“GOP Deficit Scolds”: By All Means, Cut Social Security, But Don’t Tax The Rich
If the White House’s political goal in calling for Social Security cuts in its budget was to reveal the GOP as the intransigent, uncompromising party in Washington, it’s having the desired effect.
The statements from Republican leaders today in response to the budget are noteworthy, though not surprising: They say we should proceed with Obama’s proposed entitlement cuts but not raise any new revenues by closing any millionaire loopholes. Oh, they don’t put it in those terms. But here’s John Boehner:
While the president has backtracked on some of his entitlement reforms that were in conversations that we had a year and a half ago, he does deserve some credit for some incremental entitlement reforms that he has outlined in his budget. But I would hope that he would not hold hostage these modest reforms for his demand for bigger tax hikes. Listen, why don’t we do what we can agree to do? Why don’t we find the common ground that we do have and move on that?
And here’s Eric Cantor:
If the President believes, as we do, that programs like Medicare, Medicaid and Social Security are on the path to bankruptcy, and that we actually can do some things to put them back on the right course and save them to protect the beneficiaries of these programs, we ought to do so. And we ought to do so without holding them hostage for more tax hikes.
In other words, let’s only do the thing where there’s common ground (entitlement cuts) and not do the thing where there is disagreement (tax hikes).
Now in one sense, this can be seen to validate some of the left’s worst fears about what would happen if Obama offered entitlement cuts. Now that he’s formally proposed cutting Social Security benefits, Republicans can describe that proposal as the one area of agreement between the two parties. And it’s true Obama will probably take a political hit for the proposal.
At the same time, though, it’s worth noting that this doesn’t put Republicans in the greatest political position, either. The GOP position — revealed with fresh clarity today — is that we should only cut entitlements but not raise a penny in new revenues by getting rid of any loophole enjoyed by millionaires. GOP leaders try to compensate for this by robotically repeating the phrase “tax hikes” as a negative, but polls show that majorities already understand that Republican policies are skewed towards the rich. The use of the phrase “tax hikes” to obscure what Dems are really calling for — new revenues from the wealthy — didn’t fare too well in the 2012 elections.
And so, if the White House budget was partly intended as a trap, Republicans walked into it, revealing themselves as the only real obstacle to compromise. Indeed, as Steve Benen points out, Paul Ryan helped underscore the point when he struggled to name anything Republicans could support that their base wouldn’t like.
Now, maybe you don’t believe that there’s much political value in staking out the compromising high ground in this debate, because the Very Serious Deficit Scolds in Washington won’t ever award Obama any real credit for doing this. And maybe you believe that offering Chained CPI will do nothing more than make it easier for Republicans to attack Dems for cutting Social Security in 2014 and 2016.
All I can say to that is that the White House views things differently. Obama advisers believe Republicans could just as easily attack him this cycle for cutting Social Security based on his previous support for Chained CPI. They think the lesson of 2012 (remember the failed “he raided Medicare to pay for Obamacare” talking point?) is that Dems can fend off this attack with relative ease. And from what I have been told, they are looking beyond just getting the approval of the Very Serious People. They want to establish a Beltway narrative that GOP devotion to protecting the wealth of the rich is what’s preventing a deal to replace the sequester, in hopes that it will seep into local news coverage of the cuts around the country as the pain of those cuts sinks in, weakening Republicans further.
Chained CPI is awful policy, and I oppose it. On the raw politics of all this, however, only time will tell who is right.
By: Greg Sargent, The Plum Line, The Washington Post, April 10, 2013
The Paul Ryan Budget: Why The GOP Is Still The Party Of The Rich
On Tuesday, Rep. Paul Ryan (Wisc.) released the House GOP budget, which was greeted with no small amount of incredulity for being almost exactly the same as the economic platform that he and Mitt Romney ran on in 2012 — a platform that was roundly rejected by voters who decided to go with President Obama’s proposals instead. But Ryan, retreating into rhetorical vagueness, claims to see the matter differently. “Are a lot of these solutions very popular, and did we win these arguments in the campaign?” he said. “Some of us think so.”
