Friday, July 15, 2011

Sealing our fates, Part Two

In all the talk about the “negotiations” over the deficit, amid all the give and take - which really means all the White House give and all the GOPper take - there is a point which has not been made nearly clearly enough:

Barack Obama, PHC* himself, or, as my wife calls him, the Asshole-in-Chief, is talking about trillions of dollars in cuts in domestic spending as part of a "deficit reduction" deal. Contrary to what seems to be the unspoken assumption among too many, including too many who pass as "liberals" or even "progressives" these days, these are not cuts being forced on him either by political opponents or by economic reality. He wants to make these cuts. He wants to cut trillions in domestic spending. He wants to cut Social Security, Medicare, and Medicaid.

How do I know? For one thing, these "discussions" about the debt ceiling didn't just start a few weeks ago. They've been going on since at least February. Across that time, the White House has been doing a "Social Security is on the table no it’s not yes it is no maybe yes no" dance. If it was really "off the table" then it should have been off the table, no maybes, no "we have to look at everything" dodges involved. He was willing to cut so-called entitlements from the start.

The only reason it's not already a done deal is that he also wants some sort of at least symbolic tax increase to go along with it, the better to sell the deal to his own party which likely would break out in open insurrection otherwise and might anyway.

In the last two weeks, this has become just undeniable. On July 6, the Washington Post reported that
President Obama is pressing congressional leaders to consider a far-reaching debt-reduction plan that would force Democrats to accept major changes to Social Security and Medicare in exchange for Republican support for fresh tax revenue. ...

As part of his pitch, Obama is proposing significant reductions in Medicare spending and for the first time is offering to tackle the rising cost of Social Security, according to people in both parties with knowledge of the proposal.
Then on July 10, Treasury Secretary Timothy Geithner said on Meet the Press that Obama is willing to cut Medicare and Medicaid.

If there was any question left about this, it should have been resolved by the news the next day that according to five separate sources with knowledge of negotiations - including both Republicans and Democrats - PHC offered an increase in the eligibility age for Medicare, from 65 to 67, as part of a deal, an offer the White House subsequently confirmed.

The effects of that change would be dramatic:
According to the Kaiser Family Foundation, raising the eligibility age to 67 would cause an estimated net increase of $5.6 billion in out-of-pocket health insurance costs for beneficiaries who would have been otherwise covered by Medicare. Seniors in Medicare Part B would also face a 3 percent premium increase, the study found, since younger and healthier enrollees would be routed out of Medicare and into private insurance. Beneficiaries in health care reform’s exchanges would see a similar spike in premiums with the addition of the older population. Employer retiree health costs would also increase by $4.5 billion.
What’s more, PHC has also proposed as part of a deficit deal a change in the way that inflation is calculated in making Cost of Living Adjustments for Social Security benefits. Instead of using the Consumer Price Index, he would use what’s called "chained-CPI" which supposedly takes account of how people's buying habits change as prices rise - and which by its nature invariably reports a lower inflation rate than the CPI does.

The result of such a change would be what some people have accurately called a "stealth benefit cut." As a result of switching methods, you as a retiree would still get a COLA, but it would be less of an increase than what you would have gotten under the method of calculation used across the history of the system from the 1930s to date, so the effect is hidden - you wouldn’t see the cut.

But it is a benefit cut, even as it is designed to be an invisible one. And since the cut recurs with each COLA, the effect is cumulative so the longer you live, the deeper a cut you see. The Social Security Administration estimates that this change would put an additional 175,000 people into poverty by 2030 and nearly a quarter million by 2050.

If even after all this you still doubt that such cuts are being willingly undertaken, consider that on Monday The Incredible Shrinking O said again he wants the "largest possible deal," one that would include "meaningful changes to Medicare, Social Security and Medicaid."

But amazingly enough, you do still, even now, find among the Obamabots (and even a few pundits) the touching - or maybe pitiful - faith that this is all a game, that the White House is just putting out these proposals because they know the GOPpers won't accept them, that they just are using them as a way to show how intransigent, how unreasonable, the GOPpers are.

I call bullshit and this is why:

Remember that commission PHC appointed to supposedly look for ways to cut the deficit? The one that got dubbed the Cat Food Commission? This was from nearly eighteen months ago, a time when there was no screeching about an imminent "debt ceiling crisis." The people he chose to chair it - Erskine Bowles and Alan Simpson - both were on record calling for cuts in Social Security; Simpson kept claiming that the system was about to go bankrupt. What's more, a majority of the members of the commission - and remember, he chose these people - were likewise advocates of such cuts.

And when in November the co-chairs released their own report because the commission as a whole couldn't reach the required level of agreement on the particulars? What a shock: It called for cuts in Social Security! And it called for them despite acknowledging that the cuts really wouldn't affect the deficit, the issue the Commission was supposed to be addressing.

How can anyone rationally claim that this Commission was not a setup to enable Obama to call for cuts in Social Security? And how can anyone rationally claim that he now has not put entitlement cuts on the table willingly and indeed wants to make the biggest cuts possible as part of his "largest possible deal?"

We just can’t doubt it: Barack Obama is not trying to protect Social Security, he is not trying to protect Medicare, he is not trying to protect Medicaid. He is right in line with the right-wing deficit hawks who think the real problem with our economy is that poor people and the elderly have it too easy.

In his press conference on Monday, PHC said "We have agreed to a series of spending cuts that will make the government leaner, meaner." He got that right - especially the meaner part.

Footnote: The most infuriating part of this is that, as I expect you know, Social Security and Medicare have only a minor impact on the deficit. They are financed out of payroll taxes, not income taxes, and that money is recorded as a separate account.

Both programs have reserves which are now predicted to last by the Trustees of the programs until 2036 in the case of Social Security and 2024 in the case of Medicare, reserves which are invested in government bonds - which actually means that they are helping to finance the deficit. The impact comes in a year when they run a deficit in their own accounts because then they have to redeem some of those bonds, which the general account has to pay out. For Social Security, that shortfall in 2010 was $49 billion - which is less than 3.8% of the $1.3 trillion federal deficit for that year.

By the way, note that those years when the surpluses will be exhausted is without any intelligent changes, such as removing the cap on income subject to the payroll tax for Social Security, now $106,800. Beyond that point, the tax becomes regressive: Earn to the ceiling, you pay 6.2% of your income to the fund. Earn double the amount ($213,600), you pay 3.1%. Earn $1.1 million, you pay just 0.62% of your income toward Social Security.

*PHC = President Hopey-Changey

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