BUCKNACKT'S SORDID TAWDRY BLOG We should not be a journey to the grave with the intention of arriving safely in an attractive & well preserved body, but rather to skid in sideways, chocolate, bier or wein in hand, body thoroughly used up, totally worn out and screaming "WHOO-HOO, WHAT A RIDE!!!!!!"
Showing posts with label fed debt. Show all posts
Showing posts with label fed debt. Show all posts
28 October 2018
11 March 2018
19 December 2013
The Meaning of a Decent Society & Official Trailer for Inequality For All 19DEZ13
AMERICANS have been duped into believing the federal deficit/debt is THE primary threat to our economy. Nothing could be further from the truth. Brutal, cold blooded fiscal austerity is what is holding our economy back, it is destroying the middle class, denying tens of millions of the hope they will be able to provide a decent life for their families and that their children's lives will be better than theirs. There was a time when the austerity propaganda campaign would have been rejected by the American people because we believed in the social contract that made our nation one. But the economic violence of the "great recession" of 2008 (you know, the one we are still in), the relentless harping about the deficit and debt by the mass media and the deceptive political campaigns of too many Democrats, including Pres Obama, have almost succeeded in beating the American people into submission, ready to accept the scraps once the greed of the rich, the military-industrial complex, the rest of corporate America and the bank-financial cabal have been met. We haven't hit rock bottom yet, but we are well on our way. See my earlier post on how austerity, not debt, can destroy a nation at How To Destroy An Entire Country
& How the Defeat of Trade Unionism Gave Rise to Low-Wage Jobs &
Organized labor's decline in the US is well-known. But what drove it?
14&4DEC13 & 4SEP13
http://bucknacktssordidtawdryblog.blogspot.com/2013/12/how-to-destroy-entire-country-how.html
Consider this from Sen Elizabeth Warren (D MA) “Americans are fighters. We're tough, resourceful and creative, and if we have the chance to fight on a level playing field, where everyone pays a fair share and everyone has a real shot, then no one - no one - can stop us. ” and join the fight to take our country back. This is class warfare, and we must begin to fight back. This from HuffPost....
It's the season to show concern for the less fortunate among us. We should also be concerned about the widening gap between the most fortunate and everyone else.
Although it's still possible to win the lottery (your chance of winning $636 million in the recent Mega Millions sweepstakes was one in 259 million), the biggest lottery of all is what family we're born into. Our life chances are now determined to an unprecedented degree by the wealth of our parents.
That's not always been the case. The faith that anyone could move from rags to riches -- with enough guts and gumption, hard work and nose to the grindstone -- was once at the core of the American Dream.
And equal opportunity was the heart of the American creed. Although imperfectly achieved, that ideal eventually propelled us to overcome legalized segregation by race, and to guarantee civil rights. It fueled efforts to improve all our schools and widen access to higher education. It pushed the nation to help the unemployed, raise the minimum wage, and provide pathways to good jobs. Much of this was financed by taxes on the most fortunate.
But for more than three decades we've been going backwards. It's far more difficult today for a child from a poor family to become a middle-class or wealthy adult. Or even for a middle-class child to become wealthy.
The major reason is widening inequality. The longer the ladder, the harder the climb. America is now more unequal that it's been for eighty or more years, with the most unequal distribution of income and wealth of all developed nations. Equal opportunity has become a pipe dream.
Rather than respond with policies to reverse the trend and get us back on the road to equal opportunity and widely-shared prosperity, we've spent much of the last three decades doing the opposite.
Taxes have been cut on the rich, public schools have deteriorated, higher education has become unaffordable for many, safety nets have been shredded, and the minimum wage has been allowed to drop 30 percent below where it was in 1968, adjusted for inflation.
Congress has just passed a tiny bipartisan budget agreement, and the Federal Reserve has decided to wean the economy off artificially low interest rates. Both decisions reflect Washington's (and Wall Street's) assumption that the economy is almost back on track.
But it's not at all back on the track it was on more than three decades ago.
It's certainly not on track for the record 4 million Americans now unemployed for more than six months, or for the unprecedented 20 million American children in poverty (we now have the highest rate of child poverty of all developed nations other than Romania), or for the third of all working Americans whose jobs are now part-time or temporary, or for the majority of Americans whose real wages continue to drop.
How can the economy be back on track when 95 percent of the economic gains since the recovery began in 2009 have gone to the richest 1 percent?
The underlying issue is a moral one: What do we owe one another as members of the same society?
Conservatives answer that question by saying it's a matter of personal choice -- of charitable works, philanthropy, and individual acts of kindness joined in "a thousand points of light."
But that leaves out what we could and should seek to accomplish together as a society. It neglects the organization of our economy, and its social consequences. It minimizes the potential role of democracy in determining the rules of the game, as well as the corruption of democracy by big money. It overlooks our strivings for social justice.
In short, it ducks the meaning of a decent society.
Last month Pope Francis wondered aloud whether "trickle-down theories, which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness," Rush Limbaugh accused the pope of being a Marxist for merely raising the issue.
But the question of how to bring about greater justice and inclusiveness is as American as apple pie. It has animated our efforts for more than a century -- during the Progressive Era, the New Deal, the Great Society, and beyond -- to make capitalism work for the betterment of all rather merely than the enrichment of a few.
The supply-side, trickle-down, market-fundamentalist views that took root in America in the early 1980s got us fundamentally off track.
To get back to the kind of shared prosperity and upward mobility we once considered normal will require another era of fundamental reform, of both our economy and our democracy.
ROBERT B. REICH, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers "Aftershock" and "The Work of Nations." His film, "Inequality for All," will be out in September. He is also a founding editor of the American Prospect magazine and chairman of Common Cause. Watch the trailer for his new film, Inequality for All:
http://www.huffingtonpost.com/robert-reich/the-meaning-of-a-decent-society_b_4473924.html?utm_source=Alert-blogger&utm_medium=email&utm_campaign=Email%2BNotifications
Consider this from Sen Elizabeth Warren (D MA) “Americans are fighters. We're tough, resourceful and creative, and if we have the chance to fight on a level playing field, where everyone pays a fair share and everyone has a real shot, then no one - no one - can stop us. ” and join the fight to take our country back. This is class warfare, and we must begin to fight back. This from HuffPost....
It's the season to show concern for the less fortunate among us. We should also be concerned about the widening gap between the most fortunate and everyone else.
Although it's still possible to win the lottery (your chance of winning $636 million in the recent Mega Millions sweepstakes was one in 259 million), the biggest lottery of all is what family we're born into. Our life chances are now determined to an unprecedented degree by the wealth of our parents.
That's not always been the case. The faith that anyone could move from rags to riches -- with enough guts and gumption, hard work and nose to the grindstone -- was once at the core of the American Dream.
And equal opportunity was the heart of the American creed. Although imperfectly achieved, that ideal eventually propelled us to overcome legalized segregation by race, and to guarantee civil rights. It fueled efforts to improve all our schools and widen access to higher education. It pushed the nation to help the unemployed, raise the minimum wage, and provide pathways to good jobs. Much of this was financed by taxes on the most fortunate.
But for more than three decades we've been going backwards. It's far more difficult today for a child from a poor family to become a middle-class or wealthy adult. Or even for a middle-class child to become wealthy.
The major reason is widening inequality. The longer the ladder, the harder the climb. America is now more unequal that it's been for eighty or more years, with the most unequal distribution of income and wealth of all developed nations. Equal opportunity has become a pipe dream.
Rather than respond with policies to reverse the trend and get us back on the road to equal opportunity and widely-shared prosperity, we've spent much of the last three decades doing the opposite.
Taxes have been cut on the rich, public schools have deteriorated, higher education has become unaffordable for many, safety nets have been shredded, and the minimum wage has been allowed to drop 30 percent below where it was in 1968, adjusted for inflation.
Congress has just passed a tiny bipartisan budget agreement, and the Federal Reserve has decided to wean the economy off artificially low interest rates. Both decisions reflect Washington's (and Wall Street's) assumption that the economy is almost back on track.
But it's not at all back on the track it was on more than three decades ago.
It's certainly not on track for the record 4 million Americans now unemployed for more than six months, or for the unprecedented 20 million American children in poverty (we now have the highest rate of child poverty of all developed nations other than Romania), or for the third of all working Americans whose jobs are now part-time or temporary, or for the majority of Americans whose real wages continue to drop.
How can the economy be back on track when 95 percent of the economic gains since the recovery began in 2009 have gone to the richest 1 percent?
The underlying issue is a moral one: What do we owe one another as members of the same society?
Conservatives answer that question by saying it's a matter of personal choice -- of charitable works, philanthropy, and individual acts of kindness joined in "a thousand points of light."
But that leaves out what we could and should seek to accomplish together as a society. It neglects the organization of our economy, and its social consequences. It minimizes the potential role of democracy in determining the rules of the game, as well as the corruption of democracy by big money. It overlooks our strivings for social justice.
In short, it ducks the meaning of a decent society.
Last month Pope Francis wondered aloud whether "trickle-down theories, which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness," Rush Limbaugh accused the pope of being a Marxist for merely raising the issue.
But the question of how to bring about greater justice and inclusiveness is as American as apple pie. It has animated our efforts for more than a century -- during the Progressive Era, the New Deal, the Great Society, and beyond -- to make capitalism work for the betterment of all rather merely than the enrichment of a few.
The supply-side, trickle-down, market-fundamentalist views that took root in America in the early 1980s got us fundamentally off track.
To get back to the kind of shared prosperity and upward mobility we once considered normal will require another era of fundamental reform, of both our economy and our democracy.
