As of today, Sargent seems to have made his choice, or assumed a collective one for "liberals":
The Monica Lewinsky scandal may have helped save Social Security in the late 1990s. Now the scandal fever currently gripping Washington — IRS, Benghazi, Associated Press phone records — may save Social Security and Medicare two decades later.Save Social Security? From Obama's chained-CPI proposal, which by slowing cost-of-living increases would reduce payments from the current baseline by about 0.3% per year, with offsets for the very elderly? Save Medicare? From Obama's $400 billion/10 year grab bag of nips and tucks, little different from those proposed in his 2013 budget, the most notable difference being larger (but still quite incremental) premium hikes for wealthy seniors than those proposed in 2013?
Liberals who are dreading the scandal-mania that is taking hold should note that it contains a potential upside: It could make a Grand Bargain that includes cuts to Medicare and Social Security benefits even less likely than it already is.
I don't get this taboo, this sense that Democrats will have crossed some fundamental Rubicon if they swap some of the Draconian cuts to discretionary spending locked in by the sequester with these shavings off Medicare and Social Security. Such cuts, if enacted, should prove no more of a watershed for Democrats than the $600 billion in tax hikes over ten years did for Republicans when they agreed to those hikes under duress at the fiscal cliff's edge.
Conversely, I don't get this resigned relief at settling comfortably into the sequester strait jacket -- which, as Sargent and his like-minded ilk have driven home, will cause intense present pain -- rent subsidies cut off, children thrown off Head Start, federally funded clinics closed or reducing service -- and long-term damage to essential national investments in medical research, renewable energy, Head Start, Title 1 funding for low income school districts, student loans, infrastructure, etc. etc.
In an ideal (or less insane) political environment, I would not favor using chained-CPI to shore up Social Security's financing; I would prefer raising the cap on income subject to the payroll tax. But I do think that that mild benefit reduction is a price worth paying to enable replacement of worse cuts to discretionary spending already enacted. It's also a price worth paying as part of a bargain that would get federal revenue another step closer to where it needs to be -- replacing maybe a third instead of a sixth of the revenue lost by the (mainly preserved) Bush tax cuts.
Perhaps the "liberals" Sargent speaks for fear that Obama would negotiate a bad bargain. But that battle is already more or less lost. He has signed off on $2.5--$3 trillion in spending cuts over ten years, depending on how you count, balanced by just $600-700 billion in new revenue. A "bad" grand bargain would add $300-600 billion in new revenue and partially replace some discretionary spending cuts with the entitlement cuts discussed above. In other words, unless you assume that Obama would negotiate really fundamental changes to Social Security and Medicare far beyond those proposed in his budget, or unless you cling to a taboo that deems entitlement cuts inherently more abhorrent than cuts to domestic discretionary spending, a grand bargain can't be any worse than the bargain already enacted in agonizing piecemeal from 2011 to the present.
In any case, two larger forces render the imagined choice most probably moot. The first is Republican intransigence and refusal to agree to any revenue increase not forced by expiration of a tax cut. The second, for better or worse, is the future course of healthcare inflation. If the slowdown of the last five years holds steady, or even accelerates as various pilot payment reforms bear fruit, our structural deficit challenges are essentially won. If it re-ignites, then both further spending/benefit cuts and new tax hikes are in the offing.