As has been recounted in depth elsewhere, the Ryan budget would, in all likelihood, lead to massive cuts in aid for the poor, while dramatically reducing tax rates for the wealthy. It’s hard to say with any certainty because, as Dana Milbank at The Washington Post puts it, “There are so many blanks in Ryan’s budget that it could be a Mad Libs exercise.” However, an independent analysis last year of the Ryan-Romney plan, which is similar in structure, showed that the math doesn’t add up without draconian spending cuts and closing tax loopholes for the middle class.
The smart money is that Ryan doesn’t believe his plan has a chance of passing a Democratic-controlled Senate, let alone Obama’s desk. It changes Medicare into a voucher program, strips Medicaid of a guaranteed source of federal funding, and repeals ObamaCare. “In a real way the whole thing is a sop to rank and file conservatives who haven’t come to grips with that reality,” say Brian Beutler at Talking Points Memo.
Indeed, Ryan may have angered the right wing by including the fiscal cliff deal to raise taxes on the wealthy as part of his budget projections. “You wouldn’t know it from the media coverage,” says Joshua Green at Bloomberg Businessweek, “but some conservatives don’t agree that Ryan’s budget is a shockingly right-wing ‘lightning rod’ proposal — they think it’s too liberal. And they’re deeply disillusioned by what they view as Ryan’s breaking faith with the conservative movement.”
But even if Ryan’s budget dies in Congress, the fact of the matter is that it is out there, outlining the Republican Party’s economic and fiscal priorities. “Budgets are statements of values,” writes Jonathan Cohn at The New Republic. “And with this budget, Ryan, once again, has revealed what Republican values are: Cutting taxes, primarily to benefit the wealthy, while savaging programs on which the poorest Americans rely.”
In the end, with Ryan’s budget, it will only be that much harder for the Republican Party to shed its image as the party of the rich, a reform that several conservative commentators have argued is absolutely essential to winning back power. Indeed, the Ryan budget shows that Republican officials are gambling that a makeover on immigration and social issues may be enough to turn the tide — a theory that Democrats will surely be glad to test in the next election.
By: Ryu Spaeth, The Week, March 12, 2013
“Insurance Against Need, Guaranteed Return”: Why Democrats Must Get Smart On “Entitlements”
In a season of depressing budget news, the worst may have been that a majority of U.S. House Democrats signed a letter urging President Barack Obama to oppose any benefit cuts to Social Security, Medicare, Medicaid and other entitlements. That’s the last thing we need.
To hold the line on harmful cuts to discretionary spending, Obama and the Democrats must educate the public about the necessity of entitlement reform. Otherwise, the poor and needy — largely spared by the automatic reductions under sequestration — will get hit much harder down the road.
Liberals are right to reject Republican proposals that would slash social-welfare programs even as they refuse to consider closing tax loopholes for the wealthy. And I agree that the sequestration will cut into the bone of important government functions and investments in the future.
That makes two more reasons to start talking seriously about how we will pay for the insanely expensive retirement of the baby boomers.
How expensive? Anyone reaching retirement age in the next 20 years (including me) will take more than three times as much out of Medicare as he or she contributed in taxes. By 2030, the U.S. will have twice as many retirees as in 1995, and Social Security and Medicare alone will consume half of the federal budget, with the other half going almost entirely to defense and interest on the national debt. It’s unsustainable.
If Democrats don’t want to talk about these programs, they can say goodbye to every other pet program. We can preserve Medicare in amber only at the expense of investments in pre-kindergarten programs or cancer research.
To reform entitlements, we should assess what these programs were meant to do in the first place.
For starters, Presidents Franklin D. Roosevelt and Lyndon B. Johnson didn’t call them entitlements. Jimmy Carter’s administration borrowed the term from Anarchy, State and Utopia, a 1974 book by Robert Nozick, a political philosopher. “Entitlement” sounds selfish and at odds with the dignity and peace of mind that Social Security and Medicare are meant to provide.