ROBERT B. REICH, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers "Aftershock" and "The Work of Nations." His film, "Inequality for All," will be out in September. He is also a founding editor of the American Prospect magazine and chairman of Common Cause. Watch the trailer for his new film, Inequality for All:
Published on Aug 7, 2013
A passionate argument on behalf of
the middle class, INEQUALITY FOR ALL features Robert Reich—professor,
best-selling author, and Clinton cabinet member—as he demonstrates how
the widening income gap has a devastating impact on the American
economy. The film is an intimate portrait of a man who's overcome a
great deal of personal adversity and whose lifelong goal remains
protecting those who are unable to protect themselves. Through his
singular perspective, Reich explains how the massive consolidation of
wealth by a precious few threatens the viability of the American
workforce and the foundation of democracy itself. In this INCONVENIENT
TRUTH for the economy, Reich uses humor and a wide array of facts to
explain how the issue of economic inequality affects each and every one
of us.
18 December 2013
THE BUDGET DEAL, DEMOCRATS SNATCH DEFEAT FROM THE JAWS OF VICTORY & Senate Approves Budget Deal, Reducing Chances Of A Shutdown 18DEZ13
THIS budget deal is nothing to be proud of, if fact Democrats should be ashamed of abandoning millions of unemployed Americans and caving to the demands for austerity for the 99% from the gop / teabagger minority in the Senate while agreeing to protect the wealth and power of the 1% and the military-industrial complex. Once again these jellyfish democrats have snatched defeat from the jaws of victory. Here is a petition from Credo to the Senate to eliminate the debt ceiling and to stand against further austerity measures when Congress votes on raising the debt ceiling by 15 JAN14. And see How To Destroy An Entire Country & How the Defeat of Trade Unionism Gave Rise to Low-Wage Jobs & Organized labor's decline in the US is well-known. But what drove it? 14&4DEC13 & 4SEP13 http://bucknacktssordidtawdryblog.blogspot.com/2013/12/how-to-destroy-entire-country-how.html
| Tell Senate Democrats: Abolish the debt ceiling | ||
| The petition to Senate Democrats reads:
"The Ryan/Murray budget bill wasn’t a compromise, it was a big win for Republicans who have succeeded in moving the goal posts so far that Democrats voted for a budget that had spending levels below the original Paul Ryan budget. With another debt ceiling showdown on the horizon, Democrats need to go on the offense now and adopt an aggressive strategy in advance of the next set of negotiations. Part of that should be pushing to abolish the debt ceiling, which serves no useful purpose other than to give the Republicans another opportunity to hold us all hostage to their extremist agenda."
Automatically add your name:
| ||
Dear Craig,
The politicos in Washington DC may be hailing this deal as a “compromise” or a good first step. But in fact, it’s a big win for Republicans. Military spending goes up. Unemployment benefits for nearly 1.3 million Americans go away. Incredibly, this budget boasts spending levels lower than the original Paul Ryan budget. How did we get here after the Democrats, led by Senate Majority Harry Reid with strong backing from President Obama, so thoroughly routed Republicans over the government shutdown in October? It comes down to a deeply misguided and bipartisan belief in the myth that, with millions of Americans still suffering through the aftershocks of the economic collapse, what we really need right now is austerity and deficit reduction. This is a budget that is both cruel and counterproductive -- we shouldn’t be limiting government spending to levels below Paul Ryan’s original and heartless budget proposal at a time when government spending is needed to lift us out of the economic slowdown. And if this budget deal wasn’t bad enough, in February we’ll face another showdown over the debt ceiling. You can bet that Republicans will be ready to build on the change of momentum represented by this victory to extract even more concessions from Democrats in exchange for raising the debt ceiling. Tell Democrats: It’s time to go on offense. Stop caving to Republicans and fight to abolish the debt ceiling before the next negotiation over revenues and spending. Click here to automatically sign the petition. The Republicans have now set their sights on the looming need to raise the debt ceiling as their next hostage-taking opportunity. While thankfully the prospect of a grand bargain (a scenario where Democrats accept cuts to Social Security, Medicare or Medicaid benefits in exchange for tax increases) has diminished, far too many Democrats support benefit cuts and many more are failing to adopt the type of aggressive posture that they’ll need to stare down the Republicans. If you want to see what aggressive looks like, look no further than Senate Minority Leader Mitch McConnell. The budget hadn’t even passed before Minority Leader McConnell said he’d use the February must-pass vote to raise the debt ceiling as another opportunity to extract budgetary concessions from Democrats. This is what happens when the pretense of fiscal discipline is used to mask an extremist agenda that amounts to an unwavering commitment to the needs of the top 1 percent. We need the Democrats to unabashedly adopt a posture that aggressively seeks to close loopholes that subsidize corporations and the wealthy and restore the cuts that Republicans have passed in their relentless attacks on vital programs benefiting the poor and the middle class. Time and again, Democrats have compromised with Republican extremists, leading to deeply pernicious results, including the cruel and unconscionable refusal to extend emergency unemployment benefits for millions of Americans set to expire just three days after Christmas. Democrats learned in October that they could win if they went on offense and refused to cave. The best way to bounce back from the recent setback and regain the momentum is for Democrats to set the stage for the next round of negotiations with an aggressive campaign to do away with the debt ceiling and end Republican hostage-taking of our economy. Tell Democrats: Abolish the debt ceiling. Click here to automatically sign the petition. Despite the cries from Republicans about out-of-control government spending, the debt limit doesn't have much at all to do with spending. Instead, the debt ceiling artificially prohibits the government from issuing new debt to pay the bills that are already due based upon previous budgets duly approved by Congress -- including budgets supported by many of the people who used the debt ceiling as an excuse to push their extremist agenda through blatant extortion. While votes to raise the debt ceiling have traditionally been opportunities for members of Congress to grandstand, the severe consequences of not raising the debt ceiling have until recently served to ensure it was increased as a routine matter -- including seven times under George W. Bush. But extremist Republicans -- many of whom voted for the tax giveaways to the wealthiest Americans and the unfunded wars that caused our government deficit to explode -- have now twice tried to used the threat of a government default to hold the entire American economy hostage to their radical demands. The Democrats shouldn’t sit back and let the Republicans do it again. Tell Democrats: The debt ceiling serves no useful purpose other than to give Republicans a hostage and should be abolished. Click the link below to automatically sign the petition: http://act.credoaction.com/go/2959?t=6&akid=9651.179403.qHLFZJ Thank you for speaking out to stop Republican hostage-taking. Matt Lockshin, Campaign Manager CREDO Action from Working Assets
Automatically add your name:
| ||
Senate Approves Budget Deal, Reducing Chances Of A Shutdown
Senate Minority Leader Mitch McConnell
(R-Ky.), walks to the chamber for the final votes on the bipartisan
budget deal on Wednesday.
The vote by a simple majority was absent the partisan brinksmanship that has become a hallmark of budget deals in recent memory. The appropriations committees in both chambers must now set in stone a $1.012 trillion fiscal 2014 spending bill before current spending authority expires. Congress also faces a Jan. 15 deadline to raise the debt ceiling — another potential partisan standoff. Last Thursday, the House voted 332 to 94 to approve the deal, which was hammered out by Republican Paul Ryan and Democrat Patty Murray. outlines the details below: Update at 6:50 p.m. ET. Obama: Budget Deal A 'Good First Step': In a White House statement, President Obama called the budget deal "a good first step away from shortsighted, crisis-driven decision-making that has only served to act as a drag on our economy." "It's a budget that unwinds some of the damaging sequester cuts that have harmed students and seniors and acted as headwinds our businesses had to fight," he said. "It clears a path for critical investments in things like education and research that have always grown our economy and strengthened the middle class. And it will continue to reduce our deficits at a time when we've seen four of the fastest years of deficit reduction since the end of World War II." | ||
| http://www.npr.org/blogs/thetwo-way/2013/12/18/255282288/senate-approves-budget-deal-reducing-chances-of-a-shutdown |
22 October 2013
Stop Republican hostage-taking by abolishing the debt limit The Republican Coup of 2013 22&20OKT13
OUR economy can't take another battle over the debt ceiling, especially when there is nothing in the US Constitution about limiting the national debt. We, the people, don't have to tolerate being held hostage by a minority of right wing extremist in congress who are angry they can't get their way because they don't have enough votes, even among congressional republicans. Sign this petition telling congress to abolish the federal debt limit, and share it with others. This should be passed before the next fiscal battle in JAN 2014. From Daily Kos and Credo..
Craig, join Daily Kos and CREDO in urging Congress to abolish the debt limit. Click here to sign our petition.
Republican hostage-takers came dangerously close to willfully and recklessly driving our economy over a cliff. But it doesn't have to be this way.
America is virtually alone in the developed world in having a debt ceiling, and there’s nothing in the Constitution about it.
We can make sure that Republicans never take our entire economy hostage again by abolishing the debt ceiling. If Republicans want to cut spending, then they can just use the budget process.
Please join Daily Kos and CREDO in signing our petition to Congress: abolish the debt limit.
Keep fighting,
Paul Hogarth, Daily Kos
On April 7, 2009—less than three months after Barack Obama first took the oath of office—the Daily Show's Jon Stewart
perfectly summed up the red-hot, right-wing rage that hasn't cooled
since. "I think," Stewart explained to frothing-at-the-mouth tea party
supporters, "you might be confusing tyranny with losing."
Nevertheless, just days later thousands of the GOP's furious faithful turned out for Tax Day Tea Party rallies, events funded by conservative groups like Americans for Prosperity and FreedomWorks and promoted by Fox News, displaying signs proclaiming "Taxed Enough Already" and "No Taxation without Representation." That was more than a little ironic. After all, President Obama and the newly elected Democratic majorities in the House and Senate had just delivered tax relief for 95 percent of working households with the largest two-year tax cut in American history. And by 2010, federal tax revenue as a percentage of the U.S. economy had plummeted to the lowest level since 1950. So much for the need to water the Tree of Liberty with the blood of patriots and tyrants.
