Harry Reid on cutting Social Security benefits: the idea belongs in the flames of Hail

The "fiscal cliff" was a contrived crisis, and the shabby melodrama of the lame-duck Congressional session allowed our national press core to show off their shallowness overtime.

NBC's Chuck Todd achieved a minor milestone of hackery on the Rachel Maddow Show on January 1. The phony "fiscal cliff" had been discussed since the election as occurring at midnight on December 31, when the Bush tax cuts expired. Democratic activists and commentators had been saying all along that Obama needed to show he was willing to "go over the cliff," i.e., let the tax cuts expire on December 31, to maximize his leverage in the negotiations.

And that's what happened. Faced with the Republican Party being saddled with a notable increase in taxes for all federal income taxpayers and the Democrats demanding they be cut, House Speaker John Boehner defied what Charlie Pierce calls the "feral children" that currently dominate his caucus and allowed the January 1 bill to go through, essentially a Democratic bill with a few pieces of corporate welfare attached.

But the Beltway pundits were not only in love with the "fiscal cliff" narrative. They also seemed to be confident that a deal would be done just in time to avoid "going off the fiscal cliff." So when midnight of December 31 rolled around with no deal being approved by Congress, the punditocracy apparently decided to stick with their narrative anyway.

So there was our friend Chuck Todd on TV Tuesday explaining that the "fiscal cliff" moment hadn't occurred because the real "fiscal cliff" moment was noon Thursday when the new Congress would be seated. Or, as Chuck put it, on Tuesday, it's really still 2012 because the new Congress hadn't come in, though he did his journalistic duty and explained that it wasn't technically true that it was still 2012, because it was, you know, already 2013.

Chuck and Luke Russert seemed almost giddy at being able to chatter on like sportscasters about who was doing what and what the next play might be. If they considered the substance of the bill to be newsworthy, it certainly wasn't evident in that moment. But, hey, they kept their "avoiding the fiscal cliff" narrative intact. Even if they had to redefine the calendar to do it.

My favorite of the lame-duck period is in this Washington Post article: David Fahrenthold, et al, How McConnell and Biden pulled Congress away from the fiscal cliff 01/02/2013:

At one point, Reid was unhappy with an idea that Senate aides said came from Obama — to put the change in Social Security benefits back on the table in exchange for a delay in spending cuts and a rise in the debt limit.

Aides said Reid actually tore up the proposal and threw it into the blazing fire in his ornate green marble fireplace. The paper burned. Reid said he didn’t want evidence that the idea had ever been considered.

All proposals to cut benefits on Social Security, Medicare and Medicaid should be consigned to the fires of Hell like Reid symbolically did with that one.

But that report reminds us once again how committed Obama has been to his Grand Bargain to cut benefits on Social Security, Medicare and Medicaid. We have to expect that to be a recurring problem for his whole second term, and particularly the next six months. It would also be helpful if every Member of Congress including Nancy Pelosi who has publicly gone wobbly on defending benefits for Social Security, Medicare and Medicaid were to face a serious primary challenge in 2014. That should stiffen the spines of the Democrats in Congress on the issue and make them even more willing to toll Obama reactionary Grand Bargain notion into the fireplace like something to be ashamed it was ever discussed in their presence.

Tags: austerity economics, barack obama, fiscal cliff, grand bargain, medicaid, medicare, social security

The "fiscal cliff" deal

As painful as the "fiscal cliff" melodrama was to follow, I'm relieved by the outcome in the deal Congress approved on New Year's Day.

First and foremost, we got through 2012 with no cuts in benefits on Social Security, Medicare and Medicaid. A win's a win. And that was a win for the Democratic wing of the Democratic Party.

Unemployment benefits got extended.

The Bush tax cuts were ended for those making over $400,000/yr. ($450,000 for households) and preserved for everyone else. Obama could probably have got the $250,000 cutoff point he campaigned on, but that's a win, too.

It's also good that we "went over the fiscal cliff" at midnight on December 31. This is what base Democrats had been saying the President should be willing to do to maximize his leverage. It wasn't until that happened that the House Republicans got enough out of the way to let the deal go through.

In other words, the combination of the circumstances and players forced Obama in the end to act like a Democratic President and get a deal that a Democratic President who just got re-elected by a solid margin should have gotten.

I suppose some Obama loyalists would insist that was his game all along. But it's pretty clear to me that he had to be dragged into doing that against his will.

But a win's a win. And I'm happy it wound up with an actual win.

Tags: austerity economics, barack obama, fiscal cliff, grand bargain, medicaid, medicare, social security

Neoliberalism and center-left politics: the Obama Administration

Paul Krugman has given us a good definition of what the American version of neoliberalism looks like for what is theoretically the "left" party in American politics, though the Democrats have actually become a center-right party, as Krugman even suggest in this pre-election column, The Real Referendum New York Times 09/30/2012.

Krugman is talking about what a really bad idea a post-election Grand Bargain to cut benefits on Social Security, Medicare and Medicaid would be for a re-elected President Obama. And he stresses that it would be a betrayal of the actual political mandate he's now building, perhaps more than Obama himself wanted:

... there is a sense in which the election is indeed a referendum, but of a different kind. Voters are, in effect, being asked to deliver a verdict on the legacy of the New Deal and the Great Society, on Social Security, Medicare and, yes, Obamacare, which represents an extension of that legacy. Will they vote for politicians who want to replace Medicare with Vouchercare, who denounce Social Security as “collectivist” (as Paul Ryan once did), who dismiss those who turn to social insurance programs as people unwilling to take responsibility for their lives?

This election is, as I said, shaping up as a referendum on our social insurance system, and it looks as if Mr. Obama will emerge with a clear mandate for preserving and extending that system. It would be a terrible mistake, both politically and for the nation’s future, for him to let himself be talked into snatching defeat from the jaws of victory.

Krugman talks about the idea of raising the Social Security retirement age from 65 to 67 and explains what its effects would be:

Consider, in particular, the proposal to raise the Social Security retirement age, supposedly to reflect rising life expectancy. This is an idea Washington loves — but it’s also totally at odds with the reality of an America in which rising inequality is reflected not just in the quality of life but in its duration. For while average life expectancy has indeed risen, that increase is confined to the relatively well-off and well-educated — the very people who need Social Security least. Meanwhile, life expectancy is actually falling for a substantial part of the nation.

And he follows it up with Bowlesing Toward Betrayal 10/02/2012, discussing a report at the time that Senate leaders were working on a plan to cut benefits on Social Security. Krugman writes, "Just to say, this would be politically stupid as well as a betrayal of the electorate. If you don’t think Republicans would turn around and accuse Democrats of cutting Social Security — probably even before the ink was dry — you've been living under a rock."

Krugman is right about this. But because he knows this so well, that makes it all the more surprising that he went a bit wobbly the week before Christmas week when Obama was pushing for quick approval of a plan that would have cut benefits on Social Security, including for current retirees. To be fair, he wound up criticizing it more than he waffled, but he he did leave the door open to considering it a decent deal.

He had it right in October. For Obama and the Democrats to support such a thing "would be politically stupid as well as a betrayal of the electorate."

Tags: austerity economics, barack obama, fiscal cliff, grand bargain, medicaid, medicare, neoliberlism, social security

Avoiding being "middled" on the Grand Bargain to cut benefits on Social Security, Medicare and Medicaid

I think Charlie Pierce may have invented a new word that could be a keeper. At least I've never seen it used as a verb before. It's in the last sentence of this quote from Why Do Democrats Give in to Deficit Seduction? Esquire Politics Blog 10/15/2012:

Democratic politicians who became deficit fetishists — a phenomenon, it should be said, that began under President Bill Clinton — did so in the delightfully child-like belief that they would get credit going forward as being "responsible stewards" of the economy. This, of course, bespoke an equally delightful child-like belief from the other side, that it was actually interested in deficit reduction, and not using The Deficit merely as an all-purpose excuse to ratchet up the pressure to get rid of programs that helped people that their political base thought unworthy — or, in the case of Paul Ryan, programs that they thought an illegitimate use of the government in the first place, all the while using Democratic deficit hawks as "bipartisan" political cover. This left the Democratic politicians in question hanging out to dry. One of those Democratic politicians, I fear, is the current president of the United States. ...

