- Denial Isn’t a Viable Strategy
There are moments when it is impossible not to fret for the future of the Republic.
As official Washington again plays a high stakes game of “chicken” on the consequential issue of the debt ceiling, not only does bipartisan agreement seem illusive, but there is a disheartening lack unanimity on the most basic terms of debate, that unnecessarily fuels partisan rage.
At issue, is the word “cut.”
Speaking earlier in the week, President Obama stated that all programs were on the table in the debt ceiling talks, including Social Security.
Judging by the reaction of congressional Democrats and interest groups, you would think that the President and Republicans were scouting out cliffs to roll retirees over.
Today’s Washington Post captured a number of Democratic opinions.
Among them was Senator Bernie Sanders, who spoke out against proposed cuts in entitlements in any debt deal in a conference call that included speakers representing more than 300 liberal organizations, including national labor unions, the National Organization for Women, MoveOn.org and the Alliance for Retired Americans.
Friday evening, the co-chairmen of the Congressional Progressive Caucus weighed in with a letter to House Minority Leader Nancy Pelosi praising the Democratic leader’s “unwavering defense” of Social Security, Medicare and Medicaid and pledging to vote against any deal that would include benefit cuts.
For it’s part, the lede from the Post was nothing if not on message, “Long-simmering tensions between the White House and congressional Democrats on how best to address the country’s debt boiled over Friday, with leaders and rank-and-file members alike fuming at reports that President Obama is mulling cuts to Social Security and Medicare as part of a bipartisan debt-limit deal.”
“Cuts.”
So what exactly does this mean? What is actually on the table?
Is Granny going to be getting less money next year that she did this year? Is the future a bleak world of misery and austerity for our seniors where each year they will have to make do with less as they age?
No.
Not even close.
And the Democrats deserve to be held to account for playing politics with an issue that isn’t a game to our 44 million retirees who depend on Social Security for their livelihoods.
For all the apocalyptic talk coming from Democrats, what is at issue here is a highly technical formula for the calculation of inflation, whose adjustment would change the way increases are made to Social Security, not a trigger to eviscerate benefits.
Currently, Social Security and other entitlement payments increase in tandem with an increase in the Consumer Price Index (CPI).
Most Americans don’t know, and would probably be dumbstruck to find out, that hundreds of billions of dollars in increased federal spending each year are automatically approved without so much as a hearing in Congress, based simply on an economist’s formula.
The debt ceiling discussions have focused on this archane index and a possible, proposed change to the CPI formula to a “chain-weighted” CPI. The distinction here is that the chain weighted alternative takes into account consumer behavior when prices rise, where the current CPI calculation does not.
For instance, if beef prices rise, consumers will buy less expensive chicken. It is a more realistic calculation of inflation, and – critically – it is slower growing measure.
So what the debt negotiators are considering is not a “cut” – an act that would result in an actual net reduction in payments in the new year from the previous year – but rather a slower increase in the overall payments year on year.
This is crucial to understand amid all the toxic competing claims.
If this CPI change were to be put in effect, Granny would receive an increase next year (so long as there is inflation to justify it). The actual increase would simply be slightly less than under the old formula.
But the impact of this change on the federal budget is substantial. In the normal ten-year budget window, a new CPI calculation would save over $270 billion.
And the added beauty of the change is that the longer it is in place, the greater the savings as they are compounded in out-years. One adjustment leads to real, specific savings down the road.
As for the arrmaggedon that Democrats predict for seniors under the new calculation, consider this analysis from the actuary of Social Security as reported in the Wall Street Journal. A retiree at age 65, receiving average benefits, would receive $560 less over the course of a decade under then new calculation of CPI than under the current CPI.
That is about a dollar less per week or 14 cents a day. It is an irony in the debate that there is virtually nothing you can buy in America for 14 cents. But if the nation were to implement this CPI change, that 14 cents would be part of of reforms that will save our children from a crushing debt burden.
And the added irony here in the incensed Democratic rhetoric is that the chained CPI calculation actually generates revenue on the tax side; a longtime Democratic demand.
According to the Wall Street Journal, chained CPI would increase tax revenue by slowing inflation adjustments to the stanard deduction and income thresholds that define tax brackets. It results in more taxable income at higher rates.
Indeed, the hyper-conservative CATO Institute has said that any change in the CPI calculation would amount to a “stealth tax increase.”
Ms. Pelosi and her progressives colleagues should be dancing with joy.
But no. Instead we have scare tactics and political calculations to maintain a status quo to terrify the Democrats back into a majority, even though every economic forcast predicts that unreformed entitlements are unsustainable and threaten the US with insolvency.
The inflammaotry rhetoric that paralyzes the political process on so simple an issue is a microcosm of our dangerous intellectual destitution regarding the monumental and potentially catestrophic financial challenges that are just over the next hill.
Our leaders should know better.
We as citizens, deserve better.