Some progressives are still bending over backward to whitewash the chained CPI — a Social Security cut that President Obama has offered Republicans in the past and remains on the table for the next fiscal deal. It is important to know the arguments these progressives are making and why they do not hold water.
I recently debated one such progressive chained Consumer Price Index (CPI) apologist — Spandan Chakrabarti, publisher of The People’s View — on Take Action News with David Shuster. We are debating all things fiscal deal again this Saturday at 1:45 p.m. ET via video stream on TakeActionNews.com.
Watch our debate on YouTube in two parts below. You can subscribe to Take Action News with David Shuster on YouTube for free clips from every show.
Part 1: Marans v. Chakrabarti — Chained CPI/Social Security
Here are Spandan’s three main arguments for the chained CPI Social Security cut and why he is wrong:
Chained CPI is not a benefit cut. Spandan made the strained argument that chained CPI is not a benefit cut, since Social Security benefits will continue to grow with a cost-of-living adjustment (COLA) under the change. Growing at a slower rate, he said, does not constitute an actual “benefit cut.”
This is faulty logic. Any benefit amount that is less than currently scheduled is a cut in scheduled benefits. If the reduced benefits continue to grow, then that may be an argument that the cuts are tolerable — but not an argument that they are not real cuts.
Further, the COLA does not increase benefits, but rather maintains their purchasing power, preventing them from eroding due to inflation. Even if you consider the chained CPI a more accurate measure of the “cost of living” for the seniors and people with disabilities who rely on Social Security than the current COLA formula, it diminishes the purchasing power of benefits scheduled under current law, effectively cutting them. After all, the cost of living rises at a slower rate under the chained CPI not because the current CPI-W miscalculates prices, but because it assumes that consumers will substitute for cheaper products as prices go up. The classic example is that as the price of beef goes up, you will increase the amount of chicken you buy proportionally. This leaves you unable to afford products you could once afford with your Social Security benefits, representing a reduction in the purchasing power of your benefits — in short, a cut.
Rather than admit that the chained CPI is a benefit cut and defend it on the merits, Spandan changed the baseline from scheduled benefits to payable benefits if Social Security’s projected shortfall were allowed to take effect. In this imaginary doomsday scenario, scheduled benefits would be automatically cut by 25 percent across the board. As a result, by moving the program toward solvency, the chained CPI’s 3 percent cut over 10 years would actually represent a partial benefit increase.
But as I said during the debate, Spandan’s assumptions were alarmist. Social Security has faced far more imminent shortfalls in the past, notably in 1983, and Congress has never failed to act to close them. It is ridiculous to measure benefit cuts against a baseline that assumes an extremely unlikely possibility will occur. What is more, Spandan’s policy priorities were straight out of the austerity playbook. In effect, he said: “To avoid cutting benefits later, cut benefits now.” How about just avoiding cuts altogether?
The Affordable Care Act’s reduction in out-of-pocket health care costs makes the chained CPI okay. To his credit, Spandan acknowledged the reality of health care costs for seniors. We agreed that since health care costs make up nearly three times as much of seniors’ and people with disabilities’ expenses as those of adults under age 65, seniors and people with disabilities would be at pains to practice the price substitution envisioned under the chained CPI. It is much harder to substitute bypass surgery with a hernia operation than it is to eat more chicken and less beef. The cost of living for these vulnerable populations would rise faster than the chained CPI, making it less accurate than the current COLA.
Instead, Spandan argued that the Affordable Care Act’s reduction in out-of-pocket costs for Medicare beneficiaries sufficiently offset the chained CPI’s relative inaccuracy for seniors enough to make the chained CPI an acceptable policy compromise.
While it is true that Medicare beneficiaries’ absolute costs may be projected to decline under the Affordable Care Act, health care as a share of seniors’ expenses would remain high relative to the rest of the population. Thus, even if absolute health care costs were lower, seniors would still have trouble substituting for cheaper medical goods and services as the chained CPI expects them to.
In addition, the long-term effects of the Affordable Care Act on health care costs are yet unknown and depend on successful confrontation of powerful special interests, while the effects of the chained CPI are clear and pre-determined. Medicare Part B premiums, for example, which are deducted from Social Security checks automatically before they even get to beneficiaries, continue to rise rapidly, consuming one-quarter of the COLA in 2013. If progressives are really committed to the health and well being of our seniors, one out of three of whom rely on Social Security for 90 percent of their income, we cannot risk enacting policies that will leave them worse off than they are now. Rather than relying on the promise of future health care cost reduction to justify cutting Social Security, we should only even consider the former, once we have achieved the latter.
Benefit cuts are politically inevitable so we are better off doing them under Obama. Spandan conceded that if he had his druthers, he would close Social Security’s funding gap by making millionaires and billionaires pay the same rate as average Americans. (Currently, since earnings subject to the payroll tax are capped at $113,700, someone earning $1 million only pays 0.5 percent of their earnings into the program.) He said he was open to benefit cuts mostly because he wants to reform Social Security sooner than later, and to do so while we have a Democratic president, so the deal won’t be as bad.
Here we have a disagreement about tactics. First, agreeing to benefit cuts because they are “inevitable” makes their inevitability self-fulfilling. A lot can change in a few short years. Who would have thought in 2004 that President Barack Obama would be signing the Affordable Care Act just six years later?
Second, I would not assume that a Democratic president ensures that we’ll get a better deal. It was actually much easier to defeat Bush’s privatization plan in 2005, than it has been to protect Social Security from cuts under President Obama. Republicans are more likely to overreach and unite Democratic opposition against them.
Finally, if we wait a few years, we will likely be able to reform Social Security in a more progressive way. As we get further away from the Great Recession, the strength of the austerity hawks will diminish, and the potential for a new progressive coalition to take hold will grow stronger. In the 2008 and 2012 elections, we saw the political awakening of the millennial generation, a cohort more politically liberal than any since the 1960s and more ethnically diverse than any in our country’s history. It will not be easy, but if millennials can build an intergenerational bridge with enough of the aging Baby Boomers in a fight for the future of Social Security and Medicare, we will be glad we waited.
Part 2: Marans v. Chakrabarti — Chained CPI/Social Security
About the Author (Author Profile)
Daniel Marans is Executive PRoducer of Take Action News with David Shuster.