The problem, of course, is that, thanks to two consecutive Democratic presidents, the entire debate is being held on terrain determined by the deficit hawks. Republicans have nothing to protect in this debate because they want to eliminate most of the safety net anyway. Democrats, however, get caught between protecting those programs that have defined the party for 70 years, and trying to be serious about a Republican-fueled deficit that they have agreed is the most serious problem facing the nation. It's their fault they get middled like this, over and over again. [my emphasis]

Every time President Obama says the word "deficit" in public, he hurts his re-election campaign. Nobody cares about the deficit except pundits like David Brooks whose minds are perpetually marinading in the conventional wisdom. Otherwise, nobody cares! Least of all Republican Party politicians.

The fact that we made it through December without Congress and the President agreeing to cut benefits on Social Security, Medicare or Medicaid is an excellent thing. But the fight isn't over. Sen. Dick Durbin, who has been one of Obama's main spokespeople on the "fiscal cliff" pseudo-crisis negotiations, suggested a Catfood Commission-style bipartisan commission for 2013 that would recommend cuts in benefits to Social Security - the only purpose for having such a committee, just like it was the only real reason for a "bipartisan" committee like the Bowles-Simpson Catfood Commission stacked with opponents of Social Security, Medicare and Medicaid (including Dick Durbin!) to recommend benefits cuts in those programs.

We have to remember that just before the November election, Obama was talking about spending up until the middle of 2013 pursuing his Grand Bargain to cut benefits on Social Security, Medicare and Medicaid (Obama, In Morning Joe Interview, Predicts War Inside Republican Party If He Is Reelected Huffington Post 10/29/2012):

President Barack Obama said in an interview Monday that the Republican party would have to overcome an internal war if he were reelected, but expressed hope that the partisan gridlock in Washington could come to an end.

"There are a whole range of issues I think where we can actually bring the country together with a non-ideological agenda," Obama said in a pre-taped interview on MSNBC's "Morning Joe." ...

Asked by host Joe Scarborough what would be different if, in a second term, Obama was once again dealing with a Republican majority in the House, the president expressed more optimism that Democrats and Republicans would come together to tackle the debt and deficit.

"I truly believe that if we can get the deficit and debt issues solved, which I believe we can get done in the lame-duck or in the immediate aftermath of the lame-duck, then that clears away a lot of the ideological underbrush," he said. "And then now we can start looking at a whole bunch of other issues that, as I said, historically have not been that ideological." [my emphasis]

This is a neoliberal fantasy, of getting the public to passively accept continuing declines in living standards, opportunities and public services including social insurance and reducing politics to non-ideological tinkering with problems that interfere with corporate profits and the contentment of the One Percent.

Whether Obama believes in this vision, which is nightmarish rather than idealistic, or whether he just wants the Democratic base to believe in it is interesting. But I think we have to assume he's going to continue to pursue this, even though the Republicans' intransigence during the lame-duck session gives little cause for this postpartisan optimism.

There's even some reason to think he's less willing to risk Republicans making a fool out of him the way they did on the debt ceiling debacle in 2011.

But given his remarkably durable commitment to the Grand Bargain to cut benefits on Social Security, Medicare and Medicaid, we're probably not out of the woods on this as long as Obama is President.

Tags: austerity economics, barack obama, fiscal cliff, grand bargain, medicaid, medicare, social security

Krugman shoots down a zombie claim about Social Security and Medicare

Paul Krugman last month shot down a common zombie argument made as an excuse to cut benefits on Social Security and Medicare in Class Wars of 2012 New York Times 11/29/2012

Consider, as a prime example, the push to raise the retirement age, the age of eligibility for Medicare, or both. This is only reasonable, we’re told — after all, life expectancy has risen, so shouldn’t we all retire later? In reality, however, it would be a hugely regressive policy change, imposing severe burdens on lower- and middle-income Americans while barely affecting the wealthy. Why? First of all, the increase in life expectancy is concentrated among the affluent; why should janitors have to retire later because lawyers are living longer? Second, both Social Security and Medicare are much more important, relative to income, to less-affluent Americans, so delaying their availability would be a far more severe hit to ordinary families than to the top 1 percent.

Tags: austerity economics, barack obama, fiscal cliff, grand bargain, medicaid, medicare, social security

Lumping Social Security and Medicare together rhetorically - a common trick of Social Security opponents

Jason Linkins makes an important point about Social Security and Medicare in an article about the Biden-Ryan debates during the Presidential campaign in Joe Biden Knows That A Chance To Cut Is A Chance To Cure: The 2012 Speculatron Weekly Roundup For Oct. 12 Huffington Post 10/13/2012. Moderator Martha Raddatz said in one question that Social Security and Medicare are "going broke." This conflation of Medicare and Social Security is a common trick of Social Security opponents. As Linkins explains:

Her framing of Social Security and Medicare as "going broke" is incorrect and doesn't even require a "liberal economist" to get out of bed to critique it. The very conflation of the two programs, in this context, remains a perennial error of media professionals. Medicare is the more difficult nut to crack, because it features a complicated array of inputs and outputs, there's rising longevity in the population, and the overall cost of health care is escalating. But it's not going broke -- in fact, the Obama administration added eight years of solvency to the system (which Romney wants to take away).

Social Security, on the other hand, is neither "going broke" nor a complicated fix -- raise or remove the income caps on contribution, and you provide solvency. It's a little system we like to call the "Make Alex Rodriguez Pay More Social Security (And Make The New York Yankees Match) Plan," and it's elegant in its simplicity. All we really need to preserve Social Security is some of those brave-talkin' legislators who always pound on and on about needing to make "the tough choice" to show up for work one day and prove they are what they say they are. [my emphasis]

And Medicare's financial problem is not about some flaw in its design. It's part of the larger problem of health-care costs that are taking an increasing percentage of the GDP.

Tags: austerity economics, barack obama, fiscal cliff, grand bargain, medicaid, medicare, social security

Those holiday chit-chats (Social Security version)

Here's a helpful piece on why chained CPI for Social Security really stinks: Dean Baker, Thoughts on the Chained CPI, Social Security, and the Budget CEPR 12/17/2012. These are some basic facts about Social Security and Americans retirees:

While some people have tried to foster a myth of the elderly as a high living population, the facts don’t fit this story. The median income of people over age 65 is less than $20,000 a year. Nearly 70 percent of the elderly rely on Social Security benefits for more than half of their income and nearly 40 percent rely on Social Security for more than 90 percent of their income. These benefits average less than $15,000 a year.

The reason that seniors are so dependent on Social Security is that the other pillars of the retirement stool, employer pensions and individual savings, have largely collapsed. Defined benefit pensions are rapidly disappearing. Defined contribution plans, like 401(k)s have also proved grossly inadequate. Only around half of the work force even has a defined contribution plan available to them at their workplace. In a period of stagnant wages and limited employer contributions, workers have generally been unable to accumulate much wealth in these plans. According to the Retirement Research Center at Boston College, the median value of 401(K) and other defined contribution plans for those near retirement who have a plan is $120,000, enough to get an annuity paying $575 per month.

For most workers the vast majority of their wealth was in their homes. The collapse of the housing bubble destroyed much of this equity. Counting all forms of wealth, including equity in a home, the median household approaching retirement had just $170,000 in wealth in 2011.

Also, for those holiday chats, austerity economics sucks!

Historical examples: the Great Depression, Herbert Hoover, Heinrich Brüning, gold standard

Current examples: Britain, Greece, Ireland, Italy, Portugal, Spain.

Current counter-examples: Argentina, Iceland, the US (partially, and particularly in comparison to large European economies like Britain and Spain)

Not heading the right direction: the US, circa now.

As Suzy Khimm writes in The incredible shrinking stimulus New York Times Wonkblog 12/21/2012, Obama in the "fiscal cliff" negotiations has been reducing his demands for stimulative elements: "In his third offer, reported Monday, Obama dropped his ask from $425 billion to $175 billion in stimulus, ... keeping the federal extension of unemployment insurance, infrastructure spending and some business tax breaks, but abandoning the extension of the payroll tax holiday, among other major measures."

The stimulus value of business tax breaks are highly questionable. The best kind of stimulus would be to spend money on federal projects that create jobs.

She explains the concern about the "payroll tax holiday," which economists are inclined to like as a stimulus measure. But I've always worried that framing it as a payroll tax holiday was more very much related to Obama's desire for a Grand Bargain to cut benefits on Social Security, Medicare and Medicaid, encouraging the idea that raising the payroll tax was a bad thing, and also letting Social Security and Medicare opponents portray them as "welfare" because the General Fund replaces the lost revenue. Raising the payroll tax by lifting the cap on the portion of earnings to which it is applied is a very good idea.

