Tuesday, December 18, 2012

Grijalva: Problems With Social Security Cuts in Fiscal-Cliff Deal

Posted By on Tue, Dec 18, 2012 at 12:00 PM

Time is running out to make a deal to avert the dreaded "fiscal cliff" by the year's end. (We want to take a moment to emphasize that the fiscal cliff is a terrible metaphor that has way too many people freaked out.)

Congressman Raul Grijalva does not like the details of the latest proposals coming out of the talks between President Barack Obama and Speaker of the House John Boehner. (And, as it turns out, Boehner may not like them, either, even though he's the one negotiating.)

Anyway, here's Grijalva's statement today:

Federal law has always prohibited Social Security from contributing to the deficit. Any talk of shrinking the program to ‘save money’ is flawed from the start because Social Security is not part of the national budget in the same way as military spending—it’s paid for through a dedicated payroll tax separate from general budgeting.

Some have suggested that Social Security benefits should be based on a chained Consumer Price Index (CPI), which assumes that when the price of one item rises, people buy something else—no matter how popular or necessary that original item might be. If this change goes into effect, Social Security benefits would stop reflecting the rising prices of popular goods.

The average Social Security recipient rakes in a whopping $13,000 a year. If we pass chained CPI, projected annual cuts for a typical retiree would be about $560 a year by age 75, $984 a year by age 85 and $1,400 a year by age 95.

The less money our Social Security recipients—including 9 million veterans—are able to spend, the less money goes to the businesses that create jobs. Chained CPI makes life harder for millions of retirees, weakens Social Security and doesn’t reduce the deficit by a penny. It’s a Beltway fig leaf that I will never support, and I call on my colleagues to make their feelings known as soon as possible before this becomes yet another piece of conventional wisdom that makes things worse.

Lifting the cap on high earners paying into Social Security is a real fix that would make the program solvent indefinitely. If we want to talk about solutions, let’s talk about that, not inventing reasons to take money from American retirees.

Meanwhile, Jonathan Chait analyzes what the latest offer on the table means:

President Obama came out with a newer and even more conciliatory bargaining offer to House Republicans yesterday, which on the surface appears to be evidence that a big budget deal may be at hand. Obama is offering to drop his revenue target to $1.2 trillion over a decade and is putting a host of spending cuts on the table, including to-be-determined Medicare cuts and a stingier cost-of-living adjustment method for Social Security. Since this is not Obama’s “final offer,” it stands to reason that any agreement with Boehner will move further right.

So should liberals freak out? Maybe a little — but they’re not freaking out over the right stuff.

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