Obama’s Budget: A Bad Bargain

When President Obama unveiled his 2014 budget this morning, the worst-kept secret of the past few months finally became official: The president proposes moving to the chained Consumer Price Index (CPI) as a means of calculating cost-of-living adjustments (COLA) to Social Security. Apparently the Administration hopes that dealing away earned benefits Americans rely on will lead to a ​“Grand Bargain” and settle recurring fiscal battles like the debt ceiling, the fiscal cliff and the sequester. But our organization, Progressive Democrats of America (PDA), and most Americans, believe that Social Security benefits should increase — not decrease.

The White House dismisses COLA cuts as ​“technical changes,” but the president knows better. In 2008, candidate Obama accused his opponent, John McCain, of planning to ​“cut cost-of-living adjustments or raise the retirement age” for Social Security, and vowed that he would do neither. He also said, ​“When you look at how we should approach Social Security, I believe that cutting the benefits is not the right answer. I meet too many seniors across the country who are struggling with the limited Social Security benefits that they have.” Candidate Obama was right; President Obama is wrong.

Social Security doesn’t add to the deficit, and shouldn’t be part of this discussion. As demonstrated by the misery in Europe, austerity doesn’t solve economic problems — it exacerbates them. Cutting COLAs would impose burdens on millions of Americans who fall further behind each month. When their money runs out, they skip meals, skip paying bills, and ​“borrow” money from family and friends they know they’ll never pay back. These Americans earned complete support from Social Security by paying into the program every working day of their lives. They do not deserve these cuts.

Congressional Progressive Caucus (CPC) Co-Chairs Reps. Raúl Grijalva and Keith Ellison issued a statement explaining, ​“One hundred seven Members of the House of Representatives, a majority of the Democratic Caucus, have already stated our vigorous opposition to cutting Social Security, Medicare, or Medicaid benefits.” Progressives in Congress could block the cuts, but it’s going to take a movement to turn back austerity hysteria.

PDA is working to build that movement, urging Congress to stand up against President Obama’s budget proposal through our Educate Congress Campaign. For several weeks, we’ve been pressuring Congress members to sign the letter drafted by CPC Members Reps. Alan Grayson (D-Fl.) and Mark Takano (D-Calif.) that states: ​“We will vote against any and every cut to Medicare, Medicaid, or Social Security benefits — including raising the retirement age or cutting the cost of living adjustments that our constituents earned and need.” So far, about 30 members of Congress have signed the Grayson / Takano pledge.

In an interview with the Washington Post, Rep. Grijalva explained, ​“I’ve made the commitment that if [Chained CPI] is part of it, I will not vote for it.” However, it’s not clear how many will join him. As Rep. Grijalva recounted, ​“We’ve been through this before with the public option. The motivation will be there to close ranks and support the president.”

Indeed, for progressives, President Obama’s about-face feels like déjà vu. In 2008, then-Senator Obama criticized Hillary Clinton’s health care plan for lacking a public option and including a mandate. Then, as President, he handed over policy-making to Senators who started by taking the single-payer option — publicly financed, privately administered health care — off the table. We ended up with Romneycare. Once again, the President is turning his back on the base, caving in to Congressional right-wingers and corporate special interests.

President Obama’s position on the chained CPI is particularly appalling because benefit cuts won’t even make a real dent in the budget deficit. Writing for Bloomberg, Peter Orszag reports that ​“over the next decade, the effect on the deficit of adopting the chained index would be less than $150 billion.” David Nather of Politico estimates only $130 billion. The CPC’s ​“Back to Work Budget,” meanwhile, would have eliminated the deficit by closing loopholes, shifting money from weapons to jobs creation, and taxing carbon and financial speculation (aka the Robin Hood Tax).

A sales tax on the financial speculation that caused the Great Recession — as proposed in Rep. Ellison’s Inclusive Prosperity Act—would raise up to $350 billion, more than 20 times the estimated value of chained CPI. It would also stabilize financial markets by squeezing tiny profits out of lightning trades that inflate bubbles and benefit insiders. While speculation taxes were in effect in the U.S. (1914−1966), real GDP growth surged 350% per capita. Many nations have or are implementing this policy.

Rather than back these proven-effective policies, the President is pushing a ​“Bad Bargain.” PDA will join National Nurses United (NNU) April 20 in D.C. demonstrating against austerity and for the Robin Hood Tax, building the movement to make real progress.