The same tax cut could have been structured as a "rebate" coming out of the General Fund rather than as a temporary reduction ("holiday"). In any case, the economists are right to look at it in terms of it empirical effects, even if they tend to downplay the political risks in calling it a "payroll tax holiday." Khimm:

The White House's abandonment of the payroll tax [temporary cut] is of particular concern to economists and advocates who believe that more stimulus is necessary while the economy continues to recover — particularly if Democrats and Republicans fulfill their stated promise of passing a major deficit reduction package that will begin some of its austerity in the near term. Of all the parts of the fiscal cliff, continuing unemployment insurance has the biggest "bang for the buck" in terms of boosting the economy, according to Moody’s Mark Zandi's calculations of the fiscal multipliers. But the payroll tax holiday would boost the economy even more, as it would benefit far more households. At the cost of $115 billion, it would bolster the economy by $144 billion, according to the Economic Policy Institute.

Jared Bernstein, a former economic adviser to the White House, calls the payroll tax holiday "one of the most important components" in a potential stimulus package and believes the administration did make an effort to keep it on the table before deciding to give it up in last week’s round of negotiations. "I believe they fought hard for the payroll tax holiday, and they concluded it just wasn’t possible," says Bernstein. "They completely appreciate the importance of that holiday right now." [my emphasis]

If we want to look at economic policy as a morality play, then we should focus on the broad effects, not on some slice, e.g., unemployment insurance makes people lazy. Because the small-bore morality play arguments wind up attacking policy tools like unemployment insurance that provide excellent stimulus effects, because in this case most people spend the unemployment insurance payments right away.

Tags: austerity economics, barack obama, fiscal cliff, grand bargain, medicaid, medicare, social security

Social Security opponent Nancy Pelosi defends her support of proposal to make Grandma eat catfood

Nancy Pelosi, who has publicly signed on to President Obama's proposal to cut benefits for Social Security, has the usual frivolous excuses for her support of this awful proposal, as Michael McAuliff and Sabrina Siddiqui report in Nancy Pelosi Says Social Security Cut Proposed By Obama Would 'Strengthen' Program Huffington Post 12/19/2012.

They point to one of the central problems in an argument that has become gospel - or at least acceptable in terms of cynical propaganda - among the Beltway Villagers:

Pelosi's reasoning on Social Security focuses on the costs of the program. Logically, a way to strengthen it even further would be to cut it much deeper. It's no coincidence that Rep. Paul Ryan (R-Wis.), who takes that argument to its logical extreme, also employs the term "strengthen" when talking about his plan, which slashes Medicare spending. While weakening a program to strengthen it may seem at first to be wholly counterintuitive, it begins to make sense from a different perspective. For beneficiaries, the program is weaker, as it pays out less. But for taxpayers, it's stronger, because the program can meet its obligations for a longer period of time without taxes being raised. The extra costs are borne instead by seniors.

That logic, however, is only ever applied to entitlement programs that have their own revenue streams. Nobody would attempt to argue that the military was strengthened by cutting its budget, or that education was strengthened by slashing funding for it.

Social Security was created in the 1930s to combat elderly poverty. It worked: Giving money to older Americans made them less poor. Shrinking benefits would correspondingly lower their standards of living. [my emphasis]

Tags: austerity economics, barack obama, chained cpi, fiscal cliff, grand bargain, medicaid, medicare, nancy pelosi, social security

Fiscal cliffing with Obama-style negotiating

House Speaker John Boehner seems to be balking at Social Security opponent Obama's latest offer to solve the non-crisis of the "fiscal cliff" that includes reductions to Social Security benefits and $400 billion of unspecified savings in Medicare. (Nancy Cook, Fiscal Cliff Talks Devolve Into Day of Dueling Press Conferences National Journal 12/19/2012)

Once again, Obama looks to be back in President Pushover mode in negotiating with the Republicans.

David Dayen takes note of it in Obama Proud of His Fiscal Slope Offer, For Some Reason FDL News 12/19/2012:

Anyway, the President had to defend his latest offer, with its spending cuts commensurate in level with the sequester, benefit cuts to Social Security, concession on marginal tax rate increases by moving the dividing line to $400,000 a year and allowing open the opportunity for debt limit hostage taking down the road. And he basically bragged about the wise centrism of his offer. He called it the “largest piece of deficit reduction we've seen in the last 20 years” and said it would resolve out deficit and debt issues for the next 10 years. Because that’s how things work, right? Deficit scolds just go into hibernation once some mythical level of stabilization gets reached.

Obama basically ignored the implications of the benefit cut in Social Security, and ignored the regressive tax increase for everyone associated with the move to chained CPI. He mainly expressed puzzlement that Republicans haven’t taken his deal, since he’s gone "more than halfway" in their direction. Um, that answers his own question. If by doing next to nothing, they can watch the President give up on things he long demanded – he said he would veto anything that extended the Bush-era tax rates above $250,000, and that he would not "play the game" anymore on the debt limit – then why wouldn't they just keep sitting still and letting the President come to them?

Markos Moulitsas also is struck by it, as he describes in It wasn't Obama's negotiating style that won him reelection. It almost cost him Daily Kos 12/18/2012.

Dayen mentions that Obama has already neutralized his post-election vow not to negotiate over the debt limit. : "The President says he won’t negotiate on the debt limit. By offering up this debt deal now, he’s actually in the process of doing that. And he’s basically setting up a debt default in 2014, or a major conflagration anyway, by not shutting this down immediately."

Markos makes a similar observation:

Obama isn't doing himself any favors by drawing lines in the sand and then inevitably capitulating. Republicans have learned that there isn't a negotiating stance that Obama won't compromise. That doesn't lend itself to smart negotiations. Rather, it creates unbalanced ones, as Republicans simply wait for Obama to cave on his demands. They've learned that for Obama, making a deal is more important than what's in the deal.

One of the bizarre aspects of these negotiations is that the Democratic "concession" most prized by the Republicans - cuts in benefits to Social Security, Medicare and Medicaid - is one that the Republicans know Obama wants to give up. Four years ago, we could still reasonably hope that Obama's talk about controlling deficits as political posturing to make his proposed stimulus package more acceptable to skeptics. But since he not only offered benefit cuts in Social Security, Medicare and Medicaid in 2011 but just since his re-election has again offered up cuts in benefits to Social Security and Medicare, his messaging on the subject four years ago looks like the expression of a real, hardcore goal of his.

Digby just reposted one of her early analyses of the Grand Bargain to cut benefits on Social Security, Medicare and Medicaid, Fiscal Madness 01/11/2009. Jane Hamsher, who has also been following the evolution of the Great Sellout to cut benefits on Social Security, Medicare and Medicaid, does a recap of Obamas history on the subject, Can We Please Stop Pretending Obama is "Capitulating" on Social Security? FDL Action 12/19/2012.

This doesn't invalidate the criticisms of his negotiating strategy, though. In fact, his negotiating is awful because he's trying to achieve the impossible. He wants to achieve an "end of ideology" state by agreeing to cut benefits on Social Security, Medicare and Medicaid and doing it in a way that Democrats will accept and even like. Only by achieving such an "end of ideology" can he be the great conciliator who makes no-red-America/no-blue-America a reality.

But the Republicans aren't interested in an end of ideology, they're interested in the victory of theirs. And that includes gutting Social Security, Medicare and Medicaid. But to make Democratic acceptance of that even remotely plausible, it has to be generally seen as the reluctant capitulation by Democrats to a Republican demand. And to do that, Obama would have to negotiate on the basis of Democratic priorities until the Republicans gave him a clear offer on rolling back Social Security, Medicare and Medicaid on which he could agree to a less drastic version which he could then sell as stopping the Republicans from doing more harm.

This would also require the Republicans to be willing to make such an offer and own them as their demand. But they aren't willing to do so. They falsely charged Obama in 2010 and again in 2012 with cutting back Medicare on the basis of projected savings that did not involve benefit cuts.

In another post on how Medicare Obama claims he's already gone "at least halfway" toward the Republican positions, Markos writes (Obama admits he's already conceded more than warranted 12/19/2012):

Sheesh, why didn't Obama say something like, "I made a more than fair deal. The GOP rejected it. So now I'm pulling the offer off the table and waiting to see what the GOP has to offer. Clock's ticking!" Instead, the GOP will bank the concessions he's already made, then demand more. Rinse. Lather. Repeat.

The sad part, given Obama opposition to Social Security, Medicare and Medicaid, is that stalemate and no deal is one of the best options for the country.

