years, and 9 percent after 30 years.

If a typical retiree lives to collect benefits for twenty years the average cut in benefits over their retirement ends up being around 3 percent. This is a much bigger hit to the typical retiree, who relies on Social Security for more than two-thirds of their income, than the tax increases put into law this year were to the typical rich person.

But the magic of the chained CPI is that everyone gets to run around saying that they are not really cutting benefits, they are just "adjusting" the cost of living formula. And the media do their best to assist the politicians pushing these cuts. They almost always uses euphemisms like "changing" or "restructuring" Social Security, trying to conceal the simple reality that politicians are pushing cuts to the program.

It is also worth noting, in contrast to the claims of the pretentious elites, there is no, as in zero, nada, none, basis for the claim that the chained CPI would give a more accurate measure of the rate of inflation experienced by seniors. Research by the Bureau of Labor Statistics (BLS) shows that the rate of inflation seen by seniors is actually higher than the CPI that provides the basis for the current COLA.

While this research is far from conclusive, the answer for those interested in accuracy would be to have the BLS construct a full CPI for seniors. But the Washington elites don't give a damn about accuracy, which is why not one of them has called for a full elderly CPI. The elite want cuts to Social Security; accuracy is just something they talk about to children and reporters for major media outlets.

During a lengthy debate over the federal budget last month, the Senate approved by voice vote an amendment putting the Senate on record opposing the chained CPI. Iowa Democrat Tom Harkin has been one of the loudest voices against this benefit cut, noting that Social Security does not contribute to the federal deficit.

I have no idea why Obama is so determined to cut Social Security. Maybe he wants to gain the approval of "serious" thinkers inside the beltway, as Paul Krugman suspects. Greg Sargent has a different theory about the politics behind the White House strategy.

Either way, it's blatantly unfair to ask seniors to take a bigger hit than the top 0.5 percent.

I am seeking comment from Iowa Democrats Bruce Braley (IA-01) and Dave Loebsack (IA-02) on whether they could support Obama's bargain. I will update this post as needed.

P.S. According to David Dayen, Obama's budget would also limit tax preferences for retirement savings accounts.

UPDATE: Loebsack's office responded with this comment via e-mail:

"Growing up, my grandmother relied on Social Security benefits to put food on the table and provide for our family.   Iowans pay into Social Security all their lives for the promise of security in retirement. The President should not be pushing to switch to the 'chained CPI'.  I strongly believe we must balance the budget, but not on the backs of seniors, the middle class, and the most vulnerable."

GOP House Speaker John Boehner immediately rejected the grand bargain.

Boehner said Friday that Obama should not "make savings we agree upon conditional on another round of tax increases."

"At some point we need to solve our spending problem, and what the president has offered would leave us with a budget that never balances," Boehner said. "In reality, he's moved in the wrong direction, routinely taking off the table entitlement reforms he's previously told me he could support."

Aides to Boehner emphasized that the president's chained CPI proposal would affect not just benefit increases, but also the way tax brackets are adjusted annually. They pointed to an Associated Press analysis that found that while the inflation adjustment would reduce federal spending by about $130 billion over the next decade, the change in how tax brackets were calculated would generate $100 billion in higher taxes.

"It's not just a concession on spending," said Boehner aide Brendan Buck. "In fact, the way the administration proposes doing it, it's nearly equal parts [tax] revenue and spending cuts."

Several progressive Democrats in the House and Senate are promising to fight any cuts to Social Security benefits. Democracy for America plans to support primary challengers against any Democrat who "votes to cut Social Security, Medicare and Medicaid benefits."

SECOND UPDATE: The AARP's blog weighed in with "5 Reasons Chained CPI is Bad For Social Security.

Senator Tom Harkin's political action committee TOMPAC organized an online petition drive against the chained CPI proposal. As of April 8, nearly 9,700 people had signed. From Harkin's mass e-mail of April 7:

Dear [first name],

We need to act quickly.

News broke on Friday that President Obama's budget proposal will include cuts to Social Security via a mechanism called "chained CPI" -- a move I strongly oppose. Call it whatever you want -- it's still a cut to those who need help the most. We can't let it happen.

While there are large portions of the President's budget that I strongly support, cutting Social Security is a bridge too far. It's an unnecessary attack on a critical program that, by law, is unable to add to the deficit.

It's not too late to stop this. Join me and call on President Obama not to cut Social Security before he unveils his budget on Wednesday!