It distorts the animating idea behind these programs, which is social insurance.
FDR didn’t have strong feelings about benefit levels, retirement ages or eligibility standards. He focused on what he called guaranteed return. By that he meant that having paid into the system through a kind of insurance premium (though in fact it was merely a payroll tax), Americans should rest easy that some money would be there for them if they lived long enough to need it. The whole point was “insurance against need.”
“Guaranteed return” and “insurance against need” should continue to be the two guiding principles of social-insurance reform.
“Guaranteed return” means no privatization or voucher system for these programs. FDR would have strongly opposed President George W. Bush’s plan to allow Social Security contributions to be invested in the stock market. He thought subjecting retirement income to what he called “the winds of fortune” was a breach of the social contract. Imagine what would happen to someone who retired in 1929 or 2008? No guaranteed return.
“Insurance against need” suggests keeping the focus on poor and middle-class recipients who depend on the money most. That means means-testing, giving wealthier retirees less. FDR, who favored high levels of taxation on the rich, would have been fine with taxing their benefits, too, as long as they were guaranteed to get at least something back.
Liberals generally oppose means-testing social-insurance programs. For decades they’ve argued that if the wealthy don’t get a heaping portion of Social Security and Medicare, it will undermine the political support of the programs and turn them into a form of welfare. Once that happens, the theory goes, the programs will be ended.
Like the word “entitlements,” this hoary idea should be retired. Social Security and Medicare are now so deeply in the marrow of the American middle class that they will never be seen as welfare. The question is not whether to reform them, but how.
Roosevelt structured Social Security as an insurance program with “contributions” through the tax code “so no damn politician can ever take it away.” He didn’t specify anything about the level of taxation or cost-of-living increases, which weren’t an issue in the 1930s but would become one shortly after World War II.
Today, only the first $110,000 in income is subject to the 7.65 percent tax that pays for Social Security and Medicare. Lifting the cap to higher income levels (say $250,000 or $400,000) could eventually generate hundreds of billions of dollars.
Republicans consider this a tax increase. That’s only true outside the context of these programs. The change could be structured so that no one paid in more than actuarial tables say they would take out. That would still raise billions and be consistent with the idea of paying for your own retirement if you can afford it.
For lifting the cap to have any chance, it would have to be matched by reforms such as adopting the chained consumer-price index, a new way to measure cost-of-living adjustments that Obama apparently favors. Liberals oppose chained CPI because it would theoretically result in lower benefits. But less frequent cost-of-living increases aren’t the same as cuts, especially if the current system is, as many experts believe, based on an inaccurate assessment of inflation.
Maybe there are better ideas for reforming social insurance. The point is, we better start talking about them. Otherwise, grandpa and grandma and their fellow Grateful Dead fans are going to eat all the food on the table.
By: Jonathan Alter, The National Memo, March 1, 2013
“No Good Choices”: Sequestration Is Here And Danger Lies Ahead
At midnight, $85 billion in federal budget funds will be sequestered (that is, held back) by the Treasury Department, with the potential to cause real pain for the economy and many Americans if Republicans and Democrats can’t agree to some sort of solution. (For an explainer about how this all came about, see here.)
The two sides are, naturally, quite far apart. The White House has offered a sequester replacement plan that it touts as “balanced” and thus ostensibly palatable to Republicans, though the administration is actually selling itself short: the plan should be quite appealing to the GOP exactly because it is unbalanced. The plan offers $930 billion in budget cuts with only $680 billion in revenue ($100 billion of which comes from Chained CPI, anathema to most progressives).
Republicans, meanwhile, want a sequester solution with no new revenue whatsoever—“The revenue issue is now closed,” House Speaker John Boehner said on Thursday—and many Republicans would like the sequester cuts rejiggered to spare defense spending and hit domestic and entitlement programs even harder.
So both sides are now playing the blame game, hoping that the public will get seriously angry about the disruptions caused by the sequester and blame the other side, thus bringing them to the table ready to give concessions.