Tags: austerity economics, barack obama, chained cpi, fiscal cliff, grand bargain, medicaid, medicare, nancy pelosi, social security

Nancy Pelosi endorses the Great Sellout to cut benefits on Social Security

Nancy Pelosi has become a disgrace to the Democratic Party and to California by endorsing Social Security opponent Obama's "chained CPI" proposal to cut benefits on Social Security, including for current recipients: Amanda Terkel and Sam Stein, Nancy Pelosi Predicts 'Democrats Will Stick With The President' On Fiscal Cliff Deal Huffington Post 12/18/2012.

I hope this will become a serious inflection point in the history of the Democratic Party. This can become a dividing point for the labor/liberal/pro-Social Security/Medicare/Medicaid portion of the party, which reflects the views of the base, to become a serious opposition within the party that can successfully challenge the corporate wing, of which Pelosi with her public support of a cut in Social Security benefits now has to be considered a part.

It's hard to imagine that San Francisco Democrats would be unable to mount a substantial primary challenge to Social Security opponent Nancy Pelosi in 2014.

This is a great opportunity for aspiring Democrats, from whatever combination of principle and opportunism on which they operate to establish a distinct political profile for themselves as defenders of the very popular Social Security, Medicare and Medicaid programs against corporate Democrats like, I'm sorry to say, Pelosi and Obama.

Tags: austerity economics, barack obama, chained cpi, fiscal cliff, grand bargain, medicaid, medicare, nancy pelosi, social security

Obama to seniors: Merry Christmas! I'm cutting your Social Security benefits!

So President and Social Security opponent Obama has gone there. After he let people hope for a weekend that the Grand Bargaining to cut benefits on Social Security, Medicare and Medicaid might at least be on hold until January, on Monday comes the news that he's agreed with House Speaker John Boehner on a "fiscal cliff" plan. (Jonathan Weisman, Obama's New Offer on Fiscal Crisis Could Lead to Deal New York Times 12/17/2012)

The details are overshadowed by the only thing in it that really matters: cuts to Social Security benefits, including current recipients, by adopting the "chained CPI" inflation-adjustment measure. There are various places to find explanations of "chained CPI," e.g., David Dayen, What Chained CPI Means, and Why a Cut in a Time of Inadequate Social Security Benefits Makes No Sense FDL News 12/17/2012; Mide Konczal, A Cost of Living Adjustment for Social Security in the Fiscal Cliff? Rortybomb 12/17/2012; Bryce Covert, In Fiscal Cliff Deal, Don't Chain Grandma to Smaller Social Security Checks The Nation 12/18/2012; Dylan Matthews, Everything you need to know about Chained CPI in one post Wonkblog 12/11/2012.

This AARP video explains the basic concept, Changing Social Security COLA Formula Would Hurt Current Retirees 12/14/2012:

The placing of that critical "detail" in the New York Times article linked above, the ninth paragraph, is a reflection of the success among the Beltways Villagers of Obama's approach to the "fiscal cliff" marketing of concentrating overwhelming on taxes, so that coverage of any such proposal like this would focus on the Social Security opponent Obama's supposed victory on taxes and ignore the very damaging cuts to Social Security benefits. (It's not clear from what I've seen how many other programs might be affected by "chained CPI," but it's my understanding that if Social Security is subjected to it, veterans benefits will also be.)

It's bad enough that we have a Democratic President who is committed to cutting benefits on Social Security, Medicare and Medicaid. If this is adopted, it will be open season on the program. Social Security is the Mississippi River of cash flows and Wall Street wants to find some way to tap into it, ultimately by privatizing it.

It's politically important that this is a cut to current beneficiaries, a boundary that even privatization advocates like Bush II were generally unwilling to cross before now. And if a Democratic President and any substantial number of Democrats support it, the political firewall that has protected the program will be, well, badly damaged. A critical thing here will be how many Democratic members of Congress who support this cut to Social Security benefits are unseated in primaries in 2014.

It also shows that Obama is going to continue his President Pushover act - in dealing with Republicans. We saw early on in the fight over a public option for health insurance that he was willing, even eager to fight "the left," aka, his voting base. Since "the left" now apparently includes everyone who opposes cutting benefits on Social Security, Medicare and Medicaid, it's pretty much the Democrats' entire voting base. The Democrats will need some new approaches in 2014 if this thing goes through:

Raven Brooks of Netroots Nation tweeted:

If the Democrats want 2010 losses X 5 in 2014 they should go ahead and vote to cut Social Security.
— Raven Brooks (@ravenb) December 18, 2012

What's astonishing too is that Obama is willing to have himself and the Democrats be patsies for this. The Republicans will campaign against them in 2014 based on the Social Security cut if it goes through. The idea that they will observe a "Grand Bargain" by not using the Social Security cut against the Democrats is nonsense. Then when they capture both Houses of Congress, they can push Obama for more cuts in Social Security, Medicare and Medicaid and then make the Democrats own those in 2016. Awesome!

Brian Beutler in The Social Security Benefit Cut Obama May Agree To TPM 12/18/2012 reports on several alleged Social Security supporters leaning toward backing this cut which would politically have the effect of throwing Social Security to the Wall Street wolves:

Supporters like to describe it as a technical fix to the way the government calculates inflation. But in practical terms, it will effectuate a genuine Social Security benefit cut. If it’s applied across the board, it will also reduce food stamp benefits and veterans benefits, and function as a modest but regressive tax increase, as brackets grow more slowly and taxpayers find themselves pushed across income thresholds more quickly than in the past.

Chained CPI differs from the way the government currently calculates inflation by taking a broader view of the behavioral changes consumers make when prices rise. It factors in a propensity to substitute cheaper, but similar products for ones that have become more expensive. And it has been criticized by advocates for being a less accurate measure of inflation for the products seniors rely on than Social Security currently uses.

But Obama allies and and some liberal economists have identified it as the least-bad entitlement benefit cut and have given it their blessing provided it's one piece of a broader, balanced debt reduction plan, and includes protections for poorer seniors. Though the Congressional Budget Office has cautioned that indexing Social Security to chained CPI would be technically complicated, the liberal Center on Budget and Policy Priorities backed it under those circumstances. So did the progressive Center for American Progress, which has close ties to the White House.

In Evaluating The Coming Deal 12/16/2012, Beutler added an important aspect: "But even though it’s not as onerous as an increase in the Medicare eligibility age — and even though the Obama administration has never really had a problem with this particular reform — it's still a benefit cut, a real one, up front, with Obama’s fingerprints all over it." (my emphasis) As Sarah Palin might say, you betcha!

I was unpleasantly surprised to see that even Paul Krugman went a little wobbly in writing about this awful proposal. Just the day before in, he Assimilated by the Peterson Borg 12/16/2012 was writing about a "Peterson deficit-scold front group" fear-mongering about the fiscal cliff, and he observed, "The only way we could even get anything pretending to be a Grand Bargain would be for Obama to surrender completely, as he almost did in 2011; and a bargain like that wouldn't even deliver deficit reduction, because you know that Republicans would end up reneging on the revenue parts." And he reminds us of what today's Republican Party is:

So this is ridiculous — and the fact that all these people don’t realize that is in itself evidence of the bubble in which Very Serious People still live. It’s also evidence of the desperation of the deficit scolds, who are evidently horrified that they aren’t managing to exploit the fiscal cliff — which has nothing at all to do with our debt — to ram their agenda through.

This is one of the weaknesses that even sensible economists like Krugman or Robert Reich show on Social Security. For economists, a payroll tax cut looks like a technically efficient way to put more money immediately into consumers hands and one that even enhances the progressivity of the tax, since wealthy people pay a much smaller percentage of their total income on payroll taxes because of the cap and because it doesn't apply to income categories like capital gains.

But politically, the payroll tax is an anchor of the Social Security and Medicare programs because it emphasizes their nature as social insurance and gives people a sense that "I've paid into this program my entire life," and therefore more ownership of the program. Reducing the payroll tax and replacing the lost revenue from the General Fund, which we've been doing the last couple of years, helps Social Security opponents like Obama and the Republicans stigmatize Social Security and Medicare as "welfare."

That's even true of one of the reported elements of Obama's current proposal to cut Social Security benefits: the fact that the cut would be replaced by a subsidy of some kind to the lowest-income seniors. Another big and visible step toward making it "welfare."