But four-plus years later, the Republicans' scorched-earth strategy is no laughing matter. After spending most of his first term demonizing Barack Obama, conservatives are hell-bent on erasing his agenda reaffirmed by the American people less than a year ago. And as the events of the last few weeks show, many Republicans are more than willing to shutter the U.S. government and destroy the American economy to do it.
Not that Republican leaders hesitated to bring the government to a screeching halt the moment George W. Bush left the Oval Office to "replenish the ol' coffers." The unprecedented campaign of GOP obstructionism which literally began the night of Obama's inauguration quickly shattered the previous mark for filibusters, blocked President Obama's judicial nominations at record rates and even stood in the way of any appointee to head agencies like the Consumer Financial Protection Bureau and the National Labor Relations Board (NLRB).
During most of Obama's first four years in office, another Republican weapon of choice was, as Arizona Republican Jon Kyl's office acknowledged, the talking point "not intended to be a factual statement." Barack Obama isn't a Muslim and wasn't born in Kenya (or any place other than Hawaii). The Bush recession which began in December 2007 did not become the "Obama Bear Market" months before the Democrat even won the election, let alone take the oath of office. Tax cuts don't "pay for themselves" and the 2009 stimulus did not fail to "create a single job" and "make the economy worse." There were (and are) no "death panels. That 2009 Politifact Lie of the Year was succeeded in 2010 by another Affordable Care Act myth, "a government takeover of health care."
But it was on health care reform where the GOP waged—and is still waging—a war to stop President Obama and the Democratic Party at all costs. While Obama pondered this summer why the GOP's "number one priority, the one unifying principle in the Republican Party at the moment is making sure that 30 million people don't have health care," the answer was never a mystery. The health care reform initiative had to be what South Carolina Senator turned Heritage Foundation President Jim Demint in 2009 called "his Waterloo" because the alternative was Waterloo for the Republican Party. As I summed it up in "The Real Reason for the GOP's All-Out War on Obamacare" below:
The debt ceiling of the United States.
Raising the debt ceiling—that is, increasing Uncle Sam's borrowing authority in order to pay bills already incurred—used to be a routine part of governing for both parties. Since 1980, it has been boost 42 times, including on 17 occasions by Ronald Reagan (who tripled the national debt) and seven more by George W. Bush (who nearly doubled the debt again). Mitch McConnell, John Boehner and Eric Cantor voted for all of those debt ceiling hikes. Of course, they had to and not just because the cost of two wars, the Bush tax cuts, the Medicare Part D prescription drug program and TARP added trillions of dollars of red ink during Bush's tenure. There was another reason debt ceiling increases had to be approved, one which Speaker Boehner (along with Rep. Paul Ryan, Sen. Lindsey Graham and other GOP luminaries) acknowledged in 2011:
In other words, the Republicans were seeking a de facto coup d'état by other means. The government the American people twice elected would be defenestrated, not through violence, but by blackmail.
While those and other conditions for raising the debt ceiling would appear, disappear and reappear in the months to come, by the end of the summer, the core demand was set. Led by Heritage Action and its front man Ted Cruz, Republicans would demand the defunding of Obamacare and the delay of its individual mandate as the price for shutting down the government and triggering a sovereign default by the United States. In August, 80 GOP members of Congress signed a letter calling on Speaker Boehner to do just that. Writing in the Wall Street Journal last week, Stephen Moore detailed how the plan laid out by Michael Needham of Heritage Action became the House GOP's battle plan:
And no doubt, Ted Cruz will be back, as will many of the other 17 GOP senators and 144 representatives who voted Wednesday to let the United States default. Some are already threatening to pursue impeachment. But Cruz's opposition to this week's "terrible deal" wasn't because "it does absolutely nothing to provide relief for the millions of Americans who are hurting because of Obamacare." As he recently admitted to Sean Hannity of Fox News, Ted Cruz like so many other Republicans is afraid Americans will like the Affordable Care Act:
http://www.dailykos.com/story/2013/10/20/1248470/-The-Republican-Coup-of-2013?detail=action
Republican hostage-takers came dangerously close to willfully and recklessly driving our economy over a cliff. But it doesn't have to be this way.
America is virtually alone in the developed world in having a debt ceiling, and there’s nothing in the Constitution about it.
We can make sure that Republicans never take our entire economy hostage again by abolishing the debt ceiling. If Republicans want to cut spending, then they can just use the budget process.
Please join Daily Kos and CREDO in signing our petition to Congress: abolish the debt limit.
Keep fighting,
Paul Hogarth, Daily Kos
Sun Oct 20, 2013 at 03:15 PM PDT
The Republican Coup of 2013
Nevertheless, just days later thousands of the GOP's furious faithful turned out for Tax Day Tea Party rallies, events funded by conservative groups like Americans for Prosperity and FreedomWorks and promoted by Fox News, displaying signs proclaiming "Taxed Enough Already" and "No Taxation without Representation." That was more than a little ironic. After all, President Obama and the newly elected Democratic majorities in the House and Senate had just delivered tax relief for 95 percent of working households with the largest two-year tax cut in American history. And by 2010, federal tax revenue as a percentage of the U.S. economy had plummeted to the lowest level since 1950. So much for the need to water the Tree of Liberty with the blood of patriots and tyrants.
But four-plus years later, the Republicans' scorched-earth strategy is no laughing matter. After spending most of his first term demonizing Barack Obama, conservatives are hell-bent on erasing his agenda reaffirmed by the American people less than a year ago. And as the events of the last few weeks show, many Republicans are more than willing to shutter the U.S. government and destroy the American economy to do it.
Not that Republican leaders hesitated to bring the government to a screeching halt the moment George W. Bush left the Oval Office to "replenish the ol' coffers." The unprecedented campaign of GOP obstructionism which literally began the night of Obama's inauguration quickly shattered the previous mark for filibusters, blocked President Obama's judicial nominations at record rates and even stood in the way of any appointee to head agencies like the Consumer Financial Protection Bureau and the National Labor Relations Board (NLRB).
During most of Obama's first four years in office, another Republican weapon of choice was, as Arizona Republican Jon Kyl's office acknowledged, the talking point "not intended to be a factual statement." Barack Obama isn't a Muslim and wasn't born in Kenya (or any place other than Hawaii). The Bush recession which began in December 2007 did not become the "Obama Bear Market" months before the Democrat even won the election, let alone take the oath of office. Tax cuts don't "pay for themselves" and the 2009 stimulus did not fail to "create a single job" and "make the economy worse." There were (and are) no "death panels. That 2009 Politifact Lie of the Year was succeeded in 2010 by another Affordable Care Act myth, "a government takeover of health care."
But it was on health care reform where the GOP waged—and is still waging—a war to stop President Obama and the Democratic Party at all costs. While Obama pondered this summer why the GOP's "number one priority, the one unifying principle in the Republican Party at the moment is making sure that 30 million people don't have health care," the answer was never a mystery. The health care reform initiative had to be what South Carolina Senator turned Heritage Foundation President Jim Demint in 2009 called "his Waterloo" because the alternative was Waterloo for the Republican Party. As I summed it up in "The Real Reason for the GOP's All-Out War on Obamacare" below:
At its core, the Republicans' scorched-earth opposition to Obamacare has never been so much about "freedom" or "limited government" or any other right-wing ideological buzzword as it has been about political power, pure and simple. Now as for the past 20 years, Republicans have feared not that health care reform would fail the American people, but that it would succeed. Along with Social Security and Medicare, successful health care reform would provide the third and final pillar of Americans' social safety net, all brought you by the Democratic Party. To put it another way, the GOP was never really concerned about a "government takeover of health care", "rationing", "the doctor-patient relationship" or mythical "death panels," but that an American public grateful for access to health care could provide Democrats with an enduring majority for years to come.For two decades, Weekly Standard Bill Kristol has been quite clear on that point. Kristol, who in 1993 and 1994 led the Republican effort to undermine Democrat Bill Clinton's health reform plan lest it "revive the reputation of the party... as the generous protector of middle-class interests," told Fox News' Neil Cavuto two weeks after Obama's inauguration the GOP should emulate the roadblock Republicans of the 1990's to halt his economic recovery package first and everything else—most of all health care reform—later:
"But the loss of credibility, even if they jam it through, really hurts them on the next, on the next piece of legislation. Clinton got through his tax increases in '93, it was such a labor and he had to twist so many arms to do it and he became so unpopular... ...That it made, that it made it so much easier to then defeat his health care initiative. So, it's very important for Republicans who think they're going to have to fight later on on health care, fight later on maybe on some of the bank bailout legislation, fight later on on all kinds of issues. It's very important for them, I think, not just to stay united at this time, though that's important, but to make the arguments."In November 2009, Senator Orrin Hatch (R-UT) laid out the stakes for Republicans in an interview with CNS. Hatch, who ironically had co-sponsored an individual mandate bill in 1993, explained in this way:
HATCH: That's their goal. Move people into government that way. Do it in increments. They've actually said it. They've said it out loud. Q: This is a step-by-step approach --The usual suspects among the right-wing think tanks amplified that message. Just days after the 2008 election, Michael Cannon of the Cato Institute insisted, "Blocking Obama's health plan is key to GOP's survival." James Pethokoukis of the American Enterprise Institute similarly warned that the passage of a Democratic health care bill could "kill conservatism." He quoted a Republican strategist who fretted:
HATCH: A step-by-step approach to socialized medicine. And if they get there, of course, you're going to have a very rough time having a two-party system in this country, because almost everybody's going to say, "All we ever were, all we ever are, all we ever hope to be depends on the Democratic Party."
Q: They'll have reduced the American people to dependency on the federal government.
HATCH: Yeah, you got that right. That's their goal. That's what keeps Democrats in power.
