One of the items that continuously comes up in reference to the budget deficit is President Obama's support for the plan put forward by the co-chairs of his deficit commission, Morgan Stanley director Erskine Bowles and former senator Alan Simpson. On numerous occasions, President Obama has indicated his support for this plan.Cutting Social Security benefits is a seriously bad idea.
One of the items in the Bowles-Simpson plan is a reduction in the annual cost-of-living adjustment of roughly 0.3 percentage points. This would be accomplished by using a different index that, by design, would show a lower measured rate of inflation. It is important to recognize that this is an annual cut that would accumulate over time. After a retiree has been receiving benefits for ten years, the cut would be 3.0 percent; after 20 years. it would be 6 percent. If a typical retiree lives long enough to get benefits for 20, years the average benefit cut over their years of retirement would be 3 percent.
This is the most immediate cut in Social Security in the Bowles-Simpson plan, but it is not the only one. The plan also would gradually raise the age at which retirees receive full benefits to 69. It also phases in a reduction in benefits for workers whose earnings averaged more than $40,000 a year over their working lifetime.
When President Obama indicates his support for the Bowles-Simpson plan, he is indicating his support for all of these measures. Of course, he is not required to accept the plan in its entirety, but if he does oppose the cuts that the plan imposes on Social Security, it would be reasonable to expect him to state this explicitly.
Digby has been keeping track of this whole toxic Grand Bargain idea ob Obama's to cut benefits on Social Security, Medicare and Medicaid. In Dispatch from the Grand Bargain trenches Hullabaloo 09/21/2012, she sums up some of the recent reports of backroom dealing over this.
This idea of cutting benefits on Social Security, Medicare and Medicaid has an amazing amount of support in elite consensus, as we see from the praise for the ridiculous "Simpson-Bowles" recommendations, which really are recommendations from Simpson and Bowles themselves, because the Commission they headed didn't actually approve them. But Obama has been explicitly talking about using those as a basis of negotiations with the Republicans. Given Obama's eagerness to compromise with Republicans, it's a really bad thing if he takes "Simpson-Bowles" as the starting point for negotiations.
But the fact that our political elites and punditocracy love the idea, cutting benefits on Social Security, Medicare and Medicaid is a really, really bad idea.
Tags: austerity economics, grand bargain