Tags: austerity economics, barack obama, chained cpi, fiscal cliff, grand bargain, medicaid, medicare, social security

The week in fiscal cliffing and Grand Bargaining

Obama's Grand Bargain to cut benefits on Social Security, Medicare and Medicaid had a bad week, it seems. Which means it was a good week for the vast majority of Americans.

After the White House floated a trial balloon to cut benefits on Medicare by raising the eligibility age from 65 to 67, by Thursday his spokesperson on austerity policy, Sen. Dick Durbin, said that the proposal is "no longer one of the items being considered by the White House" in the current negotiations.

Of course, as Digby points out (More fiscal cliff notes --- 12/13 Hullabaloo 12/13/2012), this was simultaneously an admission that Obama had been considering it.

Also, the Republicans are reported to be stubbornly refusing to propose specific spending cuts, instead demanding that Obama come up with something they can like. Unlike his performance in the 2011 debt ceiling fight, Obama does appear less willing to let the Republicans just make a fool of him, at least this month. Or maybe just this week.

But as Taylor Marsh pointed out a few days after the election, Obama showed in his first term how dedicated he was to pursue the Grand Bargain, which quickly evolved to being essentially about cutting benefits on Social Security, Medicare and Medicaid (Obama's 2011 Grand Bargain Detailed in Documents Obtained by Bob Woodward 11/12/2012):

Many people think of it [the Grand Bargain to cut benefits on Social Security, Medicare and Medicaid] as a "Nixon to China" moment, but it's not.

Obama has always been fixated on Ronald Reagan and what he did, because that’s the president that impacted, impressed and embedded most in his mind when he was coming up. So, the grand bargain is about a Ronald Reagan – Tip O'Neill moment. An "I saved Social Security" for future generations deal, which will likely include a nod to the business community, whose "fiscal cliff" is the bookend meant to push the "grand bargain" to manifestation, in the mother of all Obama – Wall Street make-up sessions imprinted for history.

So we're not out of the woods on this thing. And probably won't be as long as President Obama is in office.

But any week where the Democrats and the Democratic President are forced into the position of acting like Democrats and defending benefits on Social Security, Medicare and Medicaid instead of looking for political cover from the Republicans to cut them is a good week for supporters of those programs.

Digby also warns that we can't assume a December victory is the end of this Grand Bargain/Great Betrayal fight:

Sure people want compromise --- if it ends up with policies they like. When it doesn't, they think it was a sell-out. The politicians usually know this even if the pundits don't. And this is one reason why I've been pessimistic that the Democrats were going to hold a tough line on the "entitlements." They've been signaling for months that they would be willing to cut them if they can only get these tax hikes from millionaires. And yet, the tax hikes ... were going to happen anyway. Can we all see the problem with that? I suppose that's a smart thing to do: set yourself as winning a big victory even if it was inevitable. That way you really can't lose. But it also begs the question: why put spending cuts on the table in the first place? True, much of that came out of the failed debt ceiling talks in 2011, but that was the result of a proposed Grand Bargain that was endorsed by the Democratic leadership. You can call that a mistake, but I don't think it makes a lot of sense to get back in the same position unless this is a result you truly seek. [my emphasis in bold]

Obama wouldn't have played the December "fiscal cliff" negotiations the way he did, in other words, if he weren't still interested in his Grand Bargain to cut benefits on Social Security, Medicare and Medicaid.

Paul Krugman in Party of No Ideas 12/13/2012 reflects on the implications of the Republicans' playing this game:

This is not a negotiation in the normal sense, in which each side makes proposals and they dicker over the details; instead, Republicans are demanding that Obama read their minds and produce a proposal they’ll like. And Obama won’t do that, for good reason: he knows that they’ll just pronounce themselves unsatisfied with whatever he comes up with, and are indeed very likely to campaign in 2014 attacking him for whatever cuts take place.

He concludes from the Republicans' general frivolity in making budget proposals and their negotiating intransigence, "We are at a strange and dangerous place in American political life."

But on the "fiscal cliff" negotiations, the Republicans' experience in the debt ceiling fight in 2011 showed that that could punk the President in just that way. If Obama is not willing to have them jerk him around the same way any more, that's good and very understandable. But they could hardly be expected not to try it again since Obama was so willing in 2011 to beg them to let him "concede" and make benefit cuts in Social Security, Medicare and Medicaid.

David Dayen (FDL News 12/14/2012) seems to think the "fiscal cliff" farce for December is about over. The Republicans aren't going to make a deal. The Democratic base isn't being passive and compliant about accepting the Medicare benefits cut that the White House informally proposed via trial balloon. So the Bush tax cuts will expire on December 31. And Obama will be a strong position to force the Republicans to swallow his "middle class" tax cut proposal as a standalone cut. David sees the Republicans approaching the new year with this perspective:

Republicans have located their strategy in the debt limit, seeking to retreat to higher ground and use that vote, and the threat of a default, to force fiscal changes. Speaker John Boehner admitted as much yesterday, saying that he wants to use the debt limit vote to "to bring fiscal sanity to Washington, D.C." He described the vote as Congress asserting its "ability to control the purse," which is completely illogical. Congress controls the purse when it makes appropriations. The debt limit vote merely authorizes the Treasury to pay for the obligations Congress already approved. So the proper analogy with the debt limit is Congress controlling the ability to dine and ditch if it so chooses.

This probably isn't all that informative a post, but that's the state of play. In a matter of weeks, the tax-side issues will get dealt with. Then Republicans will take the debt limit hostage and try to negotiate over spending and social insurance. However they want Democrats to dictate the spending cuts so they can pin them on their opponents. In addition, they really want to attack programs for the poor, rather than those for the elderly, which represents a substantial portion of their base. And hitting the poor isn't all that popular.

The initial makeup of the new Congress also looks more favorable than the current one for defenders of Social Security, Medicare and Medicaid. Corruption happens, both the illegal kind and others, and lobbyists like the various incarnations of the Peterson Foundation will continue to push for benefit cuts on Social Security, Medicare and Medicaid. But getting past December is a real plus for those programs' supporters.

Tags: austerity economics, barack obama, fiscal cliff, grand bargain, medicaid, medicare, social security

Shifting fortunes on the fight to prevent cuts in Social Security, Medicare and Medicaid benefits

David Dayen, who will be missed when he takes a blogging break from his FDL News gig after December 21, writes about a hopeful development on the "fiscal cliff"/Grand Bargain front in 450,000 Seniors Would Lose Coverage Under Medicare Eligibility Age Increase FDL News 12/12/2012. The data referenced in the title on how many seniors would be hurt by the White House's trial balloon proposal to cut Medicare benefits by increasing the eligibility age from 65 to 67. The good news is that Nancy Pelosi is publicly defending Medicare benefits now.

In a USA Today op-ed, Truth about Medicare age 12/11/2012, she does what all Democratic leaders and elected officials should be doing, which is opposing the Grand Bargain proposal to cut benefits on Medicare. She calls it "a reflection of the broader Republican plan: an assault on the middle class, seniors -- and our future."

She is politic in keeping quiet about it being the Democratic President Obama who has been reflecting such bad, destructive Republican ideas as cutting benefits on Social Security, Medicare and Medicaid as part of the Grand Bargain he's been pursuing for his entire first term. David writes, "Pelosi's being a good soldier by calling this 'the Republican plan.' In reality, this makes it extremely difficult for any Democrats to carry this plan forward, at least if they expect to get votes of Democrats in the House."

Hopefully, it will also make it harder for President Obama to endorse this portion of "the Republican plan." This part of Pelosi's op-ed could be read as directed to Obama and other Democrats who are willing to support "the Republican plan" to cut benefits on Social Security, Medicare and Medicaid: "Republicans like to talk about their ideas in terms of abstract numbers. However, we cannot ignore the adverse impacts of their policies on the American people."

Pelosi spells out in very accessible language what the "Republican" proposal to cut benefits on Medicare by raising the eligibility age to 67 would mean, e.g., "raising the Medicare age asks the most vulnerable citizens to pay more with little to show for it in terms of long-term deficit reduction or more affordable care, for seniors or anyone else. It increases health spending across-the-board. It takes money out of the pockets of a small slice of Americans."

And she frames Medicare issues in Democratic terms of the need to protect benefits and address overall health care expenses:

Make no mistake: Democrats are ready to discuss even more savings that extend the life of Medicare without hurting beneficiaries. We should reduce health expenditures and build on our work in the Affordable Care Act to slow the growth of health costs. We should be strengthening Medicare, not undermining it.