Social Security already underestimates the cost of living for seniors by ignoring the fact that health care costs -- a larger portion of their income -- are increasing at a faster rate than other costs.

If anything, the Social Security benefit should be increased, not cut. And we can readily do that while still strengthening the long-term solvency of Social Security through means which don't harm the vast majority of beneficiaries.

Speaker Boehner has shown time and time again that he's not interested in reaching a balanced agreement to reduce the debt. President Obama has nothing to gain from these concessions.

He needs to remove chained CPI from his budget right now and stand up for Social Security.

Join with me -- call on President Obama not to cut Social Security!

Sincerely,

Senator Tom Harkin

  • The Democratic Party

    will commit serious political malpractice if it goes along with this stupid and cruel policy proposal.  They don't call Social Security the third rail for nothing.  Obama won't have to run again, but the 2014 ads on how the Dems cut Social Security will write themselves.

    I can't think of a better way to completely dispirit the base.  Who do they think will knock on doors for them if they vote to trash the brand by cutting the foundational programs that have defined the party for decades? I know Pelosi, Hoyer and Clyburn are on board with this, but I do not get the thinking.

    • if Pelosi were smarter

      she would realize that she'll never be speaker again if Democrats go along with this. I hope enough House Ds will stand up to prevent the deal passing. Given how few Rs would agree to even a token tax increase, they'd need almost all the House Ds.

      • It's a sad day

        when a Democrat is willing to use Social Security as a bargaining chip to get a few loopholes closed that will be opened again in the next Congress.

        This is Obama's legacy.  No one will remember him as a great President who bravely cut the deficit at the expense of the poor, the old and disabled veterans. Watch his approval rating tank.  

  • Issues

    No one is going to view this as a cut in Social Security unless the media tells them unless the media tells them it is.  I think people should try to work until their very last day possible if they can anyway, I'm sure we can find plenty of studies of people dropping dead in their fifties so I guess that somehow negates my argument that people should work until the very last possible day somehow.  

    Bob Reich and a few others are the only people following this issue.  If we assume that the people on the other side of the issue are corrupt then it will be an interest next 30 years.  

    • Chained CPI is not about working until the last day.

      It is about cutting benefits so they do not keep up with increases in the cost of living.  Studies show that seniors' costs are not accurately measured by the current CPI, never mind cutting it, because they spend more of their incomes on health care, and we know what has happened to that.

      Chained CPI also cuts benefits for disabled veterans, and it is a stealth tax increase that hits people hardest who are making around $40k/yr.

      I think you will find that more people than Robert Reich are following this issue already.  By 2014, the ads will have everyone up to speed on which party is responsible for cutting Social Security.

      • Clarifications

        2laneIA, I understand that chained CPI is not about working till the last day.  The key is simply assuming that SS will not be there (in anything close to it's current form) I have been and working until the last day, my point had nothing to do with CPI.  I have been guilty of telling people that SS is a retirement program when it should be viewed as an insurance program, a last resort and a safety net.

        Bob Reich was just an example I used.  I apologize for an online venue not being a perfect place to express my point.

        You've got to understand that I only remain a Democrat because of trade issues and a few social and spending issues.  I don't like these programs because they encourage us to depend on each other too much as opposed to the alternative.  

        We're just of different ideological points of view.  I also don't like the discourse in America 99 versus 1 or whatever way most people frame it.  

        • Social Security is one of the most successful

          government programs in US history. It doesn't contribute to the deficit, it is solvent for decades, and would be solvent forever with a simple change Obama isn't proposing (lifting the cap on income subject to Social Security tax).

          • Understood

            I still don't like the program, people have grown too dependent upon it.  I'm not for it's removal.  I know it's not going anywhere.  

            We've got to figure out how to increase the labor force through an increased birth rate and more high skilled immigration.  Lifting the cap would be fine with me, but I still don't like the program.  Not because I'm paying too much into it or any personal reason, I don't like collective dependency generally.  

        • You're right. We don't agree.

          The "key" is assuming something completely baseless if you have to assume Social Security "will not be there" in whatever form you think likely.  Social Security is self-funding through payroll deductions.  The date on which the trust fund is inadequate to fully fund benefits changes from year to year with the rise and fall of the economy, and meddling like the payroll tax cut. Currently it's 2033, but it will be a different year next year.  There are simple ways to fix it that do not involve cutting benefits, such as raising the cap. Even at that point it will pay out 75% of benefits.  And that is assuming we do nothing to fix it in two decades.