"Let me tell you something, if Democrats take the White House and pass a big-government healthcare plan, that's it."But Democrats did take the White House in 2008. And despite conservative fear-mongering and demagoguery, the Patient Protection and Affordable Care Act became the law of the land in March 2010. The right-wing euphoria about the GOP's overwhelming triumph in the November 2010 midterm elections soon dissipated into bitter disappointment. In 2012, President Obama was comfortably re-elected and Democrats retained their Senate majority in a campaign in which health care reform was, after only the economy, the most prominent issue. (While the Democrats' gains were limited in the House, they nevertheless won its popular tally by over a million votes.) Over 40 repeal votes by the House died on arrival in the Senate. With the Supreme Court having upheld the constitutionality of the ACA in June 2012, Republicans were left with only two approaches. First, despite the fact that health care is worst where the GOP does best, Republicans set out to undermine the implementation of Obamacare in almost every state they controlled. And to prevent the Obama administration from implementing the Affordable Care Act nationwide, they targeted the federal government itself with the same weapon they first threatened to detonate in the summer of 2011. That weapon was also nuclear.
The debt ceiling of the United States.
Raising the debt ceiling—that is, increasing Uncle Sam's borrowing authority in order to pay bills already incurred—used to be a routine part of governing for both parties. Since 1980, it has been boost 42 times, including on 17 occasions by Ronald Reagan (who tripled the national debt) and seven more by George W. Bush (who nearly doubled the debt again). Mitch McConnell, John Boehner and Eric Cantor voted for all of those debt ceiling hikes. Of course, they had to and not just because the cost of two wars, the Bush tax cuts, the Medicare Part D prescription drug program and TARP added trillions of dollars of red ink during Bush's tenure. There was another reason debt ceiling increases had to be approved, one which Speaker Boehner (along with Rep. Paul Ryan, Sen. Lindsey Graham and other GOP luminaries) acknowledged in 2011:
"That would be a financial disaster, not only for our country but for the worldwide economy. Remember, the American people on Election Day said, 'we want to cut spending and we want to create jobs.' And you can't create jobs if you default on the federal debt."But in the summer of 2011, House Republicans became the first party with both the votes and the intent to block a debt ceiling increase. They threatened to trigger a global economic cataclysm unless President Obama and his Democratic allies agreed to draconian spending cuts. (That's why former Bush Treasury Secretary Paul O'Neill warned that his GOP allies "who are threatening not to pass the debt ceiling are our version of al Qaeda terrorists [and are] really putting our whole society at risk.") The extortion worked, resulting in the $1.2 trillion, 10-year budget sequester. Speaker Boehner, who crowed "I got 98 percent of what I wanted," wasn't the only Republican leader exulting in the wake of the August 2011 deal they extracted. A gloating Mitch McConnell promised he and his party would be back to blackmail the president again:
"I think some of our members may have thought the default issue was a hostage you might take a chance at shooting. Most of us didn't think that. What we did learn is this -- it's a hostage that's worth ransoming. And it focuses the Congress on something that must be done."Despite triggering a downgrade of the U.S. credit rating by Standard and Poor's and reversing U.S. consumer confidence and job creation, McConnell told CNBC's Lawrence Kudlow just days later that for Republicans, hostage-taking would be the new normal.
"What we have done, Larry, also is set a new template. In the future, any president, this one or another one, when they request us to raise the debt ceiling, it will not be clean anymore. This is just the first step. This, we anticipate, will take us into 2013. Whoever the new president is, is probably going to be asking us to raise the debt ceiling again. Then we will go through the process again and see what we can continue to achieve in connection with these debt ceiling requests of presidents to get our financial house in order."In 2013, the hostage would be Obamacare. But in the weeks and months after Obama's second inauguration, that wasn't the only item on the Republican ransom note. By March 2013, Politico reported, "House GOP leadership is also eyeing several bills to hike the debt cap with different budgetary reforms [which] include increasing the Medicare eligibility age, means testing Medicare and changing the formula for calculating government benefits." By May, another approach "gained significant traction -- and has been ricocheting around K Street and Capitol Hill -- would directly wed increases in the debt ceiling to progress in tax reform." By July, the price went up again as some Republicans began demanding President Obama essentially approve the Paul Ryan budget that had garnered the votes of 95 percent of Congressional Republicans three years running.
In other words, the Republicans were seeking a de facto coup d'état by other means. The government the American people twice elected would be defenestrated, not through violence, but by blackmail.
While those and other conditions for raising the debt ceiling would appear, disappear and reappear in the months to come, by the end of the summer, the core demand was set. Led by Heritage Action and its front man Ted Cruz, Republicans would demand the defunding of Obamacare and the delay of its individual mandate as the price for shutting down the government and triggering a sovereign default by the United States. In August, 80 GOP members of Congress signed a letter calling on Speaker Boehner to do just that. Writing in the Wall Street Journal last week, Stephen Moore detailed how the plan laid out by Michael Needham of Heritage Action became the House GOP's battle plan:
"I really believe we are in a great position right now," says Michael Needham, the 31-year-old president of Heritage Action, the lobbying arm of the nation's largest conservative think tank. By "we" he means the Republican Party and the conservative movement; their "great position" refers to the potential to win the political battle over the government shutdown.As events this week showed, Needham was wrong. The twin threats to render the United States ungovernable and sabotage the U.S. economy boomeranged against the GOP. The American people rightly blamed Republicans for their shuttered government. Sen. Graham acknowledged the role the polls played in the collapse of the GOP's attempt at extortion, lamenting "Of course they had an impact." In defeat, Speaker John Boehner admitted Wednesday he didn't have the nerve to execute the American economy he and his party were holding hostage. (As Newsweek reported, both Fitch and S&P were just hours away from downgrading U.S. credit.) Despite the failure of their coup attempt, Republicans remain unbowed. While Boehner warned that "Our drive to stop the train wreck that is the president's health care law will continue," Louisiana Rep. John Fleming promised "we're going to start this all over again." As for Paul Ryan, the GOP wunderkind turned vice presidential nominee who voted against the deal as well as the Simpson-Bowles deficit commission plan, "compromise" means the adoption of his budget plan ("To break the deadlock, both sides should agree to common-sense reforms of the country's entitlement programs and tax code") the Senate, the president and the American people already rejected.
And no doubt, Ted Cruz will be back, as will many of the other 17 GOP senators and 144 representatives who voted Wednesday to let the United States default. Some are already threatening to pursue impeachment. But Cruz's opposition to this week's "terrible deal" wasn't because "it does absolutely nothing to provide relief for the millions of Americans who are hurting because of Obamacare." As he recently admitted to Sean Hannity of Fox News, Ted Cruz like so many other Republicans is afraid Americans will like the Affordable Care Act:
"If we don't do it (defund Obamacare) now, in all likelihood, Obamacare will never, ever be repealed. Why is that? Because on January 1, the exchanges kick in, the subsidies kick in," and added that "their plan is to get the American people addicted to the sugar, addicted to the subsidies, and once that happens, in all likelihood, it never gets..." "It's over," Hannity cut in, "it never gets repealed."To those Republicans who organized their failed putsch over white wine and single-malt scotch on K Street, President Obama on Thursday had a simple message:
"You don't like a particular policy or a particular president? Then argue for your position. Go out there and win an election. Push to change it," Obama said. "But don't break it. Don't break what our predecessors spent over two centuries building. That's not being faithful to what this country's about."Or as Jon Stewart put it to the tea partiers four years ago, don't confuse tyranny with losing.
29 April 2013
Wonkbook: With sequestration, everyone loses. Even Republicans. 29APR13
FROM Ezra Klein's Wonkbook column in the Washington Post, a really informative look at sequestration. I have to agree with him, with sequestration and the state of politics in Congress and across the nation, we are all losers......
On Friday, I wrote that Democrats have lost the fight to replace sequestration. In agreeing to the FAA fix, they showed that in any case where the political pain caused by sequestration becomes unbearable, they will agree to cancel that particular piece of the bill while leaving the rest of the law untouched. That means their leverage is effectively nil. Game over.
Washington being what it is, Democrats losing on sequestration is taken to mean that Republicans have won on sequestration. But that’s a conceptual error wrapped in a sad commentary about modern-day politics. The sequester isn’t a zero-sum policy, where one side wins and the other side loses. It’s a negative-sum policy. Its persistence means both political parties lose. As does the rest of the country.
That, of course, was the whole point of the sequester. It was meant to be such terrible policy that neither side would permit it to go into effect. Back then, House Speaker John Boehner called the cuts “devastating,” and promised they’d never go into effect. “Devastating” was also the wordchosen by Rep. Paul Ryan.
But after losing the 2012 election, Republicans executed an impressive tactical reversal on sequestration. Aware that the fiscal cliff was a loser and the debt ceiling would be a disaster, Boehner began working to persuade his members that the sequester represented their real opportunity.
“The Republicans’ stronger card, Mr. Boehner believes, will be the automatic spending sequester trigger that trims all discretionary programs--defense and domestic,” reported the Wall Street Journal after an interview with the Speaker. “It now appears that the president made a severe political miscalculation when he came up with the sequester idea in 2011.”
This was a backflip on the high beam. And Boehner pulled it off. House Republicans went from running against the sequester to defending it as preferable to any possible compromise. Any remaining dissension dissipated under the sheer partisan glee Republicans felt watching Democrats rage impotently against the policy. Washington is a town where one party only believes it’s winning if the other party believes it’s losing. And so, as Democrats began acting like they were losing, Republicans became all the more convinced they were winning — and they dug in deeper.
But from a policy perspective, Republicans are losing right alongside Democrats.
Republicans wanted entitlement cuts. They’re not getting them. They wanted to protect defense spending. Instead, the Pentagon is getting gutted while Medicare and Social Security are left mostly untouched. They had an eye towards tax reform. Nuh-uh.