The Republican plan, which would be phased in over more than a decade, may sound simple enough. But remember: it is brought to you by the same people who think it's a good idea to end the Medicare guarantee and turn Medicare into a voucher system -- putting seniors at the mercy of insurance companies.

Raising the Medicare age represents more of the same. For seniors nearing retirement, it means less security for themselves and their families. It betrays the bedrock promise of Medicare: that Americans who work hard and take responsibility all their lives can know dignity in their later years.

Earlier Dayen reported on other signs that the Democrats were backing away from Obama's trail baloon about cutting Medicare benefits by raising the eligibility age, Medicare Eligibility Age Increase Rejected By Obama Allies 12/10/2012.

This doesn't mean we're out of the woods on the Grand Bargain/Great Betrayal fight for December. Pelosi herself was reportedly ready to support Obama's 2011 debt-ceiling proposal to cut benefits on Social Security, Medicare and Medicaid. But it's a good sign.

Tags: austerity economics, barack obama, fiscal cliff, grand bargain, medicaid, medicare, social security

Joan McCarter on cutting Medicare benefits: it's a really bad idea

Joan McCarter in Maneuvering in the middle on fiscal cliff is still veering too far right Daily Kos 12/10/2012 gets right to the point on the Obama Administration's trial balloon to cut Medicare benefits by raising the eligibility age from 65 to 67:

Considering the election results, and how Democrats won that election on the two prongs of doing away with tax cuts for the rich and protecting Medicare, this is pretty weird. Making it even weirder is the fact that by just not negotiating, by stepping off the curb at the end of the year, tax rates would go up to a top rate of 39.6 without any old people getting hurt.

Raising the Medicare eligibility as nothing more than a political gift to Republicans who will repay it with the nothing other than more demands to privatize the program is a bad idea now. It was a bad idea a year ago and hasn't improved with the passage of time. It's also entirely unnecessary.

It's very frustrating, though not surprising to those who have followed the Obama Administration's cautious and even conservative take on economics - and by conservative I mean conservative, not the screaming-mimi hysteria that passes for conservative in today's Republican Party - to see the Democratic President insistently frame today's economics needs in Republican-friendly and pro-cyclical terms.

What the economy really needs now is serious stimulus in the form of government spending that creates jobs and provides a multiplier effect in the private economy. Instead Obama focuses the debate on stimulus around tax cuts. His political operation is promoting a Twitter hashtag #My2K, to emphasize the $2,000 on average the White House estimates are at stake in the middle-class portion of the tax reductions that expire January 1. That's not bad in itself: it allows people a way to put the fight in a concrete image for themselves, i.e., a stack of bills adding up to $2,000. It also encourages people to engage in some way. Personally, I try to post something on Twitter every day with a #My2K hashtag griping about Obama not defending benefits on Social Security, Medicare and Medicaid. Because they are promoting it so actively, the Obama team is presumably paying some attention to what is posted there.

But Obama is nevertheless framing economic issues in terms of deficit reduction in the middle of a recession. He should be using this opportunity to reaffirm the idea of positive government action for the benefit of working people. He should be aggressively confronting the very real and very damaging issue of extreme and rising economic inequality. Robert Reich in As Washington Fiddles over the Fiscal Cliff, the Real Battle Over Inequality Is Happening in the Heartland 12/10/2012 reminds us how sadly misguided this approach is:

Washington has a way of focusing the nation’s attention on tactical games over partisan maneuvers that are symptoms of a few really big problems. But we almost never get to debate or even discuss the big problems because the tactical games overwhelm everything else.

The debate over the fiscal cliff, for example, is really about tactical maneuvers preceding a negotiation about how best to reduce the federal budget deficit. This, in turn, is a fragment of a bigger debate over whether we should be embracing austerity economics and reducing the budget deficit in the next few years or, alternatively, using public spending and investing to grow the economy and increase the number of jobs.

Even this larger debate is just one part of what should be the central debate of our time — why median wages continue to drop and poverty to increase at the same time income and wealth are becoming ever more concentrated at the top, and what should be done to counter the trend.

This is what the Democrats are stuck with as long as they remain captive to neoliberal doctrines of deregulation, reduction of workers' rights, cutting government services including Social Security, Medicare and Medicaid, and a vague faith that education will somehow make everything all right someday. The depression and the spectacular financial crisis of 2008 created a remarkable historical opportunity for center-left parties around the world to take leadership and define a new, progressive politics. Their general failure to do so in the US in Europe staggers the imagination.

It's not nearly enough for Obama and the Democrats to blather about asking the plutocrats to "pay a little bit more" in taxes. As Reich points out, the super-rich aren't being so timid in their attempts to exploit the crisis for their narrow class interest:

The dilemma isn’t just economic. It’s also political. As money concentrates at the top, so does power. That concentrated power generates even more entrenched wealth at the top, and less for the middle class and the poor.

A case in point is what’s now happening in Michigan. In the state where the American labor movement was born – and where, because of labor unions, the American middle class once had the bargaining power to gain a significant portion of the nation’s total income – Republicans and big money are striking back.

Legislators in the Michigan state House, followed almost immediately by Republicans who dominate the state Senate, voted Thursday afternoon to eliminate basic union organizing and workplace protections for both public and private-sector workers. Michigan Republican Governor Rick Snyder says he'll sign the measure.

This anti-labor blitzkreig was launched and coordinated by “Americans for Prosperity” – a group developed and funded by the right-wing industrialists and billionaire campaign donors Charles and David Koch, to “pave the way for right to work in states across our nation.”

The Koch brothers are the same ones, not incidentally, who several years ago backed a group called "Citizen’s United," on its way to the Supreme Court for an opinion by the Court's Republican majority that opened the floodgates to big money corrupting our federal and state governments. (The brothers Koch have also entertained Justices Scalia and Thomas at strategy meetings they’ve organized of Republican donors.)

Tags: austerity economics, barack obama, fiscal cliff, grand bargain, medicaid, medicare, social security

"Tax the Rich" video

Tax the Rich: An animated fairy tale 12/05/2012. Featured Ed Asner as narrator. From the California Federation of Teachers.

h/t Pension Pulse

Tags: fiscal cliff

The cut-Medicare trial balloon

Ezra Klein was the one who reported on the trial balloon proposal being floated by the Obama Administration in The fiscal cliff deal comes clearer: a 37% top tax rate and a higher Medicare eligibility age Washington Post 12/07/2012.

Quoting Digby once again, because she's been tracking this awful Grand Bargain concept to cut benefits on Social Security, Medicare and Medicaid more carefully than any other writer I know, she tracked its manifestations over the last few days, for instance in Hot Air Trial Ballooning Hullabaloo 12/09/2012 where she explains why it's important for supporters of Social Security, Medicare and Medicaid to raise hell over the Democrats suggested they are willing to cut benefits on those programs:

Before everyone gets into another tizzy about how shrill and unreasonable I'm being for taking this rumor seriously, let's have a little discussion of what a "trial balloon" is. It is, simply, a rumor that's purposefully spread during a negotiation in order to gauge the reaction. Therefore, it is important to react, not act all glib and self-assured that it could never happen. They want to know if you think this is a good idea, so if you don't you should say so. And you should say it in a shrill enough fashion that they know it's a very big deal, if you think it's a very big deal.

Even if you think the President is adamantly opposed to cutting vital social welfare programs --- which I don't since he's said he is willing to make these "tough choices" many, many times --- he is helped in that by a shrill base rising up to counter the Boehner tea party freak show on the right. Whether you think he's got your best interest at heart or that he's trying to do a Grand Bargain, reacting "shrilly" to ideas to cut the safety net and other vital programs that affect real people is completely appropriate. This is the public part of the negotiations and it's important that they hear from you.

Now, if you think that cutting these vital programs for no good reason is a good idea, well then fine. You are well within your rights to roll your eyes at the silly people who find the whole concept of deficit reduction in a time of economic crisis to be absurd and who think that the consequence of this self-laid trap of a "fiscal cliff" should not be borne by average people who have already lost much of their accumulated wealth and are still suffering. That's fine. But if it happens and you were dismissive of those who spoke out, let's not pretend you didn't get exactly what you wanted. (And if it doesn't happen, it's not unlikely that you will have the shrill hysterics to thank for it.) (emphasis in original)

That useless Dick Durbin - the White House spokesperson to "the left" on cutting benefits for Social Security, Medicare and Medicaid - but also Nancy Pelosi - who was reportedly read to support such cuts during the debt-ceiling fight in 2011 - were obliquely promoting the idea that Obamacare would take up the slack if Medicare eligibility were raised from the current 65 to 67. See also Digby's Where do the hippies come up with this stuff? 12/09/2012.