          I don't like these programs because they encourage us to depend on each other too much as opposed to the alternative.

          We all live in a community and share a commons, both in reality and as a metaphor.  We do things together that we cannot do as well by ourselves, such as educate children, build roads, defend our borders.  One of those things is preventing a future in which we revive the past of Charles Dickens, with old people shaking their cups on a street corner, or starving and freezing to death.  (Are there no workhouses?  Are there no prisons?) SSI has kept millions of children from hunger and deprivation.

          Each generation since the thirties has paid forward, allowing their grandparents to live with very modest dignity even if they have arrived at old age with nothing, assured that when it is their turn their grandchildren will do likewise.  I have paid into this program for many decades now and I do not appreciate efforts to cut it.

          Your alternative is one we know about and it is bleak indeed. Since the vampire squids on Wall Street crashed the economy, millions of people have lost their 401ks, equity in their largest asset (home), or lost their jobs and with them their health care and their homes. Your alternative is to tell them that the intergenerational compact is broken, and we are all on our own. That is not what a decent society does.

          The discourse about 99%/1% has its basis in the simple fact of where almost all the economic gains from increased productivity have gone since Reagan. Here are two links that explain this, and both have an awesome collection of charts. http://www.theatlantic.com/bus...   and    http://www.businessinsider.com...

          For more charts that explain how income equality is killing off the American Dream, go here: http://www.huffingtonpost.com/...

          • Pointless

            Thank you explaining how SS works.  We're all aware that it helps disabled children.  I still don't like the dependency factor.  We're all aware of a general ballpark year when the trust fund will go bankrupt. I guarantee you I'm not the only one in my age group who doesn't expect SS to be there and we don't need someone who compared Obama to Blue Dog Democrats and belong to a "post-capitalism" group on Daily Kos to explain it to us.  

            I enjoyed your characterization of people as vampire.  Nice charts.  People have to have separate retirement accounts with their SS, ultimately we're responsible for ourselves to the highest level possible.

            I don't why we're having this discussion.  You're entitled to your point of view.

            • Forgive the typos

              I think you get my point.  No one is talking about disbanding unions, although people should be able to work wherever they please.  

            • What year is that?

              We're all aware of a general ballpark year when the trust fund will go bankrupt.

              Please provide some support for this (in my view) totally erroneous statement.


              belong to a "post-capitalism" group on Daily Kos

              Hello?  What in heck are you talking about?

              I enjoyed your characterization of people as vampire.

              Not mine. Matt Taibbi:

              The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates.

    • the media won't tell them that

      because for some reason, there is a media consensus supporting entitlement cuts. Really strange that journalist think it's a good idea to screw around with cost of living adjustments for someone whose primary income is a modest Social Security check. The chained CPI isn't even an accurate reflection of the inflation rate facing senior citizens.

  • N/A

    http://2laneia.dailykos.com/us...

    You may have altered your groups, I'll admit fault on that one.  I can't prove it now. I sure as heck don't trust you or your politics ever since I've seen your posts here/  

    You yourself just said the trust fund is solvent until 2033.  U apologize for the term bankrupt, insolvency would be a better term,  Who cares who originally used the term vampire.  It's dangerous and stupid to use.

    Now here come all the stories about Wall Street and Pete Peterson, blah, blah naked capitalism..blah blah,

    http://www.pbs.org/newshour/bb...

    Why should I post a video or cite any evidence if it doesn't come with a leftist point of view, you'll discard it.  You've got way too much time on your hands.  

    I know this makes you feel good that you are debunking my "propaganda" in your mind.  All I'm asking is for people to be as self sufficient as they can be and reach their full potential.  

    • I don't understand

      Why anyone would want to cut benefits for low-income people when the program is already solvent for 20 years, especially since lifting the cap on income subject to Social Security taxes would affect only wealthy people and would extend solvency for decades. A Democratic president should never be proposing what Obama is proposing.

      You seem to be making a philosophical argument that people should be less dependent on Social Security, but how is that going to work when fewer and fewer employers offer pension benefits?

      • Valid point

        Too many people depend upon Social Security as their primary or sole income during their retirement years.  This is dangerous and other adjectives that I won't mention.

        You make a completely legit point about less employers offering benefits, this is likely to only get worse.  You have to try to find some secondary incomes if you can.

