Monday, December 31, 2012

Ezra Klein writes

Today’s Republican Party thinks the key problem America faces is out-of-control entitlement spending. But cutting entitlement spending is unpopular and the GOP’s coalition relies heavily on seniors. And so they don’t want to propose entitlement cuts. If possible, they’d even like to attack President Obama for proposing entitlement cuts. But they also want to see entitlements cut and will refuse to solve the fiscal cliff or raise the debt ceiling unless there are entitlement cuts.

We've seen this play before.  In March, Sahil Kapur of Talking Points Memo reported

“Democrats cut $500 billion from Medicare in order to pay for ObamaCare,” Lindsay told TPM. “The Path to Prosperity puts that back towards ensuring that Medicare remains sustainable instead of funding the Democrats’ massive government healthcare takeover.”

Republicans used this line of attack ahead of the 2010 elections and reaped the political rewards. But their own budget, for the second year in a row, illustrates that the GOP has no qualms with the Medicare policy they’re excoriating Dems for enacting.

Republicans liked the reduction in Medicare spending in the Affordable Care Act, which did not prevent them from (successfully) bashing Democrats for it in the 2010 mid-term elections, nor Mitt Romney from criticizing Barack Obama for it in the 2012 presidential election.

Still, on Sunday's Meet The Press, the President (his segment taped Saturday) told David Gregory

David, as you know, one of the proposals we made was something called Chain CPI, which sounds real technical but basically makes an adjustment in terms of how inflation is calculated on Social Security. Highly unpopular among Democrats. Not something supported by AARP. But in pursuit of strengthening Social Security for the long-term I'm willing to make those decisions. What I'm not willing to do is to have the entire burden of deficit reduction rest on the shoulders of seniors, making students pay higher student loan rates, ruining our capacity to invest in things like basic research that help our economy grow. Those are the things that I'm not willing to do. And so...

Due to the President's phraseology, two-thirds of the statement is ambiguous.  He might mean that he doesn't want students to bear sacrifice alone or that he doesn't want students to pay higher loan rates at all; similarly, he may intend that basic research not be reduced alone or that he wants no reduction in our capacity to invest in basic research.   But it is clear that he while he doesn't want all the "burden of deficit reduction to rest on the shoulders of seniors," he believes they should assume at least some pain.

Senator Marco Rubio (R-CA), who has his sights set on the White House, wasted no time in exploiting the President's plea for austerity, to be borne by elderly people.  He tweeted "report that GOP insisting on changes to social security as part of fiscal cliff false.   BTW those changes are supported by Barack Obama."  Slightly shorter Rubio:  don't blame us; blame your guy.

Fortunately, word today came late yesterday that Mitch McConnell has dropped his request to include chained CPI (which the President describes as not a cut, just a silly ol' adjustment) to calculate Social Security benefits as part of a short term budget deal.  This is a belated, but significant, gift to virtually all congressional Democrats expecting to run for re-election because the GOP, as Rubio hinted, would have made them own it.  And it's bad policy, as explained by Representative Peter DeFazio (D-OR):

What is a chained CPI? Well, the pointy heads like Mr. Furman who work for President Obama say "we're [...] overstating inflation with the way we adjust, so there's something called 'substitution effect,' so when prices of things go up, you buy something cheaper so that means there isn't inflation."

Well, no. Wait a minute. The think you used to buy is more expensive so you're buying something else. In the pointy head economics world this makes sense. So let's see how this would work for someone on Medicare. Okay, you can't afford your heart bypass so instead you'll say to the doctor "look, I can't afford the copay on the heart bypass, why don't you do a hernia instead?" That's substitution, and in Mr. Furman's world this makes sense.

Now what this would do to seniors on Social Security—we already understate inflation, and seniors haven't gotten a COLA for the lat two years. Tell me the price of prescription drugs and medical care hasn't gone up over the last two years. We need, in fact, a different measure for seniors, for Medicare, for veterans for others who consume more health care and more essentials which the CPI doesn't measure. It just measures junk that people buy. That's all it measures. And they're saying because people will buy cheaper junk we should change the CPI.

That means a senior, by the time they reach 85 in this brave new world of the chained CPI will get $100 less a month in their Social Security.

When the GOP tried to turn Social Security over to Wall Street in 2004, Digby wrote "if the Democrats end up cutting social security and other vital safety net programs in this round of the ongoing scam, they will have become the biggest dupes in political history."  Similarly, congressional Democrats would become dupes today if they join Republicans in cutting Social Security or, probably, Medicare.  They ought to remember the wise three lemmings (from Stephan Pastis' Pearls Before Swine) when Barack Obama, who himself has run his last race, diplomatically asks them to fall on their sword.

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