Tags: austerity economics, barack obama, fiscal cliff, grand bargain, medicaid, medicare, social security

Supporters of Medicare are calling Obama on his trial balloon to cut proposal benefits in the program

Lately I've gotten into one of those phases where I'm wondering if I should just post two or three times a day, "read Digby" or "read Charlie Pierce." Both are following the "fiscal cliff" drama, which is a farce that could have literally deadly implications for people who will be hurt by the human sacrifice in terms of cuts to benefits in Social Security, Medicare and Medicaid that elite political and media consensus have decided are necessary and unavoidable.

But for whatever value I'm adding, if only a tiny bit more noise on the issue in the blogosphere, I'm adding my own transmission of their information here. Pierce in The Actual Cost Of Washington's Clever Debt Deal Esquire Politics Blog 12/10/2012, he takes up the issue of Alzheimer's, which Peter Coy mentioned in his Bloomberg Businessweek article (The Fiscal Cliff Isn't the Problem 12/06/2012) that I discussed yesterday. Pierce's take:

We are on the brink of an epidemic of AD in this country. There are 5.4 million people with the disease right now, and there are estimated to be another 15 million people — mostly, aging spouses and economically stressed children — providing what amounts to $210 billion in unpaid care. (There are estimated to be 800,000 people with the disease who are living alone.) The disease already costs $140 billion to Medicare and Medicaid. By 2050, it is estimated, and assuming a cure is not found, the total cost of caring for Alzheimer's patients could soar past $1 trillion.

The current plan being bruited about in Washington would raise the Medicare eligibility age from 65 to 67 years of age. This is the low end of the Alzheimer's spectrum, but the increase in diagnosed cases is still significant, rising three percent per thousand people nationally just between 2000 and 2008. In John Boehner's Ohio, there are 13,000 people roughly within that window with the disease. There are 7,100 in Eric Cantor's Virginia, and 5700 in Paul Ryan's Wisconsin. All of these people represent not only the ravages of the disease, but the severe emotional and economic strain that it puts on their families. All of these people represent a considerable amount of pain that is not being factored into the shrewd political calculations that get you on the Sunday shows.

Pierce also looks at what's left of "welfare" proper (the Supplemental Security Income Program) in The Voices Missing From The Safety Net Debate Esquire Politics Blog 12/10/2012 and explains one of the common scams used to denigrate poor people and smear federal assistance to them, in this case brought to us by alleged liberal Nicholas Kristoff. Pierce:

Oh, dear god, have I seen this movie before. You have the heartbroken local bureaucrat without any specific examples, just "many people." You have the statistics-free analysis of programs, and you have the pet "scholar" from the American Enterprise Institute who, in a stunning coincidence, writes a book concluding pretty much the same thing about social-welfare programs that everyone else at AEI believes. Indeed, his work reinforces the ideas that the AEI was set up in the first place to promote. (Burkhauser, you will note, has made a career out of suggesting an increased work ethic on people who are not him.) And, of course, there is the anguished liberal conscience of the Times columnist. What's missing, of course, are any of the actual people who allegedly are getting fat on disability payments.

Liberals like Kristoff in this mode are indispensable for the Republican reactionary project of gutting social services in the US. From Herman Melville's The Confidence Man:

"You are an abolitionist, ain't you?" [the rough Missourian asked the herb-doctor]

"As to that, I cannot so readily answer. If by abolitionist you mean a zealot, I am none; but if you mean a man, who, being a man, feels for all men, slaves included, and by any lawful act, opposed to nobody's interest, and therefore, rousing nobody's enmity, would willingly abolish suffering (supposing it, in its degree, to exist) from among mankind, irrespective of color, then am I what you say."

"Picked and prudent sentiments. You are the moderate man, the invaluable understrapper of the wicked man. You, the moderate man, may be used for wrong, but are useless for right."

Digby not only has excellent political analysis. She also has the right attitude. In Day of Action Hullabaloo 12/10/2012, she writes about the "fiscal cliff" drama: "Going over the cliff is entirely in the president's hands. He just handily won re-election and he can dictate the terms. There is no reason for any 'concession', certainly not now."

Digby also points to and recommends Joan Walsh's article, "Fiscal cliff" cruelty Salon 12/10/2012 in which she explains that the Medicare benefit cuts proposed by the White House in trial balloon form is a terrible idea. She reminds us not to be naive about trial balloons and how they work. They are a long-established political tool: "The worst sellouts of liberal principles allegedly under consideration by the White House, particularly a hike in the Medicare eligibility age from 65 to 67, may be trial balloons by staffers, or outrages floated in order to make other compromises more palatable to progressives later."

She also says, and very rightly so, "Raising the Medicare eligibility age is so bad that I literally can’t believe the president would consider it. Even though there’s evidence he might."

And as long as I'm fiscal cliffing here, this from Joan's article reminds me of something:

Meanwhile, a compromise on the top tax rates is likewise a bad idea, because 39.6 percent is already a compromise. Everyone who talks about rebuilding the middle class needs to acknowledge how we did it last time around: with a top marginal tax rate above 90 percent through both Eisenhower administrations. John F. Kennedy cut it to 70 percent, and that’s where it stayed until Reagan slashed it – and we know how good the Reagan revolution was for the middle class. I’m not saying that’s where it should return, but if we keep sacrificing progressivity, we’ll never have the money we need to do what we need to do. Tax rate hikes shouldn’t stop at $250,000. There should be more, and higher, tax rates on the super rich.

Listening to some of the chatter on the "fiscal cliff" hoo-hah, I've started to wonder how many people actually know what marginal tax rates are. Because I rarely if ever see it explained in news articles. I'm guessing there is some large portion of the public who thinks that a 90% marginal tax rate on the highest portion of income means 90% tax on all income.

This is an important part from Joan's article on current politicking to cut benefits on Social Security, Medicare and Medicaid around the "fiscal cliff":

The White House seems to be playing both sides of the street on the question of whether it’s thinkable to go over the cliff. On Wednesday, Treasury Secretary Timothy Geithner told reporters the administration is “absolutely” prepared to do so if the GOP won’t budge on top tax rates. But that same day, the White House was meeting with Latino groups to build support for a theoretical fiscal cliff deal, by outlining the ways Latinos would be hurt by the tax hikes and program cuts that would (eventually) be triggered. Thursday they did the same thing with African-American groups. As long as we’re getting racial, it’s worth pointing out that keeping the top tax rates low, or compromising at 37 percent, is an absolute Christmas gift for wealthy white people, who make up a wildly disproportionate share of the top earners. And the lower life expectancy of African-Americans makes raising the Medicare eligibility age particularly cruel.

And it's very true that cutting benefits on Social Security, Medicare and Medicaid will hit minorities disproportionately hard. Journalists should be jamming Obama and other Administration officials on that point. David Dayen discusses this point in Medicare Eligibility Age Increases Particularly Levies Pain on Seniors of Color FDL News 12/10/2012: "coverage disparities between the rich and poor melt away at 65 right now, and particularly between whites and minorities. Delaying that two years just means two more years where poor people of color will defer medical care and live without health insurance."

And, yes, cutting benefits on Social Security, Medicare and Medicaid would be a terrible betrayal of the solid majority that just re-elected Obama. Joan Walsh:

So yeah, I think these are appalling ideas. We just had an election in which the president promised to protect Medicare, and never once publicly supported raising the eligibility age to 67, while Romney’s advisers said his plan included hiking the age. (Romney himself avoided details about any of his plans.) Post-election polls find that two thirds of voters oppose increasing the Medicare eligibility age. Should this deal become reality, it would reinforce the cynicism Americans harbor about government – and about Democrats. Deservedly.

The truth is, Obama should be pushing to lower the Medicare eligibility age, to let those 55 and over opt to buy into the program with their own money. The premiums paid by a younger, healthier cohort would help stabilize the program, while the benefits of getting that population insured earlier would keep costs down later. That’ll never happen, you say? Well, we can make sure it’ll never happen if progressives never ask for it.

Honestly, the only real reason to throw seniors into the Obamacare pool is to put more people at the mercy of private insurance, and weaken both the economic and political basis for Medicare. [my emphasis]

Tags: austerity economics, barack obama, fiscal cliff, grand bargain, medicaid, medicare, social security

Some real-world features of current federal budget needs

Bloomberg Businessweek's Peter Coy steps outside the "fiscal cliff" conventional wisdom and actually explains several practical real-world issues around them well in The Fiscal Cliff Isn't the Problem 12/06/2012. Though not without some flotsam and jetsam of the CW. Particularly at the end, where he devotes a long paragraph to letting a Blue Dog Democrat hyping a version of the "inter-generational accounting" scam without pointing out that's what he's describing.