There is substantial reason to be optimistic that Obama has the upper hand and will “win” this battle. The public appears to be on his side, and serious fractures within the GOP may soon emerge—defense hawks who cannot abide the Pentagon cuts much longer, and rationalists within the party who think the brand is being irreparably damaged.
But for progressives, is it really a win for Obama’s preferred approach to prevail? The emerging consensus is ‘no.’ Some of the cuts Obama offers are plain bad, like his offer to “reform” federal retirement programs and save $35 billion, which means in essence to take $35 billion from the pensions of public workers. Many cuts are inoffensive, and some are good cuts: like reducing certain agricultural subsidies and reducing Medicare payments to big drug companies.
The revenue would mainly be taken from the wealthy via capping deductions and closing loopholes that benefit top earners. But there’s that Chained CPI bit (or “superlative CPI,” as the White House refers to it) that really troubles progressives—and should. It represents a tangible cut to the safety net: seniors already living on $1,200 per month would see $1,000 less per year under the new formula. Disabled veterans would lose $1,400 per year, and middle-class taxes would be hiked on top of it. (The increased tax revenue is, I suppose, why the White House has classified Chained CPI as new revenue, but on the benefit side of Social Security and other programs, this is clearly a cut.)
Cutting entitlements for any reason is a no-go for many Democrats in Congress, especially when coupled with nearly a trillion dollars in budget cuts. That’s what would happen if Obama’s plan wins, and it’s what worries liberals. “There’s a broader concern about the fact that entitlements may get ensnared when we go to an alternative fix, [that] they won’t escape,” Representative Jerry Nadler told BuzzFeed.
The AFL-CIO issued a statement this week that didn’t back Obama’s “balanced” approach, but called for the sequester to be straight-up repealed. “There’s no need to replace the sequester in full or in part. We don’t need it. Republicans are saying we need to address the source of the problem as leverage to get entitlement cuts,” it read. The Congressional Progressive Caucus has also called for sequestration to be completely repealed.
That’s the best-case solution for progressives. (Realistically speaking, of course. The actual best-case solution is the comprehensive plan released by the Congressional Progressive Caucus.) But Boehner probably won’t be able to sell a full repeal of spending cuts in exchange for exactly nothing to his rambunctious hard-core caucus in the House. There might not be any deal to be had here.
In that case, sequestration stays in place. That’s definitely worse than repealing it, but is it really worse than Obama’s grand bargain? Under sequestration half of the cuts come from defense spending; Medicare is protected except for a 2 percent cut to doctor reimbursements, and Social Security, Medicaid, the Children’s Health Insurance Program and food stamp programs are protected entirely.
The other domestic cuts are no doubt painful and bad policy, but progressives have a tough choice in weighing that against what Obama’s proposing. And this of course assumes Obama gets everything he wants, which will not happen. Whatever bargain Congress and Obama strike out, if they manage to get something done, will almost certainly be worse.
There are real dangers to enacting some kind of bargain with Republicans to end the sequester—clearly on policy, but also on the politics, even though the administration seems to think otherwise. If White House aides truly believe that achieving a “grand bargain” that includes chained CPI will yield some sort of political victory, they ought to pay closer attention to the blame game now happening around the sequester.
One of Bob Woodward’s central claims, and the one that spurred the now-infamous pushback from the White House, is that Obama’s team came up with the sequester. This has been relentlessly pushed by Republicans (who invented a corny #Obamaquester hashtag) and by far too many mainstream media journalists.
This is plainly ridiculous—Obama wanted a clean debt-ceiling hike in 2011, and Republicans denied it and forced a showdown. Republicans were not enticed by what the White House offered to end the standoff and demanded some kind of guarantee of budget reductions, and at that point an administration official proposed sequestration as a tool. To strip that final piece of the timeline of all preceding context, and say that somehow Obama wanted the sequester, is exactly backwards—but it’s what is happening.