        I know some people can't find these sources, partially because they genuinely can't find things and partially because they've been trained to believe that they are owed certain things.  

        Your point about the benefits issue is completely relevant.  We need more patriotic business owners, but with the pressure that we face from the free traders and the environmental groups it's too difficult to run an effective business where you care about your employees.

        People should not be using an insurance program as a retirement program however, if they can help it.  

        Political groups make hay out of it though, senior citizens get to stay more active by demonizing people so if it works for them they can continue to beat the drum about Social Security.  

    • Wow

      You really dislike the generation or two which preceded you.

      • True in many ways

        I think a lot of elderly people did great things in their life.  I think they innovated, worked hard and many paid their dues.  They've become trained and dependent upon something when they actually know better and they know the value of self sufficiency and dignity.

        I understand that disability and illness happens, people can't work until the latest possible date that they would like to, but my argument is about using this system as your primary income.  It's an extremely sad way to go through life and then politicians get in a jam and have the elderly by the tail, suckering them for votes.  If people had secondary income opportunities they wouldn't be held hostage by politicians and these "retirement security" activist groups.  

    • You apparently have me confused with someone else.

      This other person belongs to groups of which you do not approve and so is not to be taken seriously or engaged in civil dialogue on politics or economics.  

      I have never asked anyone on line to "trust me."  That is why I provide links to actual facts to back up what I write.  I invited you to do the same.

      I read the transcript of the PBS interview you cited. A television interview is a difficult setting to convey a lot of information, but I am familiar with the writing of one of the guests, Nancy Altman, who is a recognized expert on Social Security. As she points out, she worked for Alan Greenspan on the 1983 deal to fix Social Security through the baby boom, and she has been working on these issues ever since.  The PBS headline is alarmist and actually not true, unless "run dry" is the same as "paying 75% of scheduled benefits."

      We are none of us self-sufficient.  We contribute to our collective commons so we can educate ourselves in preparation for work at the public's expense (K-12).  We drive to work on roads we all paid for.  If your house catches fire, a bunch of public employees will show up to help you. In Iowa, our biggest industry is populated with people who get checks from the government every month.  Are you in favor of killing off all subsidies for agriculture?  How about the wind industry? Or insurance companies, another big hitter in Iowa--they would be in a different business absent Medicare. Being self-sufficient is a nice-sounding myth unless you go off the grid in northern Idaho and never need any help from anyone again. Maybe your position on self-sufficiency makes you feel OK about advocating cutting the incomes of elderly people whose average yearly Social Security benefit is $15k/yr.  I don't understand that thinking.

      • LOL

        Did I call for complete self sufficiency or living off the grid?  Am I a Libertarian or a capto-anarchist?  Obviously not.  You play the same games ever time, someone calls for changes in a social program and you go off the deep end as usual on here.

        I truly believe that person on Daily Kos is you given that they are a member of Social Security Defenders and other groups dealing with hunger.  They have the exact same user name as you use on here.

        Here is a list of the politicians I have donated money to:  None are anything close to the corners you are trying to put me in.

        1. Chris Dodd

        2. Al Franken

        3. Meg Whitman

        4. Lincoln Chafee

        5. Bob Kerrey

        6. Donna Amandus

        7. Jerry Kearns

        8. Scott Ourth

        9. Bill Heckroth

        10. Jared Polis

        11. Lance Lefebure

        12. Teddy Turner

        13. Forward Together PAC

        14. Bill Bloomfield

        15. Dick Schwab

        I asked for people to not depend upon SS in any form as their primary income, something closer to self sufficiency not some Ayn Rand island to yourself bullshit.

        I never said you asked anyone to trust you, but I think you do an entertaining job of demonizing people.  I'm willing to provide sources and if you'll read the post I knew you wouldn't buy the PBS source either, your positions strike me as rigid and it is very frustrating to you, not because you ask for facts it's a rigid ideology.  

        Did I ever take a position on chained CPI?  I missed doing that.  I just made a philosophical point about how the elderly have been held hostage by some groups in my view.  

        • I am 2laneIA.

          I do not belong to

          a "post-capitalism" group on Daily Kos

          My public profile can be read by anyone with an internet connection.

          I am tired of responding to your personal attacks.

          That is all.

  • True

    Hence why I posted the link to the profile.  I said in a previous post, "You may have altered your groups, I'll admit fault on that one.  I can't prove it now. "  I take full accountability for that mistake.  

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