Of course it’s a benefit cut. Of course it’s a tax hike, for everyone but the wealthy.
The “chained CPI” proposal in President Obama’s budget continues to draw much-deserved fire, which is only likely to increase as more information about it becomes known.
Here are ten embarrassing facts about the chained CPI which the White House and its defenders would prefer to see overlooked:
1. Of course it’s a benefit cut.
Chained-CPI defenders say it’s not a benefit cut, just a slowdown in the rate of the benefit’s planned increases. That’s a silly semantic game unworthy of serious leaders or analysts. The Social Security benefit, as laid out on the Social Security Administration’s website, includes adjustments designed to keep pace with the rising cost of living.
Those adjustments aren’t a benefit increase. They’re designed to prevent the benefit from being decreased as a result of inflation. If you lower that adjustment, you’re cutting benefits. Period.
2. Of course it’s a tax hike.
Same goes for the tax impact of the chained CPI. Our tax brackets were designed to make sure that taxes didn’t go up inadvertently because inflation kicked them into a higher tax bracket. That was done to make sure that people who weren’t earning more in real dollars – which includes many (if not most) of the “99 percent” – weren’t hit with an unearned tax hike.
The President has repeatedly promised that there will be no middle-class tax hikes while he’s President.
If you substitute the chained CPI for the current formula, as the President has proposed, people will be kicked into higher tax brackets earlier. Then they’ll pay more in taxes, even if they’re not making any more “real” money.
That’s a tax hike.
3. And it’s a tax hike for everybody but the wealthy.
In fact, it’s a tax hike on all but the highest levels of income. The richest earnings won’t be affected because they’re already in the highest tax bracket.
Got it? So it’s a tax hike on everybody except the richest among us. (Actually, it’s a tax hike for them too, but only on their lower levels of income. The richer you are, the less you’ll see in a tax-rate increase.)
4. You could save much more money in other, better ways.
The White House has said the chained CPI will save $122 billion in benefits over ten years. Leaving aside the fact that Social Security doesn’t affect the deficit (which we’ll discuss shortly), here’s what isn’t being done:
Close capital gains loopholes: $174 billion.
End the Bush tax cuts at Obama’s original $250,000 level, rather than the compromise $400,000 number: $183 billion.
Cut overseas military bases by 20 percent: $200 billion.
Negotiate with drug companies: $220 billion.
Enact “Defense-friendly” Pentagon cuts: $519 billion.
End corporate tax loopholes (without being “revenue neutral,” as the President’s proposing): $1.24 trillion.
Enact a financial transaction tax on the folks who ruined our economy: $1.8 trillion.
Faced with those numbers, the chained-CPI benefit cut is … well, embarrassing. (Details, and additional alternate deficit reducers, here.)
5. The White House’s proposed “bump” disproves its own argument.
The Administration’s been claiming that the chained CPI is merely a “technical adjustment” designed to make cost-of-living increases more accurate. But it’s just introduced an adjustment for seniors who live longer in order to offset the impact of its reduction over time.
But if the chained CPI really measured inflation more accurately, it wouldn’t affect real benefits any more after twenty or thirty years than it did after the first year. Confusing? We explain here. (With pictures and everything.)
Bottom line? They know it’s a benefit cut.
6. It’s political suicide for Democrats.
The polls are clear on that question. Voters over fifty hate the chained CPI. It doesn’t matter whether they’re Democrats, Republicans, or independents. They hate it.
And older Americans are more likely to vote than other voters (who also hate it, according to earlier polls.)
It took the Republicans all of fifteen minutes to portray this move, which they’ve supported for a long time, as a “shocking attack on seniors.” They’re ready to run a reply of their successful 2010 strategy, when they ran to the left of Dems with a “Seniors’ Bill of Rights” – and recaptured the House.
7. The Social Security cut doesn’t reduce the deficit.
Social Security doesn’t contribute to the deficit, since it’s funded separately. In fact, it’sforbidden by law from contributing to the deficit.
It doesn’t even belong in these negotiations.
8. That tax hike on everybody except the wealthy will help a little. But …
On the other hand, they’ll be hitting everybody except millionaires and billionaires with tax increases that grow with every passing year.
If regressive taxation is something you believe in, then I guess that’s something. Except for our next embarrassing fact …
9. The deficit’s already shrinking rapidly.
The deficit is already shrinking – and “rapidly,” in the words of those radical lefties atGoldman Sachs.
The deficit isn’t our most urgent economic problem. It’s not even close. We desperately need jobs, real wage growth, consumer confidence, financial security for the elderly and disabled (which means increasing Social Security) …
Sure, deficits need to be addressed after the economy’s been righted, but right now they’re nowhere near the top of the list.
In fact, there’s an extremely good chance that the cuts in the President’s budget will make the deficit worse, as austerity cuts have in Europe. The Republican budget would certainly have that effect, since its cuts are far more severe.
10. It doesn’t matter if “the GOP asked you to” do this.
It doesn’t matter if “the GOP asked” the White House to call for this benefit cut and middle-class tax hike,as White House Press Secretary Jay Carney is now saying. The President’s been floating the idea for years. He and his appointees have defended it publicly.
And now the President has officially included it in his budget.
The Republican budget did not include it.
And now they’re using it against the President and his Party. That should surprise no one. To paraphrase the question asked by generations of American mothers: If the Republicans asked you to jump off a bridge … ?
The chained CPI is the wrong answer to the wrong problem at the wrong time. It’s time for the White House to recognize that, cut its losses, and ditch this turkey of an idea. In the meantime Democrats need to walk away from it fast, before they pay a high price for it at the polls.
Richard (RJ) Eskow is a blogger and writer, a former Wall Street executive, an experienced consultant, and a former musician. He has experience in health insurance and economics, occupational health, benefits, risk management, finance and information technology.