President Obama’s new fiscal cliff proposal includes cuts to Social Security and a middle-class tax hike—and though details are still sketchy, progressives are deeply wary.
Monday night, the White House made Republicans a new offer as it seeks to avoid the automatic tax hikes and spending cuts set to go into effect in the new year. The proposal would extend the Bush tax cuts for those making up to $400,000, to be paid for by cuts to Social Security and Medicare, and by other tax changes that would fall on both the rich and the middle class. The White House had previously suggested cuts to Social Security were off the table in fiscal cliff talks.
The response from progressives has been skeptical. Cutting Social Security, wrote New York Times columnist Paul Krugman Tuesday morning, is “cruel and stupid.” Krugman wrote that he’s “still agonizing” over whether on balance to support the package, since the alternative—going over the cliff and suffering the automatic spending cuts and tax hikes that could trigger a new recession—is also bleak. But “it’s not a deal to be happy about.”
Moveon.org, which for weeks has been focused on mobilizing supporters to preventing cuts to social programs during the negotiations over the cliff, sounds even cooler on the idea.
“MoveOn members overwhelmingly oppose cuts to Social Security, Medicare, and Medicaid benefits,” the group said in a statement. “And they've made clear that they would see any fiscal agreement that cuts such benefits as a betrayal that sells out working and middle class families. If such a deal were proposed by the President and Speaker, MoveOn members would expect every Senate and House Democrat to do everything in their power to block it."
Robert Kuttner, the co-founder of The American Prospect, a key progressive opinion magazine, is dead-set against the plan.
“It’s unconscionable to cut Social Security at all when the president is proposing to reduce the proposed taxes on the wealthiest by $400 billion,” Kuttner wrote Tuesday morning, in an article titled "Social Security: Will Obama cave?"
The White House proposal would raise $1.2 trillion in new revenue, in part by changing the treatment of itemized deductions, which will hit the rich hardest. It would extend unemployment benefits and boost infrastructure spending—both key pieces of economic stimulus. And it would prevent Republicans from holding the economy hostage over the debt ceiling for two years. But it would end the Bush tax cuts only for those making $400,000 or more—a climb-down from the $250,000 mark Obama had previously insisted on—while failing to extend the payroll tax cut, meaning middle-class taxes will rise. It would cut $1.22 trillion in spending. And, perhaps most controversially, it would cut Social Security by changing the way inflation is calculated, meaning payments grow more slowly, by about 0.3% each year.
The proposed change to Social Security is particularly controversial in progressive policy circles. Last month, a group of 300 economists and policy experts—including former Clinton administration Treasury official Brad DeLong, Dean Baker of the Center for Economic and Policy Research, and Economic Policy Institute president Lawrence Mishel—signed a statement opposing the specific Social security cut that the White House is proposing, saying there’s “no empirical basis” for the change, and that it “could exacerbate, rather than correct, an existing problem.”
Just last month, the White House suggested that Social Security cuts are off the table during the fiscal cliff negotiations, since it’s accounted for separately from the rest of the federal budget. "We should address the drivers of the deficit, and Social Security currently is not a driver of the deficit," spokesman Jay Carney said. Democratic congressional leaders have made clear they too don’t see Social Security as fair game. "We are not going to mess with Social Security," Senate Majority Leader Harry Reid said last month.
Of course, there’s no guarantee that House Speaker John Boehner can line up his caucus behind the White House’s proposal. Reports Tuesday morning indicated Boehner is insisting on tax rate hikes only for those making $1 million on more.