Skip to content
, February 21, 2014

From the Office of Pointless Budget Maneuvering

Are you ready for some pointless threatening of social security benefits? / Cornischong

It’s almost time for President Obama to release his annual budget proposal, and the world couldn’t be more not excited. Because the president’s budget proposal, much like his State of the Union address, is another one of those rituals that means very little in terms of how the congressional agenda plays out. In both cases, the president outlines his priorities, and then Congress . . . does whatever it wants.

Still! It’s always interesting to see where the president’s head is at any given time. And according to early reports, it looks like he’s stopped winking in austerity’s direction, for now. Courtesy of the Washington Post:

With the 2015 budget request, Obama will call for an end to the era of austerity that has dogged much of his presidency and to his efforts to find common ground with Republicans. Instead, the president will focus on pumping new cash into job training, early-childhood education and other programs aimed at bolstering the middle class, providing Democrats with a policy blueprint heading into the midterm elections.

As part of that strategy, Obama will jettison the framework he unveiled last year for a so-called grand bargain that would have raised taxes on the rich and reined in skyrocketing retirement spending. A centerpiece of that framework was a proposal—demanded by GOP leaders—to use a less-generous measure of inflation to calculate Social Security benefits.

Well, that’s nice. But what is this “demanded by GOP leaders” business? The history of the so-called chained consumer price index battle is a touch more complicated. Instead of “demanding” the price index switch, GOP leaders were more accurately demanding Obama’s assumption of this unpopular policy so that they could heckle him over it.

So, about chained CPI. Right now, the cost-of-living adjustments for government benefits are pegged to the consumer price index’s measure of inflation. “Chained” CPI is an alternate measure of inflation that’s been floating around in think tank circles for a while which, according to boosters, more accurately reflects inflation through assumptions about consumer behavior. The extremely annoying and terribly overused example of choice is that when the economy gets bad, people are more likely to buy chicken instead of beef, so chicken is substituted for beef in the index’s basket of goods. The key selling point, though, is that this “more accurate” index just so happens to record a lower rate of inflation than the traditional CPI. By linking benefits to the “chained” version, then, the government over many years would save billions and billions of dollars through the lower COLAs.

This appealed to a certain class of naïve politicians like, say, Barack Obama, who thought they could pass off a benefit cut as, well, a technocratic tweak for the noble purpose of enhancing accuracy! Man oh man, does that not hold up. For one thing, if “accuracy” is the goal, Social Security benefits might as well be tied to a higher rate of inflation, since the costs of things older people tend to spend money on outstrip traditional CPI’s inflation measurement. More generally, though, a switch to chained-CPI from CPI would mean that people would receive fewer benefits than current law projects them to receive. That is the direct definition of a benefit cut.

Chained CPI’s chance came during the December 2012 fiscal cliff negotiations. Democratic negotiators were framing the possible bargain as tax hikes (or, really, an expiration of tax cuts) on the wealthy in exchange for “giving” the Republicans the switch to chained CPI. At the last minute, though, Republicans walked away from chained CPI as their “demand.”

Why? Perhaps because that was never really their demand at all.

Despite the conventional wisdom that Republicans just want to slash away at all entitlement spending willy-nilly, the last thing they want to do is cut benefits for current seniors. You’re smart, reader, so you can understand why: current seniors are the Republican party’s voter base. They don’t want to cut benefits for the very old, very cranky folks who put them into office. It’s still true that cutting (or preferably eliminating!) social insurance programs is the ideological core of the Republican agenda. The way they square this competition between ideology and electoral reality is through things like the Paul Ryan budget: something that does indeed cripple entitlement programs but doesn’t kick in for decades, when present-day younger people (Obama voters!) would be set to receive their sweet, sweet government bennies.

What Republicans were able to do by stringing Obama along with this “demand” and then dropping it at the last minute—just as he was prepared to give it to them—was to scream to the public that Obama wanted to cut their Social Security checks. The classic literature on this subject is a late-December 2012 tweet from Republican Senator Marco Rubio of the infamous old-people state Florida:

It appears that with this latest budget proposal, the Obama administration has come to realize that (a) chained CPI is bullshit and (b) he was being played on it. Good? Good!