Sequestration also includes one huge, but little-noticed, downside for the deficit-conscious Republicans. As any good budget wonk knows, our debt problems are much worse in the coming decades than in this decade. But most deficit-reduction policies save much more money in the second decade than in the first. Chained-CPI, for instance, cuts Social Security benefits by a bit more than $100 billion in this decade, but by hundreds of billions in the next decade (my own note here, chained-cpi is not good for Social Security or for the nation. Find more on just how evil this proposal is by doing a search on this blog for post on chained cpi and / or Social Security). The White House’s proposals to further means-test Medicare save tens of billions in the first decade, but around $200 billion in the second decade.
As Marc Goldwein of the Committee for a Responsible Federal Budget points out, sequestration ends after 10 years. It just shuts off. So rather than putting deficit-reduction policies in place now that will grow later, sequestration puts policies in place now that will vanish later. So where a bigger budget deal would start slowly to protect the economy and then ramp up as our debt problems worsen, sequestration will start fast, hurting the economy, and then disappear as our debt problems are entering a more critical phase.
This is, for Republicans, a win only insofar as Democrats feel it a loss. But that’s a very narrow and depressing definition of what it means to “win.” Sequestration was built to punish both parties, as well as the voters who support them. If left in place, it will do its job. Republicans may feel like they’re winning. But really, we’re all losing.
Wonkbook’s Number of the Day: 1.2 percent. That’s the year-over-year change in the personal consumption expenditure price index, which the Fed uses as the basis for its 2-percent annual inflation target. Significantly below-target inflation may keep the Fed in a more accommodative mood in the coming months. More below.
Wonkblog’s Graph of the Day: Ideas have consequences, in one graph: The effects of divergent fiscal and monetary policies.
Wonkbook’s Top 5 Stories: 1) a politics, and public policy, that thinks beyond austerity; 2) racial wealth disparities widen; 3) gun control tries to reboot; 4) the unglamorous way to save money on Medicare; and 5) an overview of the White House Correspondents Dinner.
1) Top story: Austerity is dead. Long live austerity.
Democrats ask: What debt crisis? “[T]hen there are the other Democrats -- the ones who reject the entire premise of the current high-stakes fiscal fight. There's no short-term deficit problem, they say, and there isn't even an urgent debt crisis that requires immediate attention…[A]ided by a pile of recent data suggesting the deficit is already shrinking significantly and current spending cuts are slowing the economy, more Democrats such as Virginia Sen. Tim Kaine and Maryland Rep. Chris Van Hollen are coming around to the point of view that fiscal austerity, in all its forms, is more the problem than the solution.” Ben White and Tarini Parti in Politico.
…And the GOP is stepping away from entitlement reform and towards a tax overhaul. “With another fight over the national debt brewing this summer, congressional Republicans are de-emphasizing their demand for politically painful cuts to retirement programs and focusing on a more popular prize: a thorough rewrite of the U.S. tax code. Reining in spending on Social Security and Medicare remains an important policy goal for the GOP. But House leaders launched a series of meetings last week aimed at convincing rank-and-file lawmakers that tax reform is both wise policy and good politics and should be their top priority heading into talks with Democrats over the need to raise the federal debt limit.” Lori Montgomery in The Washington Post.
@tylercowen: Still way too many tweets and posts not facing up to how much the “austerity” debate, esp. in Europe, is really about distribution.
Defense cuts pose economic quandary for liberals. “Liberals are increasingly facing a conundrum as the Pentagon experiences the deepest cuts in a generation: The significant reductions in military spending that they have long sought are also taking a huge bite out of economic growth. Liberal lawmakers and others on the left have argued for years that the military budget is bloated and should be dramatically scaled back. At the same time, they have been major advocates of government spending to help drive economic growth and create jobs.” Zachary A. Goldfarb in The Washington Post.
…And at the Pentagon, the need for furloughs varies. “The Navy has said it can make the cuts needed without furloughs, while the Army thinks the war in Afghanistan and other priorities make it nearly impossible to make the cuts without furloughs. The Pentagon, focused on maintaining rough consistency in furloughs across the department, is trying to figure out how to balance the services' varied perspectives.” Steve Vogel in The Washington Post.
@ryanavent: Funny thing is, austerity impact in Q1 was supposed to be payroll tax, but PCE is ok. Sequester in Q2 and beyond. What to expect from that?
How austerity, a bad economic idea, won over the West. “[A] modified form of the austerity that has characterized policymaking in Europe since 2010 is coming to the United States as well; the only questions are how big the hit will end up being and who will bear the brunt. What makes all this so absurd is that the European experience has shown yet again why joining the austerity club is exactly the wrong thing for a struggling economy to do.” Mark Blyth in Foreign Affairs.
@Neil_Irwin: Another steep decline in government spending, off 8.4%, including 11.5% defense spending drop. Looks like austerity is the culprit.
Debate: Chris Giles and Robin Harding, economic writers for The Financial Times, argue over the merits of austerity in depressed economies.
KLEIN: Reinhart and Rogoff aren’t the problem. The Republican Party is. “The real debate right now is with a Republican Party that won't permit any more stimulus, won't permit any more deficit reduction if it includes tax revenues, and won't even permit the federal government to make it easier for people to refinance their homes. That's a position that often gets called "austerity," and so cloaks itself in the work of more serious deficit hawks, but it's actually something very different, and much less coherent. And it's not the position of Reinhart and Rogoff, or Krugman, or even Joe Scarborough. In fact, it's not even obviously bridgeable with the positions of Reinhart, Rogoff and Krugman.” Ezra Klein in The Washington Post.
DIONNE: The economic whodunit. “The policy mystery of our time is why politicians in the United States and across much of the democratic world are so obsessed with deficits, when their primary mission ought to be bringing down high and debilitating rates of unemployment…[D]eficits don't really matter to many of the ideological conservatives shouting so loudly about them now. Their central goal is to hack away at government.” E.J. Dionne in The Washington Post.
KRUGMAN: The austerity narrative unravels. “Those of us who have spent years arguing against premature fiscal austerity have just had a good two weeks. Academic studies that supposedly justified austerity have lost credibility; hard-liners in the European Commission and elsewhere have softened their rhetoric. The tone of the conversation has definitely changed.” Paul Krugman in The New York Times.
EICHENGREEN: Central bank easing isn’t a currency war. It’s stimulus. “The BoJ and Fed were criticised for unleashing a torrent of capital flows into emerging markets. Now, in contrast, officials in other countries, while still less than fully comfortable about the consequences, realise that they would be even worse off had the Fed and the BoJ responded to them.” Barry Eichengreen in The Financial Times.
STEVENSON AND WOLFERS: Refereeing the Reinhart-Rogoff debate. “Lost in all this sound and fury is the real question that we should be debating: Is it appropriate to infer that high debt is driving slower growth, and hence governments need to take greater care before taking on debt? Or is lower GDP growth, or perhaps some other factor, the reason that debt burdens rise? If the observed correlations reflect the latter reason (and there are hints that it may), then the whole exercise has little relevance to public policy.”Betsey Stevenson and Justin Wolfers in Bloomberg.
MCNABB: Costs of uncertainty. “Our economists at Vanguard isolated changes in the U.S. economy that we determined were specifically due to increases in policy uncertainty…This gave us a picture of what the economy might look like if the shocks from policy uncertainty had not occurred. We estimate that since 2011 the rise in overall policy uncertainty has created a $261 billion cumulative drag on the economy…Without this uncertainty tax, real U.S. GDP could have grown an average 3% per year since 2011…In addition, the U.S. labor market would have added roughly 45,000 more jobs per month over the past two years. That adds up to more than one million jobs that we could have had by now, but don’t.” Bill McNabb in The Wall Street Journal.
Music recommendations interlude: Jesse Cook, “Havana.”
Top op-eds
BOWLES AND SIMPSON: We still want a grand bargain. “While the president's budget represents a significant step forward, it does not go as far as necessary to keep our debt declining as a percent of our economy…The plan we propose would achieve $2.5 trillion in deficit reduction through 2023, replacing the immediate, mindless cuts of the sequester with smarter, more gradual deficit reduction that would avoid disrupting a fragile economic recovery while putting the debt on a clear downward path relative to the economy over the next 10 years and beyond. Importantly, the plan would achieve this deficit reduction while respecting the principles and priorities of both parties.” Erskine Bowles and Alan Simpson in The Washington Post.
JOHNSON: Brown-Vitter remakes reform battlefield. “[S]mall banks are increasingly focused on the ways megabanks have achieved an unfair competitive advantage — primarily through implicit government subsidies. The most compelling voice at the forum last week was Terry Jorde, a senior executive vice president of the Independent Community Bankers of America. She made clear that small banks are being undermined by the reckless behavior of megabanks that are seen as "too big to fail.”" Simon Johnson inBloomberg.
REARDON: No rich child left behind. “What is news is that in the United States over the last few decades these differences in educational success between high- and lower-income students have grown substantially. One way to see this is to look at the scores of rich and poor students on standardized math and reading tests over the last 50 years. When I did this using information from a dozen large national studies conducted between 1960 and 2010, I found that the rich-poor gap in test scores is about 40 percent larger now than it was 30 years ago.” Sean F. Reardon in The New York Times.
LUCE: The age of impasse. “Barack Obama has not yet clocked up 100 days - he hits that milestone on Wednesday. Yet there is already an air of resignation about how the next four years are likely to play out. A large share of it comes from the realisation that the Republican party is not for turning after all.” Edward Luce in The Financial Times.
SHARKEY: The urban fire next time. “For the past several years all the ingredients have been in place for an urban crisis. Unemployment has hovered above 15 percent in many of our most distressed cities. High-poverty neighborhoods have spread beyond cities and into the suburbs. The housing collapse has left large sections of communities boarded up. And yet our cities have been relatively quiet…The question is, what comes next, now that the stimulus is over? A historical perspective on urban policy reveals a cycle in which periods of major investment are followed by periods of neglect, disinvestment and decline. This pattern is in the process of repeating.” Patrick Sharkey in The New York Times.