This is identical to what would likely happen to Chained CPI. Sure, this whole showdown was created by Republicans. And everyone understands the GOP to be the party that wants to cut “entitlement” programs. But Republicans have very deftly avoided proposing specific cuts to Social Security or Medicare in this debate; only Obama has with his Chained CPI proposal. Does anybody really think that two years from now, Republicans wouldn’t pull the exact same parsing of history as they did with the sequester, and blame Obama for cutting Social Security, which an overwhelming amount of Americans oppose? (Remember too that this is exactly what the Romney-Ryan ticket did with the $700 million in Medicare cuts included in the Affordable Care Act.)
In short, the sequester is a disaster, but a potentially worse disaster may lie ahead. There are no good choices here, only less-bad ones, and progressives should be wary about confusing political victory with a policy victory.
By: George Zornick, The Nation, March 1, 2013
“GOP Reversion To Form”: When Did “Tax Reform” Become A Tax Hike?
One of the issues baffling non-conservatives in assessing the latest stage of the fiscal conflict in Washington is that Republicans are treating Democratic demands for loophole-closing on the wealthy exactly like it’s a tax rate increase. That’s odd, since it’s Republicans who have continuously injected loophole-closing–or as they usually call it, “tax reform”–into the debate. For years they’ve discussed it as a possible way to finance a revenue-neutral tax rate cut. Paul Ryan made it (or at least a very vague version of it) central to the math and marketing of his various budget proposals. During most of the 2012 campaign, Mitt Romney touted “tax reform” in the more traditional way, as a magic asterisk that would both limit revenue losses from the tax rate cuts he was proposing, and would also (even less plausibly) prevent his overall plan from changing the distribution of the tax burden. After the election, “tax reform” became part of the package Republicans supported as a “fiscal cliff” measure to maintain all the Bush tax rate cuts.
But Republicans have always been reluctant to talk about tax reform if it’s used for any purpose other than reducing tax rates or avoiding higher tax rates, even though conservative economists tend to support loophole-closing as an efficiency measure worth taking in isolation from rate changes.
So once the battle over tax rates ended (temporarily) with the so-called “fiscal cliff” agreement, Republicans quickly declared not just tax rates but any additional revenues as off-limits in future agreements. So even though you’d think they’d be at least as open to a tax-reform-for-entitlement-reform deal as they were for a tax-rates-for-entitlement-reform deal last year, that has not been the case. It’s tax rates that continue to drive GOP tax policies, even in the absence of any real chance that they will soon be raised or lowered.
Here’s how Jonathan Chait explains what he calls this “reversion to form:”
The answer to this piece of the mystery is clear enough: Republicans in Congress never actually wanted to raise revenue by tax reform. The temporary support for tax reform was just a hand-wavy way of deflecting Obama’s popular campaign plan to expire the Bush tax cuts for the rich. Conservative economists in academia may care about the distinction between marginal tax rates and effective tax rates. But Republicans in Congress just want rich people to pay less, period. I can state this rule confidently because there is literally not a single example since 1990 of any meaningful bloc of Republicans defying it.
What has aided the easy reversion to form, with low taxes for the rich dominating all other considerations, is the pent-up rage and betrayal John Boehner has engendered among his most conservative members. Almost nothing Boehner has done since taking over as speaker has endeared him to his ultras. Every subsequent compromise creates more embitterment, and the last few moves have provoked simmering rage.
Conservatives had to swallow a tax hike, and then swallow an increase in the debt ceiling. Boehner has, incredibly, had to promise his members that he will not enter private negotiations with Obama.
The pressure for confrontation as a method has built up to the point where seemingly no deal Boehner could reach would leave him safe.
So Republicans aren’t open to the tax reforms they’ve supported in the past, or to entitlement reforms they’ve been demanding for years (though this particular issue is complicated by the fact that they only want “entitlement reforms” if they significantly reduce actual benefits; anything else can’t possibly be a “reform”). They have truly painted themselves into a corner this time, and that’s why we are going to have a sequester followed quite possibly by a government shutdown if Democrats resist making the domestic spending part of the sequester permanent.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal. February 26, 2013
