- Even though President Obama included chained-CPI in his FY14 budget proposal, it wasn’t his idea. Chained-CPI – which incrementally reduces Social Security benefits – was first proposed in 2003 by then-Federal Reserve Board Chairman Alan Greenspan as a way of cutting the federal budget deficit. (Read Greenspan’s testimony to Congress here.)
- Almost exactly a year later, Greenspan was back before Congress, arguing that “Congress should make President Bush’s tax cuts permanent and cover the $1 trillion price by trimming future benefits in Social Security and other entitlement programs.”
- The American public has never supported the Bush tax cuts. Just months after the first round of tax cuts was passed, in 2001, a Washington Post poll found that 57% of Americans wanted to roll back the tax cuts in order to preserve the federal budget surplus. (Yes, we had a surplus, back then.)
- The Bush tax cuts primarily benefited the folks at the top of the food chain. The top 1% received more tax benefits than the bottom 80% of taxpayers combined.
- Even Bush’s own economists disavowed the idea that lower taxes improve the economy. Back in 2006: “Even under favorable assumptions, making the tax cuts permanent would have a barely perceptible impact on the economy. Under more realistic assumptions…the tax cuts could even hurt the economy.”
So here we are, 12 years after the public said “repeal the tax cuts”… 10 years after Greenspan suggested using chained-CPI to reduce the budget deficit… nine years after Greenspan explicitly told Congress to choose between tax cuts and Social Security… seven years after Bush economists reported that his tax cuts would likely hurt the economy…
..and there’s a faction of the Congress insisting on even more tax cuts… and Social Security cuts… or they’re going to blow the economy to smithereens.
As you’re watching events unfold in Washington, over the next few weeks, remember this fact, too:
Got the aspirin bottle handy?
In his 2003 testimony to Congress, Greenspan also suggested a third path: increased immigration. “Short of a major increase in immigration, economic growth cannot be safely counted upon to eliminate deficits and the difficult choices that will be required to restore fiscal discipline.”
(But it turns out that that same small faction in Congress doesn’t like immigrants, either.)
Don’t know what the chained-CPI brouhaha is all about? Read the latest report from the National Committee for the Preservation of Social Security and Medicare here.
Here’s how I look at it:
Chained-CPI is a vivid example of the “race to the bottom” that unions have been trying to stop for years. It assumes that when personal finances are tight, consumers will alter their purchasing behavior and buy cheaper products. Then, since they’re spending less, Congress figures they’ll need less money in Social Security benefits.
It’s the image of a senior citizen, trying to make ends meet, who gives up buying beef because she can only afford chicken… and then her Social Security benefit drops, so she gives up chicken and buys tuna… but with the next benefit drop, she can’t afford tuna anymore.
It’s the cat food thing.
(And BTW… given that about 12% of our nation’s jobs are in retail… I gotta wonder about the idea of “solving” a federal fiscal crisis by slowly strangling consumer spending.)