President Obama proposed a new budget today. He outlined investments in education and infrastructure, along with new ways to cut tax loopholes. It’s a decent budget that tries to meet Republicans halfway.
But there is a big problem. Today, Obama became the first Democratic president to back Social Security cuts in a formal budget.
He doesn’t call them cuts. Social Security is too popular and effective for that. Obama’s budget cuts social security by changing the formulas used for calculating benefits, and it raises middle class taxes in the process.
In DC, they call it “Chained CPI.”
As the Washington Post reported, chained CPI is jargon that refers to two practical results: seniors receive “less [social security benefits] in the future” and many are pushed “into higher tax brackets.”
We could go into details about how it all works, but that’s what they want. The austerity crowd wants us to get in the weeds, get bored, and decide instead to talk about anything other than the real issue: a cut in the deal citizens made with their government when they paid in to social security all their lives, and that is what we should focus on.
After the Depression, FDR enacted Social Security as an independent program. It was funded through an independent account–not the general treasury–in order to protect it from all the short-term budget battles. That makes sense. You can’t maintain a 40-year retirement program within four-year political cycles.
But now, critics of social security are using that accounting mechanism to argue that social security is “going bankrupt.” This is misleading in two ways.
First, the independent account is solvent for another 25 years. And more to the point, it can be solvent for as long as we want to fund it. FDR created an independent account as a floor to protect social security. It’s not a ceiling.
We can always add to the fund from the general treasury. Or we can apply social security taxes to millionaires, who pay social security taxes on less than 10%of their income. Or we could apply the revenues from one of the loopholes cited in Obama’s budget and put that cash towards social security.
We have a lot of options–if we want to make good on our deal for today’s seniors, rather than cut the $460 they get each week.
So let’s put aside the euphemisms of Chained CPI and the disingenuous talk about solvency. I think the New Yorker summed it up best, when it explained that the only reason politicians focus on the program’s “solvency” is because it “makes cutting entitlements seem inevitable, rather than a political choice.”
But budgets are always about political choices, and pretending otherwise is no way to start this debate.
(Here’s how the “chained CPI” works and why critics like Paul Krugman call it a benefits cut.)