But on the realistic side, he explains on Social Security, "Social Security’s imbalance could be fixed by raising the ceiling for wages subject to the payroll tax." He doesn't even mention the proposal to cut benefits for existing and future retirees by tying inflation adjustments to the "chained CPI" measure.

The piece in both print and online is accompanied by an illustration by Ana Benaroya that works well in spoofing the excessive hype around the "fiscal cliff" and the potential harm that could come from addressing it in bad ways:

But I also have to wonder about the "Don't Feed the Animals" sign it features. Among the more enthusiastically segregationist-minded, a meme became popular this past year comparing ordinary people receiving some sort of government assistance to wild animals who shouldn't be fed by people. Although I'm more inclined to read this use of it as a spoof of segregtationist and conservative attitudes.

Coy also gives us a non-crazy description of the real issue around projected Medicare and Medicaid cost issues (although he doesn't mention more recent projections that suggest the problem may be less severe than often thought):

The knottier problems are Medicare and Medicaid, whose costs have been driven up by extraordinarily inefficient health-care spending. The U.S. spends 53 percent more on health care per capita than No. 2 Norway while getting worse results. (Norwegians’ life expectancy at birth is a year and a half longer.)

The per capita cost and value-per-amount-spent are two areas in which the United States really does have an argument that we're "exceptional."

And he connects the costs of health care to federally-funded research, or lack thereof:

Making benefits less generous is the no-brainer way to close the gap [on Medicare and Medicaid]. The forward-thinking way is to conquer diseases that sap America’s human and economic potential, as Jonas Salk’s vaccine did for polio in the 1950s. Medicare and Medicaid alone spend $140 billion a year on dementia care, the Alzheimer’s Association estimates, yet the U.S. spends only about half a billion dollars a year researching cures. George Vradenburg, chairman of USAgainstAlzheimer’s, argues that the disease could be mostly eliminated by 2020 with Manhattan Project-size funding; cuts to research could make the problem worse. "This disease could very well become the financial and social sinkhole of the 21st century," says gerontologist Ken Dychtwald, chief executive officer of the consulting firm Age Wave.

Coy might have added that cutting benefits on Medicare and Medicaid, as President Obama proposed in 2011 in the debt-ceiling negotiations, is not only a "no-brainer" but a no-heart-er approach. But in the context, "no-brainer" would not only mean an approach that requires no thought but one that doesn't make good sense.

He makes an obvious and accurate Keynesian point that contradicts Republican economic dogma, "What’s limiting business investment and hiring today isn’t the prospect of slightly higher tax rates but the fear that there won't be enough customers."

And he explains how protracted depression can produce major long-term damage to the economy:

Weak, uncertain demand is the lasting legacy of the Great Recession and the slow rebound since. In manufacturing, mining, and utilities, depreciation has outpaced fresh investment since the start of the recession in December 2007, leaving the sector with a decline in productive capacity, according to Federal Reserve data. Recessions have lasting consequences: Eroding capacity, they limit the economy’s ability to grow—and generate tax revenue—in the future.

Coy also talks about the importance of engaging in public research for "education, scientific research, and infrastructure." But I'm getting more and more indifferent to those vague formulations that are often found in close company with neoliberal assurances that the Great God Free Market will take care of everything as long as we have fewer unions and less protection for workers ("labor market flexibility" in the jargon) and also fewer government services, lower or nonexistent pensions, and restricted access to health care for all but the One Percent ("enhancing national competitive" in the neoliberal mantra). Coy does point out an important aspect of infrastructure investment, though:

Physical capital is underfunded as well. In 2009 the American Society of Civil Engineers gave the U.S. a grade of D for infrastructure. It’s doubtful that things are much better now; only about $100 billion of the Obama administration’s nearly $800 billion stimulus program went toward roads, bridges, and other needs. Infrastructure investment would make the U.S. more competitive in the long run while creating jobs in the short run, and since the U.S. can borrow for next to nothing, the financing would be cheap. But Boehner is opposing Obama’s debt proposal—which includes $50 billion in infrastructure spending—because it doesn’t cut spending enough. That's unfortunate.

And he even says that holding back necessary spending right now "by spending cap or sequester would be as dumb as discarding coffee filters to lighten one’s backpack." He also notes, perhaps with an ironic twist, "The U.S. spends more on its military than the next 13 countries combined; that would suggest potential for some nips and tucks." Yeah, "nips and tucks."

Coy's article is nevertheless framed in the context of making responses to the "fiscal cliff" pseudo-crisis less damaging than they might be.

And that's part of the more general problem. Both Democratic and Republican leaders are focusing their emphasis on reducing the deficit in the middle of a depression, not on the immediate need for strong stimulus spending. Vague magic formulas about the need to spend more on "education, scientific research, and infrastructure" don't count.

Tags: austerity economics, fiscal cliff, grand bargain, medicaid, medicare, social security

Fiscal cliffing ourselves into austerity economics in the middle of a depression

Digby has a good roundup on austerity-economics news in Europe and Australia in Let's do it anyway, shall we? Hullabaloo 12/07/2012. Guess what? It's making their economies shrink!

The most important immediate issue in the Fiscal Cliff farce is maintaining the benefits on Social Security, Medicare and Medicaid. Wall Street, the Republicans, and - sadly, President Obama - are using this ginned-up pseudo-crisis to try to cut benefits on those programs as a way for Wall Street to tap into the Mississippi River of cash flows that privatized versions of those programs could provide for banks, brokers and insurance copies to suck gigantic fees from at the expense of the majority of the country.

But those cuts wouldn't provide immediate pro-cyclical effects. i.e., making the recession worse. The whole debate in which the President, leading Democrats and the whole Republican Party are calling for deficit reduction in the middle of a depression just shows the ghost of Herbert Hoover running wild.

Mike Koncza in gives some examples of the toxic economy analysis that One Percenter think tanks have been cranking out, in particular over the issue of the debt ceiling, and concludes, "There's no good reason for the debt ceiling, and now there are really bad consequences for its existence. Time to end it." (Another Reason to Kill the Debt Ceiling: Conservative Think Tanks' Responses to Default Rortybomb 12/05/2012)

Jared Bernstein takes a look at some current real-world figures and points out something relevant to the deficit:

In fact, if any column in the table is flashing red (other than unemployment), it’s the revenue column. Since 2009, revenues are up only 0.7% of GDP while spending is down 2.4%. That’s the largest three-year spending contraction since the mid-1950s. The 3.1% of GDP decline in the budget deficit since 2009 is the largest three-year drop since the 1940s. To be fair, it’s also the case that the increase in the deficits up to 2009 were historically very large as well. But they needed to be. (emphasis in original)

And Yves Smith at Naked Capitalism asks us to be alert for "shameless cases of fearmongering and distortions" during the budget/fiscal cliff/deficit/Grand Bargain debates. And gives us an example: Fiscal Cliff Propaganda Watch: Business Owner Says the Fiscal Cliff Made Him Fire His Son 12/07/2012. Several examples, actually:

The lies told to sell the chump public on the necessity of enduring cuts to the social safety net are already at a breathtaking level. Where would you like to begin? The idea that big reductions in spending (going over the edge of the world off the fiscal cliff would be horrific, while only somewhat big cuts would be salutary? That Social Security “reforms” are necessary to fix the budget? Even former budget chief Peter Orszag ‘fessed up that one was not true. Or the favorite refuge of the Republicans, that raising taxes on the wealthy will hurt job creation. Ahem, we’ve pushed the low taxes model further than any other advanced economy, and the result is crumbling infrastructure, an overpriced and mediocre health care system, and record corporate profits combined with extreme measures to pay more to workers and a lack of new investment (the corporate sector has been a net saver since the early 2000s).

I've gotten as tired of hearing the phrase "crumbling infrastructure" as that cute little girl in the pre-election YouTube video crying about how tired she was of hearing about Bronco Bamma and Mitt Romney. But his point is right.

We would have a better chance of have some really constructive solutions to the depression if we had a President who didn't have to be constantly pressured to act like a Democrat at all on economic issues. But at least he's not Mitt Romney, and that's good.

Tags: austerity economics, barack obama, fiscal cliff, grand bargain, medicaid, medicare, social security