Super nerdy economics humor interlude: “Daron Acemoglu once tried to make a regression table. But his computer ran out of asterisks.”
2) Racial wealth disparity widens
Tame inflation means continued Fed easing. “Federal Reserve officials are likely to continue their easy-money policies at the central bank’s policy meeting on Tuesday and Wednesday, in part because several recent inflation measures have fallen well below the Fed’s 2% target…The Commerce Department reported Friday that its personal consumption expenditure price index--one of the Fed’s favored measures of consumer price inflation--was up 1.2% in the first quarter from a year earlier, well below the central bank’s target.” Jon Hilsenrath in The Wall Street Journal.
It’s Bernanke versus austerity. “We rarely get to see a major, nationwide economic experiment at work, but so far 2013 has been one of those experiments -- specifically, an experiment to try and do exactly what Beckworth and Ponnuru proposed. If you look at macroeconomic policy since last fall, there have been two big moves. The Federal Reserve has committed to much bolder action in adopting the Evans Rule and QE3. At the same time, the country has entered a period of fiscal austerity. Was the Fed action enough to offset the contraction? It's still very early, and economists will probably debate this for a generation, but, especially after the stagnating GDP report yesterday, it looks as though fiscal policy is the winner.” Milke Konczal in The Washington Post.
Explainer: Economic data for the week ahead. Amrita Jayakumar in The Washington Post.
Obama finalizes economic-policy roster. “Barack Obama has cemented the elevation of trade in his second-term agenda with the expected appointment of his top White House adviser on the global economy as the new US trade representative. Michael Froman, 50, who had initially been expected to stay on as Mr Obama's chief adviser for international economic affairs in the White House, will take over a significantly expanded trade agenda as the USTR.” Richard McGregor in The Financial Times.
Wealth gap between races has widened since the recession. “As of 2010, white families, on average, earned about $2 for every $1 that black and Hispanic families earned, a ratio that has remained roughly constant for the last 30 years. But when it comes to wealth -- as measured by assets, like cash savings, homes and retirement accounts, minus debts, like mortgages and credit card balances -- white families have far outpaced black and Hispanic ones. Before the recession, non-Hispanic white families, on average, were about four times as wealthy as nonwhite families, according to the Urban Institute's analysis of Federal Reserve data. By 2010, whites were about six times as wealthy.” Annie Lowrey in The New York Times.
Report: Hidden overseas accounts quietly rising to surface. “The Internal Revenue Service has recouped more than $5.5 billion under a series of programs that offered reduced penalties and no jail time to people who voluntarily disclosed assets they were hiding overseas, government investigators said Friday. In all, more than 39,000 tax cheats have come clean under the programs. Government investigators suspect that thousands of other taxpayers have quietly started reporting foreign accounts without paying any penalties or interest. The number of people reporting foreign accounts to the IRS nearly doubled from 2007 to 2010, to 516,000 accounts, a report by the Government Accountability Office said.” Stephen Ohlemacher in The Washington Post.
…And nations take a hard look at tax competition. “Across the world, the ability of multinationals to exploit cracks in the international tax system has ignited intense anger from an austerity-weary public…There has been a blurring of the distinctions between tax havens and larger industrialised countries that use fiscal measures as a source of competitive advantage to secure investment, jobs and revenues.” Vanessa Houlder in The Financial Times.
Measuring GDP is an art, not a science. “The change was long planned - changing anything in the national accounts takes a lot of planning - and reflects an international agreement in 2008. But the sudden appearance of an extra $500bn or so of GDP, an extra Belgium, understandably makes people a little queasy. The revisions are a reminder that while GDP may be the universal measure of economic success, like Olympic gold medals in sport, it is a mutable and arbitrary indicator. Nor is it the only way to measure economic output.” Robin Harding in The Financial Times.
12 April 2013
The President's Social Security Plan Is a Really, Really Bad Idea & THE CHAINED CPI: A PAINFUL CUT IN SOCIAL SECURITY BENEFITS AND A STEALTH TAX HIKE 11APR13&DEZ 2012
PRES Obama and officials from his administration continue to lie to the American people concerning Social Security, the program's viability, and the non-existent relationship between the federal debt and federal deficit and Social Security. His crass campaign is morally repugnant and puts him on par with the gop and tea-baggers in Congress, resorting to deception, manipulation, misrepresentation, fueling fear of economic hardship to achieve his political agenda of protecting the wealth and power of the rich and corporate America. President Obama was reelected with a mandate from the people to end the class warfare on the 99% and restore the social contract of the nation. Sadly, we are just now finding out how morally weak he is, that he too has been bankrupted by the politics of Washington, bought out by those with the money to buy even our highest elected officials to get their way. We do not have to support him, to "have his back" as the e mails from the White House and Democratic organizations request. He has turned his back on us. As I have posted before, Democracy is not a spectator sport. To protect Social Security, defeat chained cpi and protect the integrity of Medicare and Medicaid we need to contact our Representative http://www.house.gov/representatives/find/ and Senators http://www.senate.gov/general/contact_information/senators_cfm.cfm and demand they vote against any and all legislation containing chained cpi and cutting the funding and benefits of Medicare and Medicaid. From HuffPost....
Issue Brief December 2012
* Alan Barber is the Domestic Communications Director at the Center for Economic and Policy Research in
Washington, D.C. Nicole Woo is Director of Domestic Policy at CEPR.
The Chained CPI: A Painful Cut in Social Security Benefits and a Stealth Tax Hike
In the debate over federal budget deficits, several politicians have proposed to change the formulas that determine benefit levels for Social Security and other government programs as well as income tax brackets. Switching to a relatively new formula, the Chained CPI, would help the federal government save money by slowing increases in benefits and raising additional tax revenue.
Proponents of this proposal argue that the Chained CPI is a more accurate formula and any impact on beneficiaries of the government programs affected would be mitigated by increased tax revenue from the wealthy. However, research and data effectively refute those arguments by showing that:
1) Switching to the Chained CPI would result in cuts to already modest Social Security benefits.
2) It is likely that the Chained CPI is not an accurate measure of the inflation rate seen by seniors.
3) The Chained CPI would lead to income tax increases for working Americans.
Measuring Inflation
The Bureau of Labor Statistics (BLS) calculates the consumer price indexes (CPIs) to gauge inflation by measuring changes in the prices of goods and services that Americans purchase each month. In addition to being the basis for annual adjustments in benefits for government programs, changes in income tax brackets and deductions are also pegged to CPIs. Different indexes are used for different purposes. The CPI-U is used for income tax bracket calculation, while the CPI-W has been used to determine the yearly change in benefits for Social Security to keep pace with inflation since 1975.1
Some policy makers now want to change to the Chained CPI, which shows a lower rate of inflation than the currently-used CPIs. This index measures the price of a basket of goods that changes in response to the relative price shifts of different goods as opposed to the CPIs, which remain fixed over time. An example of this would be a rise in the price of chicken leading people to buy less chicken and more cheese. The Chained CPI would then place a higher weight on the cheese component of its index and a lower weight on the chicken component. In essence, it substitutes in items with less rapid increases in price for items that have more rapid rises in price thereby causing it show a lower overall rate of inflation.
The Chained CPI Would Result in Benefit Cuts for Retirees and Other Vulnerable
Americans
Social Security benefits are already quite modest. In 2012, the average annual benefit for
beneficiaries aged 65 and older was less than $15,000.2 Any additional reduction of benefits would
have serious repercussions for retirees, 2-out-of-5 of whom rely on Social Security for 90 percent of
their retirement income.
The Chained CPI is relatively new and has only been calculated by the BLS since 2002. It has shown
a rate of inflation 0.3 percent lower than the current index used to calculate Social Security’s annual
cost-of-living adjustment. Over time, changing to the Chained CPI would result in significant cuts to
Social Security benefits: a cut of roughly 3 percent after 10 years, about 6 percent after 20 years, and
close to 9 percent after 30 years. In addition, lower-income retirees would lose much larger
proportions of their income than wealthy ones.3
As shown in Figure 1, if the switch to the Chained CPI had been made in 2001, the reduction in
benefits would have effectively wiped out the entire 2012 Social Security cost-of-living adjustment.4
Switching to the Chained CPI immediately would have a more significant impact on the retirement
income of seniors than the ending the Bush-era tax cuts would have on the after-tax income of the
wealthiest 2 percent of households. For the average worker retiring at age 65, this would mean a cut
of about $650 each year by age 75 and a cut of roughly $1,130 each year at age 85.5 These reductions
in benefits would be a substantial hardship for millions of retired and disabled Americans.
Switching to the Chained CPI would also directly affect many other vulnerable Americans. Many federal assistance programs rely on the CPI to determine eligibility for benefits. Just as the elderly would see their benefits cut by shifting to the Chained CPI, so would veterans, low-income children, the disabled, and others who are more likely to rely on government programs.
Accurately Calculating Cost-of-Living Adjustments for the Elderly
It is important to note that while some claim the Chained CPI more accurately calculates inflation, this is likely not the case for seniors, who would be directly affected by using the Chained CPI to calculate Social Security’s cost-of-living adjustments. The Bureau of Labor Statistics has found that seniors spend proportionally more of their income on medical care and housing, which in addition to rising more rapidly than most other costs, are also much harder to substitute with other products. This research suggests that a CPI based on living costs of the elderly would actually show a higher, not lower, rate of inflation. The BLS has constructed an experimental elderly index (CPI-E) that takes these factors into account, and it shows a rate of inflation that averages 0.3 percentage points higher than the CPI currently in use.6
In addition, there are fewer opportunities for substitution in these areas of consumption. Also, because the elderly are a less mobile population, they may find it more difficult to change their consumption patterns. If accuracy is the main concern to be addressed by altering the Social Security cost-of-living adjustment, then the BLS could construct a full elderly index that more accurately tracks the consumption patterns of the elderly. There is no basis for assuming that a Chained CPI more accurately measures the rate of inflation experienced by the elderly than the current measure, however there is no doubt that it will lead to a reduction in benefits.
