Friday, April 5, 2013

(Save Us from the) Ball and Chain

So Barack Obama is including chained CPI in his budget.

I've generally defended Obama when he's charged with "bargaining with himself" and other accusations of lousy poker playing, but not on this one.

I agree with the liberal conventional wisdom on it: Obama isn't really going to win over the deficit scolds, and if he does, so what? Meanwhile, he's not going to get any closer to a grand bargain that Republicans simply don't want, while he's undercutting congressional Democrats by opening them up to the likely attacks that it's Democrats who are proposing to cut Social Security benefits.

About the best one can say for it is what Jonathan Chait says: this isn't really news, and so it's hard to say anything now about this budget that one wouldn't be saying already about the White House's fiscal cliff offer, which was already on full view at the White House web site.

But I think Chait is wrong. The budget is usually the president's opening offer in the budget game. If over the course of the year and in negotiations he eventually makes a compromise offer, that's fine -- but we're now in a new game, in a new budget year, and even with a new (and more Democratic) Congress. The best budget move at this point would be to reiterate his opening move, not to restate his compromise offer. And even if that wasn't true in the abstract and back in January when he was supposed to have submitted this budget (and, yes, there's no excuse for it being this late), we know by now that House Republicans have certainly treated their budget as an opening move -- or, really, as more of a pie-in-the-sky wish list.

Basically: there's nothing wrong with submitting a budget that's "realistic" rather than "ideal." I have no problem with that. If Obama's idea budget was the Congressional Progressive Caucus budget (and I don't know that it is, but if it was) then it still might be a good idea for him to submit the Senate Democratic budget -- a non-ideal budget he would nevertheless be reasonably happy to live under. A good idea both in terms of spin, and even in terms of bargaining; a wildly overoptimistic opening bid can sink negotiations, after all. But it sure makes a lot more sense to start negotiations -- and again, Paul Ryan has clearly indicated that for House Republicans budgets are negotiation-starters -- with "here's my bid, but I'm open to compromise" than with "here's my compromise offer, but remember that there's stuff in here that I don't really support except in the context of a compromise."

The only caveats I have is that maybe the White House is working with information the rest of us don't have...but really, I find it far more likely that the White House is fooling itself and engaging in wishful thinking.

9 comments:

  1. The only possible upside here is that it draws out any notable Republicans to argue for even greater SS or Medicare cuts now that Obama has been the first to prominently raise the issue (at least more prominently than he had in the past). Then Obama and the Democrats can turn around and slam the Republicans for callousness. So is it a strategy to draw Republicans out?

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  2. We need to make changes to SS to protect its long term solvency, so why not do some of it now? I don't get too fussed that the President is taking some steps now.

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  3. And a progressive response to that is that the changes need to be on the revenue side, and on the top end of payout distribution.

    Modern media of all types have no sense of history, much of the Social Security system's supposed "problem" arises because of FDR's determination that SS be structured as an insurance program, not a welfare program. Everyone contributed according to income, however payouts are also determined by income, in other words, people who were making top wages also got top payouts. I worked in the back room of a bank in the old days, people who contributed at top levels got monthly checks for $3000/4000 -- back in the seventies! -- far more than today's minimum wage workers are getting from their jobs now. And contributions stopped after your first $106,000 or something a year, a level that "worked" when I was growing up but is far too low now.

    So increase the cap, and re-arrange the payouts so people who retire with incomes in the 20 to 60 thousand range get better payouts, while those above that level get scaled back. If the cap goes to $200 grand income a year, that person shouldn't get much more than the person who retired at $100 grand/yr. And introduce a "donut hole" on the revenue side: no additional payouts for those earning in the $200 grand to #1 million income range, but over $1 million/yr. income you get to pay an additional 1% of that income into a special social security tax that brings revenue to the system -- to your relatives and neighbors and fellow Americans -- but does not entitle you to any additional payout.

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    1. You hit the nail on the head. Do we want an insurance program or a welfare program. I'd prefer SS to be an insurance program. If I put in twice as much as somebody else, I think I deserve twice the benefit. And as somebody who earns above the current cap, I'd be happy if the cap was raised, but again as long as my future benefit was close to being commensurate with my contribution.

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    2. Bob, You're right. If you raise the cap (a bad idea), and limit benefits, you've essentially changed the program from an insurance to a welfare program. This would only give Republicans more leverage in getting rid of the program. Dale Coberly and Bruce Webb at Angry Bear have done extensive research and analysis on what's needed to "fix" SSI. By Coberly's estimates it would take about 90 cents per week from employee/employer to make the system solvent for another 50-60 years. Obama has bought into the notion that the system is broken and is part of the deficit problem. (It isn't). This is just another example of the President sticking his finger in the eye of his progressive/liberal base. Much like the way Republicans used to treat their evangelical base. Progressives and liberals are going to have to take some advice from FDR when it come to backing off this misguided position: "Make me do it."

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    3. I think we get caught up in terminology. You say it isn't "broken". Call it whatever you want, it needs fixing. Just read the Trustees report, which I would consider a non-partisan source.

      As to whether it's part of the deficit, the CBO shows it both ways. Plus there is no lock-box, so in order to fund those unfunded liabilities the Treasury needs to finance it sometime in the future. It's nice now that rates are low, but what happens if rates rise dramatically and the Treasury needs to raise large amounts of high interest rate debt to fund Social Security payouts?

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  4. If you missed 2010, just wait for 2014. Democrats will be the ones who have to retrench.

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    1. A boastful threat with no rationale. In other words, a pile of worthless words.

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  5. At this point, the President has to know there's no chance Republicans of any stripe will accept his proposed budget. It follows that his proposal has another aim.

    Should establishment/Old School Republicans take any part of his budget as grounds for negotiation, what is the most probable reaction of the Tea Party/Neolibertarian wing?

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