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Obama's Chained CPI Gamble

Updated on May 29, 2013

President Obama finally released his 2014 budget. In doing do, he becomes the first Democratic president to offer cuts to Social Security in his budget proposal.

Perhaps more importantly, he offers Republican candidates for all eternity, the opportunity to propose taking an axe to social insurance programs "just like Obama did, back in the golden age of reasonable Obama-liberals."

Obama's budget contains a new formula to calculate cost of living increases, with the innocuous enough name of... chained CPI.

Chained CPI was the 11th hour monkey wrench thrown into fiscal cliff negotiations just last December by House Speaker John Boehner. Chained CPI was suddenly the zenith of responsible entitlement restraint.

Now though, House Budget Chair (and honorary P90X spokesperson...) Paul Ryan is relocating the goal posts by suddenly dismissing chained CPI as basic "statistical reform."

Clarifying, "It's no great entitlement reform."

Fair enough...


Obama seems to be working off of the assumption that GOP leadership will remain adherent to the donor-class raison d'etre of insisting upon continued upward wealth-redistribution above all else.

By offering chained CPI, and incurring the outrage of his own base - Obama is showing any moderates left out there that he is the reasonable adult in the room. Obama has realized that republicans cannot take yes for an answer, and will not come around to his extremely moderate budget proposal.

In the immortal words of Jake Taylor in the modern cinema classic, Major League, in response to knowledge of institutional malfeasance & skullduggery at the highest levels -

"I guess there's only one thing left to do. Win the whole f***ing thing."

Obama is obviously going all in on 2014. Dangerous game, that. Voter turnout levels in mid-term elections fall by roughly a third, and disproportionally depresses democratic turnout. 2010 gerrymandering insists that democrats achieve a 7% nationwide advantage in order to flip the House, which would require 17 additional seats. Certainly no cake-walk.

If the past 40 years is to serve as prologue, then we should brace for a raw deal for regular folks in this country.


Just six short months ago, Romney/Ryan were attacking Obama for "raiding" Social Security of $700 billion. Now Ryan is using that same $700 billion in his own budget. After demonizing Obamacare throughout the campaign, Ryan now takes advantage of the revenues in his own budget. This is the age old conservative tactic of insisting that liberals make cuts to social insurance programs, and then blaming and attacking them for doing so.

Greg Walden
Greg Walden | Source

Already, House GOP reelection committee chairman Greg Walden (R-OR) is calling Obama's olive branch a "shocking attack on seniors."

What confounds this humble analyst though, is that Obama is conceding to a false premise. Gutting benefits for the elderly and disabled is not a valid budgetary solution - it's a gimmick.

So what is chained CPI? It is a way of calculating inflation for cost of living purposes. What does it do? It saves $130 billion over ten years - by taking it out of the hide of seniors and disabled veterans. It assumes that as prices for prescription drugs rise, seniors can simply buy generic. If seniors are eating steak today, they can simply switch to chicken - then from tuna fish to cat food. See, it's simple!

Problem with chained CPI is the same problem inherent in raising the retirement age - simply shifting costs onto the elderly is not a valid deficit reduction solution (and the working-poor are not benefiting from elevated life-expectancy rates). Not only is it morally repulsive, it does not address the actual root of the problem.

1958 SSI poster
1958 SSI poster | Source

Conservatives often use their "reform entitlements to save them" meme. However, Social Security cannot add a single red cent to the national debt. This by virtue of having the payroll tax as it's funding source. Saint Ronald Reagan himself notably noted that Social Security has nothing to do with the national debt.

In fact, the federal government owes the Social Security slush fund $1.9 trillion dollars. Social Security is currently solvent at least through 2037.

You want to "save" Social Security? Raise the payroll tax cap from $113,700. Better yet, eliminate the cap altogether. Why should the wealthy get to skip out on paying the rates that everyone else pays? Problem solved.

This brings us to Medicare and Medicaid. Once again, the conservative plan is to shove rising health care costs onto seniors. They have many options, each more sinister than the next.

First is to block-grant Medicaid to states, so conservative governors like Rick Perry can rob the elderly of their earned benefits in federal Medicaid moneys, in a blatantly self-serving ploy to balance their budgets on the backs of seniors.

Then, they would put an end to guaranteed benefits, by turning Medicare into a voucher program. Because that's just what sickly seniors love to do, traipse around town with a coupon bargain-hunting.


You want to strengthen Medicare and Medicaid? Make the Big Pharma negotiate wholesale prescription prices with seniors, rather than forcing seniors to pay retail prices for wholesale drug purchases.

In addition to the simple task of raising the Medicare tax from 1.45%, the biggest and most effective and needed reform is in our health care system. We pay twice what any other nation pays for health care, and we get horrible results. Sure, we have the best hospitals in the world for those who can afford it. But we have unacceptable health care outcomes overall since tens of millions of us simply cannot afford health care. ACA/Obamacare was a start, in that it began to reform the insurance industry - but the heavy lift is in our delivery system. There are models of quality health care systems here in the US, but we need many more examples of those. We have a fee-for-service system, and we do not do preventative care. We do not cure, we treat. Cures are not profitable.

Lastly, conservatives would privatize Social Security. They would take our hard earned benefits, and throw them to the same Wall Street wolves who helped turn guaranteed pensions into 401(k) crap-shoots.

Luckily, the GOP leadership has rejected Obama's latest budget out of hand. Before it was even released, in fact.

Which is great news for the working poor, the disabled, and the elderly.



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