Some proponents of the Chained CPI argue that workers would respond to a reduction in Social Security benefits either by working later into life or saving more for retirement. In fact, in the 1990s there were a series of methodological changes to the CPI that reduced the measured rate of annual inflation by 0.5-0.7 percentage points. If the workers responded as argued, we would expect that non-Social Security income would be a larger portion of total income for beneficiaries in their mid-70s now (and therefore would have mostly been receiving the lower cost-of-living adjustment for a decade) than before the CPI was changed. However, the data shows the opposite: the share of Social Security in retirement income increased rather than decreased in the vast majority of cases.7 This indicates that most workers did not save more to make up for lower Social Security benefits in order to counteract the CPI reduction. This is further proof that switching to the Chained CPI would lead to lower retirement incomes for elderly Americans.
This is of particular note as the rise in the retirement age has already resulted in a decrease in benefits relative to lifetime earnings. The full-benefits retirement age increased from 65 to 66 between 2003 and 2008, and it is scheduled to rise further to 67 from 2017 to 2022. These retirement age increases are cuts in benefits, since beneficiaries have to work more years before receiving them. Early retirees who begin collecting benefits at 62 between the years 2005-2016 are already seeing a decrease in benefits relative to lifetime earnings of 5 percentage points. For those retiring at 62 after 2022, when the retirement age reaches 67, the decrease in benefits will be 10 percentage points. Figure 2, below, illustrates the benefit cuts for these retirees as a result of the prior CPI changes and the scheduled increases in the eligibility age for full benefits.8 Adopting the Chained CPI would mean additional benefit cuts, further eroding the retirement security of Social Security beneficiaries.
A Stealth Tax Increase on the Middle Class
The Chained CPI would also effectively raise taxes on virtually all working Americans, especially middle and lower income families. By applying it to all government programs, including the annual adjustment in income tax brackets, the Chained CPI would cause those thresholds to rise more slowly than they do now. That would lead to incomes jumping up to higher tax brackets faster, or in other words, income tax increases.
According to Congress’ Joint Committee on Taxation, if individual income taxes were indexed to the Chained CPI starting in January 2013, by 2021, 69 percent of the gains in revenue would come from taxpayers with incomes below $100,000, while those in the highest income brackets would barely be affected. For example, workers with incomes between $10,000 and $20,000 would experience an increased tax burden of 14.5 percent, while those with incomes over $1,000,000 would just see an increase of 0.1 percent. 9 This contradicts the idea that the negative effects from benefit cuts due to a switch to the Chained CPI would be offset by increased revenue from the wealthy.
1 Social Security is indexed to the CPI-W (an index that tracks the consumption patterns of wage and clerical workers), while tax brackets and most other programs are indexed to the CPI-U (an index that tracks the consumption patterns of all urban households).
2 Social Security Administration. 2012. “Monthly Statistical Snapshot, October 2012. ”http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot
3 Baker, Dean and David Rosnick. 2010 “The Impact of Social Security Cuts on Retiree Income.” Washington, DC: Center for Economic and Policy Research. http://www.cepr.net/index.php/publications/reports/the-impact-of-social-security-cuts-on-retiree-income
4 CEPR Graphic Economics. 2011. “Eleven Years Under Chained CPI Would Effectively Wipe Out the 2012 COLA.” October 19. http://www.cepr.net/index.php/graphic-economics/graphic-economics/eleven-years-under-chained-cpi-would-effectively-wipe-out-the-2012-cola
5 Calculations based on 2012 Trustees report (http://www.ssa.gov/oact/tr/2012/index.html) if change is made from CPI-U to Chained CPI in January of 2013.
6 Stewart, Kenneth J. and Joseph Pavalone. 1996. “Attachment F: Experimental CPI for Americans 62 Years of Age and Older.” Washington, DC: Bureau of Labor Statistics. http://www.bls.gov/news.release/cpi.br12396.a06.htm
7 Baker, Dean and David Rosnick. 2011. “The Impact of Cutting Social Security Cost of Living Adjustments on the Living Standards of the Elderly.” Washington, DC: Center for Economic and Policy Research. http://www.cepr.net/index.php/publications/reports/impact-of-cutting-ss-cola-on-living-standards-of-elderly
8 Ibid.
9 Barthold, Thomas A. 2011. “Memorandum: Revenue Estimate and Distributional Analysis.” Congress of the United States, Joint Committee on Taxation. June 29. http://democrats.waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/media/pdf/112/6-29ResponseChainedCPI.pdf
http://www.scribd.com/doc/116575690/The-Chained-CPI-A-Painful-Cut-in-Social-Security-Benefits-and-a-Stealth-Tax-Hike
Yesterday, the president released his 2014 budgetand, among some solid line items like additional infrastructure spending, universal preschool and reductions in tax breaks for Big Oil, he also proposed the truly stupid idea of linking Social Security cost-of-living-adjustments (COLAs) to something called "chained CPI" (chained consumer price index).
Briefly put, Social Security benefits are routinely hiked by a few percentage points each year based on inflation. Lately, those bumps have been scarce and more than a little weak, but adjustments based on chained CPI would be even weaker because the government would presume that as retail prices increase with inflation seniors will substitute lower-cost items. In other words, the government currently calculates benefits based on inflation, but with chained CPI, the government would calculate benefits based on an assumed consumerreaction to inflation (buying cheaper stuff). Consequently, Social Security benefits would be reduced to follow this assumption.
Yeah, it sucks. And the president, while attempting to play the role of the grown-up in the room and apparently taking responsible steps toward deficit reduction and Social Security salvation, is only managing to wrap his entire presidency around the big political third rail. It's not as huge as George W. Bush's second-term embrace of Social Security tinkering, but it's a bad move.
Not only is the idea a punitive one for seniors, but the president is also fueling a series of inside-D.C. myths. They are:
1) Social Security is broke! IEEE! This might, in fact, be biggest D.C. myth of all D.C. myths. It originated with Republican concern trolls who pretend to care about Social Security but, in reality, are trying to kill it. The strategy is to weaken it to the point of being unpopular and unsalvageable -- ripe for a private takeover or total shutdown. And so we get this on-going panic-button freakout that echoes through the complacent false equivalence press corp, and is ultimately fueled by Democrats like the president. But according to the Social Security trustees, the program will be capable of paying full benefits based on the current COLA formula for the next 20 years. Actually, the outlook is even better than that: the trustees also reported that Social Security will run asurplus until 2033. Can you imagine if any program in the federal government was projected to run a surplus for even half of that time? Budget hawks would crap their cages demanding immediate action to give back the taxpayers' money by slashing the program to the line. Furthermore, once 2033 rolls around, Social Security will be capable of paying 75 to 80 percent of total benefits in 2033 money, which, accounting for inflation, is more than Social Security recipients receive today.
2) We have to tinker with Social Security because of the deficit. Whenever deficit hawks suffer from one of these routine fits of apoplexy, they always manage to loop Social Security, Medicare and Medicaid cuts into the mix, along with cuts to minor spending areas like foreign aid. Put another way, a gaggle of super-wealthy politicians and pundits who will never really need Social Security are always way, way, waaaay too eager to dump these programs onto the chopping block. In a budget crisis that's ginned up by multi-millionaires, we should demand that they get in line first -- cut programs and spending on areas that effect the wealthiest Americans, including corporations, before anyone else is forced to pitch in.
3) We have to cut the deficit or else! Total nonsense. The deficit has dropped by nearly 48 percent(as a percentage of GDP). From the high water mark of $1.4 trillion in 2009, the deficit has steadily decreased to a projected $845 billion by the end of this year. The CBO projects that by the end of 2016, the deficit will have dropped to $433 billion, for a total of nearly a trillion dollars in deficit reduction in six years. But the economic recovery is still slow. Now isn't the time to be making further drastic cuts in government spending, and by continuing to talk about deficit reduction, the president only amplifies the false perception that the deficit is growing -- along with all of the usual idiotic conflation of the deficit and the national debt.
4) Raising the payroll tax rate or lifting the income cap is out of the question! The president is already widely accused of being a big tax-hiker by Republican opponents, so another two or three percent hike in the payroll tax (the FICA tax found on your paycheck stub) probably wouldn't make much of a difference on that front, nor would proposing that the income cap on the payroll tax rise from $113,000 to, say, $200,000 or higher. But I'm not sure I've ever heard anyone from the White House even hint at floating such a plan. Personally, I would entirely eliminate the income cap, which would allow Social Security to pay full benefits until 2087, but I'm clearly a tax-loving Euro-socialist. You know, like Ronald Reagan:
In 1983, for example, [Reagan] signed off on Social Security reform legislation that, among other things, accelerated an increase in the payroll tax rate, required that higher-income beneficiaries pay income tax on part of their benefits, and required the self-employed to pay the full payroll tax rate, rather than just the portion normally paid by employees.
Obviously in today's political climate, Reagan would've failed.
But here's the good news. Naturally we ought to keep a close eye on anyone who meddles with the program, but I seriously doubt the chained CPI proposal will pass. Any real plan to reinforce the stability of Social Security will happen gradually, imperceptibly and in private without a lot of hoopla. That's the reality of Social Security sausage-making. It's the way it's always been because the alternative is to commit political suicide -- the most recent example was Bush's disastrous privatization scheme in 2005.
So why not go for a plan like the one I outlined in item #4, or -- shocker -- the Reagan plan instead of floating this weird, jargony concept that's already been tagged as a benefit cut, the worst of all solutions? It's baffling, and it's impossible to defend the president on this one. Any upside, real or unreal, of being viewed as "the grownup in the room" will be far outweighed by supporting a cut in Social Security benefits. And now when Future Republican President X wants to slash benefits, he or she only needs to point to the prior endorsement of President Obama. Sadly, and irrespective of any political chess gambit he's setting up, he's contributing to this nefarious Social Security "insolvency" panic-mongering: a total myth and perhaps the biggest lie being foisted upon the American people today.
Cross-posted at The Daily Banter.
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BobCesca.com Blog with special thanks to William White.
Subscribe to the uncensored and totally raw Bob & Chez Show After Party podcast.
Issue Brief December 2012
* Alan Barber is the Domestic Communications Director at the Center for Economic and Policy Research in
Washington, D.C. Nicole Woo is Director of Domestic Policy at CEPR.
The Chained CPI: A Painful Cut in Social Security Benefits and a Stealth Tax Hike
In the debate over federal budget deficits, several politicians have proposed to change the formulas that determine benefit levels for Social Security and other government programs as well as income tax brackets. Switching to a relatively new formula, the Chained CPI, would help the federal government save money by slowing increases in benefits and raising additional tax revenue.
Proponents of this proposal argue that the Chained CPI is a more accurate formula and any impact on beneficiaries of the government programs affected would be mitigated by increased tax revenue from the wealthy. However, research and data effectively refute those arguments by showing that:
1) Switching to the Chained CPI would result in cuts to already modest Social Security benefits.
2) It is likely that the Chained CPI is not an accurate measure of the inflation rate seen by seniors.
3) The Chained CPI would lead to income tax increases for working Americans.
Measuring Inflation
The Bureau of Labor Statistics (BLS) calculates the consumer price indexes (CPIs) to gauge inflation by measuring changes in the prices of goods and services that Americans purchase each month. In addition to being the basis for annual adjustments in benefits for government programs, changes in income tax brackets and deductions are also pegged to CPIs. Different indexes are used for different purposes. The CPI-U is used for income tax bracket calculation, while the CPI-W has been used to determine the yearly change in benefits for Social Security to keep pace with inflation since 1975.1
Some policy makers now want to change to the Chained CPI, which shows a lower rate of inflation than the currently-used CPIs. This index measures the price of a basket of goods that changes in response to the relative price shifts of different goods as opposed to the CPIs, which remain fixed over time. An example of this would be a rise in the price of chicken leading people to buy less chicken and more cheese. The Chained CPI would then place a higher weight on the cheese component of its index and a lower weight on the chicken component. In essence, it substitutes in items with less rapid increases in price for items that have more rapid rises in price thereby causing it show a lower overall rate of inflation.
The Chained CPI Would Result in Benefit Cuts for Retirees and Other Vulnerable
Americans
Social Security benefits are already quite modest. In 2012, the average annual benefit for
beneficiaries aged 65 and older was less than $15,000.2 Any additional reduction of benefits would
have serious repercussions for retirees, 2-out-of-5 of whom rely on Social Security for 90 percent of
their retirement income.
The Chained CPI is relatively new and has only been calculated by the BLS since 2002. It has shown
a rate of inflation 0.3 percent lower than the current index used to calculate Social Security’s annual
cost-of-living adjustment. Over time, changing to the Chained CPI would result in significant cuts to
Social Security benefits: a cut of roughly 3 percent after 10 years, about 6 percent after 20 years, and
close to 9 percent after 30 years. In addition, lower-income retirees would lose much larger
proportions of their income than wealthy ones.3
As shown in Figure 1, if the switch to the Chained CPI had been made in 2001, the reduction in
benefits would have effectively wiped out the entire 2012 Social Security cost-of-living adjustment.4
Switching to the Chained CPI immediately would have a more significant impact on the retirement
income of seniors than the ending the Bush-era tax cuts would have on the after-tax income of the
wealthiest 2 percent of households. For the average worker retiring at age 65, this would mean a cut
of about $650 each year by age 75 and a cut of roughly $1,130 each year at age 85.5 These reductions
in benefits would be a substantial hardship for millions of retired and disabled Americans.
Switching to the Chained CPI would also directly affect many other vulnerable Americans. Many federal assistance programs rely on the CPI to determine eligibility for benefits. Just as the elderly would see their benefits cut by shifting to the Chained CPI, so would veterans, low-income children, the disabled, and others who are more likely to rely on government programs.
Accurately Calculating Cost-of-Living Adjustments for the Elderly
It is important to note that while some claim the Chained CPI more accurately calculates inflation, this is likely not the case for seniors, who would be directly affected by using the Chained CPI to calculate Social Security’s cost-of-living adjustments. The Bureau of Labor Statistics has found that seniors spend proportionally more of their income on medical care and housing, which in addition to rising more rapidly than most other costs, are also much harder to substitute with other products. This research suggests that a CPI based on living costs of the elderly would actually show a higher, not lower, rate of inflation. The BLS has constructed an experimental elderly index (CPI-E) that takes these factors into account, and it shows a rate of inflation that averages 0.3 percentage points higher than the CPI currently in use.6
In addition, there are fewer opportunities for substitution in these areas of consumption. Also, because the elderly are a less mobile population, they may find it more difficult to change their consumption patterns. If accuracy is the main concern to be addressed by altering the Social Security cost-of-living adjustment, then the BLS could construct a full elderly index that more accurately tracks the consumption patterns of the elderly. There is no basis for assuming that a Chained CPI more accurately measures the rate of inflation experienced by the elderly than the current measure, however there is no doubt that it will lead to a reduction in benefits.
Some proponents of the Chained CPI argue that workers would respond to a reduction in Social Security benefits either by working later into life or saving more for retirement. In fact, in the 1990s there were a series of methodological changes to the CPI that reduced the measured rate of annual inflation by 0.5-0.7 percentage points. If the workers responded as argued, we would expect that non-Social Security income would be a larger portion of total income for beneficiaries in their mid-70s now (and therefore would have mostly been receiving the lower cost-of-living adjustment for a decade) than before the CPI was changed. However, the data shows the opposite: the share of Social Security in retirement income increased rather than decreased in the vast majority of cases.7 This indicates that most workers did not save more to make up for lower Social Security benefits in order to counteract the CPI reduction. This is further proof that switching to the Chained CPI would lead to lower retirement incomes for elderly Americans.
This is of particular note as the rise in the retirement age has already resulted in a decrease in benefits relative to lifetime earnings. The full-benefits retirement age increased from 65 to 66 between 2003 and 2008, and it is scheduled to rise further to 67 from 2017 to 2022. These retirement age increases are cuts in benefits, since beneficiaries have to work more years before receiving them. Early retirees who begin collecting benefits at 62 between the years 2005-2016 are already seeing a decrease in benefits relative to lifetime earnings of 5 percentage points. For those retiring at 62 after 2022, when the retirement age reaches 67, the decrease in benefits will be 10 percentage points. Figure 2, below, illustrates the benefit cuts for these retirees as a result of the prior CPI changes and the scheduled increases in the eligibility age for full benefits.8 Adopting the Chained CPI would mean additional benefit cuts, further eroding the retirement security of Social Security beneficiaries.
A Stealth Tax Increase on the Middle Class
The Chained CPI would also effectively raise taxes on virtually all working Americans, especially middle and lower income families. By applying it to all government programs, including the annual adjustment in income tax brackets, the Chained CPI would cause those thresholds to rise more slowly than they do now. That would lead to incomes jumping up to higher tax brackets faster, or in other words, income tax increases.
According to Congress’ Joint Committee on Taxation, if individual income taxes were indexed to the Chained CPI starting in January 2013, by 2021, 69 percent of the gains in revenue would come from taxpayers with incomes below $100,000, while those in the highest income brackets would barely be affected. For example, workers with incomes between $10,000 and $20,000 would experience an increased tax burden of 14.5 percent, while those with incomes over $1,000,000 would just see an increase of 0.1 percent. 9 This contradicts the idea that the negative effects from benefit cuts due to a switch to the Chained CPI would be offset by increased revenue from the wealthy.
1 Social Security is indexed to the CPI-W (an index that tracks the consumption patterns of wage and clerical workers), while tax brackets and most other programs are indexed to the CPI-U (an index that tracks the consumption patterns of all urban households).
2 Social Security Administration. 2012. “Monthly Statistical Snapshot, October 2012. ”http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot
3 Baker, Dean and David Rosnick. 2010 “The Impact of Social Security Cuts on Retiree Income.” Washington, DC: Center for Economic and Policy Research. http://www.cepr.net/index.php/publications/reports/the-impact-of-social-security-cuts-on-retiree-income
4 CEPR Graphic Economics. 2011. “Eleven Years Under Chained CPI Would Effectively Wipe Out the 2012 COLA.” October 19. http://www.cepr.net/index.php/graphic-economics/graphic-economics/eleven-years-under-chained-cpi-would-effectively-wipe-out-the-2012-cola
5 Calculations based on 2012 Trustees report (http://www.ssa.gov/oact/tr/2012/index.html) if change is made from CPI-U to Chained CPI in January of 2013.
6 Stewart, Kenneth J. and Joseph Pavalone. 1996. “Attachment F: Experimental CPI for Americans 62 Years of Age and Older.” Washington, DC: Bureau of Labor Statistics. http://www.bls.gov/news.release/cpi.br12396.a06.htm
7 Baker, Dean and David Rosnick. 2011. “The Impact of Cutting Social Security Cost of Living Adjustments on the Living Standards of the Elderly.” Washington, DC: Center for Economic and Policy Research. http://www.cepr.net/index.php/publications/reports/impact-of-cutting-ss-cola-on-living-standards-of-elderly
8 Ibid.
9 Barthold, Thomas A. 2011. “Memorandum: Revenue Estimate and Distributional Analysis.” Congress of the United States, Joint Committee on Taxation. June 29. http://democrats.waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/media/pdf/112/6-29ResponseChainedCPI.pdf
http://www.scribd.com/doc/116575690/The-Chained-CPI-A-Painful-Cut-in-Social-Security-Benefits-and-a-Stealth-Tax-Hike
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