Are "liberals" learning to love the sequester?

A while back, as the sequester took hold and Obama unfurled his budget, Greg Sargent framed up what he presented as a tough choice for Democrats (on the dubious chance that they would have any choice at all): Stand pat with the sequester in place, Medicare and Social Security left essentially untouched, and no new revenues beyond the $600 billion over ten years enacted in January -- or sign on to a grand bargain that would include entitlement cuts proposed in Obama's 2014 budget, e.g.,  chained-CPI and higher Medicare premiums for wealthier seniors, along with more targeted and gradual discretionary spending cuts than those mandated by the sequester, and some new revenue.

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.

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.

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?

Eloquent omission, Damian Paletta

I approve this messaging from the WSJ reporter on federal budgeting matters:

And while the short-term deficit is shrinking, both parties know it is projected to widen dramatically in coming decades as the U.S. population ages unless changes are made to curb the growth of programs like Medicare.

Conspicuous in its absence from this long-term budget snapshot: Social Security.  Again, later in the article:

Many Democrats have called for a broad budget deal that would reduce the deficit over many years by raising taxes and curbing the growth of Medicare and other entitlement spending.

About that conservative soft spot for means-testing

[reposted from 2/22]

Jonathan Cohn had some fun this afternoon with this tweet and article:

‏@CitizenCohn Huge scoop: White House endorses means-testing for Medicare. http://www.newrepublic.com/article/112506/david-brooks-obama-and-medicare …

--  the joke being that Obama's 2013 budget, released a year ago, proposed modest increases in the already-higher premiums that wealthy seniors pay for Medicare Parts B and D.  Legions apparently retweeted Cohn without pausing to note that the "scoop" was a year old and based on information that the White House publicized.

Cohn's post was prompted by David Brooks lambasting Obama for not offering serious entitlement cuts, such as means-testing, in current negotiations to replace the sequester (see Cohn's post for links).  Which highlights a rather odd fact: means-testing Medicare and Social Security has been a Republican talking point throughout the budget wars. They use it either, I imagine, for cover -- see, we're not just about cutting benefits for the poor -- or as a stalking horse for cutting benefits for everyone else. More on that later.

The funny thing about means-testing is that it's functionally equivalent (if arguably less efficient in some cases) to raising taxes on the wealthy, which is anathema to the GOP.  Another funny thing: people don't realize the extent to which benefits for the elderly are already means-tested -- or, if I'm using that term imprecisely, more expensive for the wealthy (and in one case, available only to the poor).  A few facts, then, about our core elderly benefits:

Breaking: U.S. senior benefits means-tested

Jonathan Cohn had some fun this afternoon with this tweet and article:

‏@CitizenCohn Huge scoop: White House endorses means-testing for Medicare. http://www.newrepublic.com/article/112506/david-brooks-obama-and-medicare …

--  the joke being that Obama's 2013 budget, released a year ago, proposed modest increases in the already-higher premiums that wealthy seniors pay for Medicare Parts B and D.  Legions apparently retweeted Cohn without pausing to note that the "scoop" was a year old and based on information that the White House publicized.

Cohn's post was prompted by David Brooks lambasting Obama for not offering serious entitlement cuts, such as means-testing, in current negotiations to replace the sequester (see Cohn's post for links).  Which highlights a rather odd fact: means-testing Medicare and Social Security has been a Republican talking point throughout the budget wars. They use it either, I imagine, for cover -- see, we're not just about cutting benefits for the poor -- or as a stalking horse for cutting benefits for everyone else. More on that later.

The funny thing about means-testing is that it's functionally equivalent (if arguably less efficient in some cases) to raising taxes on the wealthy, which is anathema to the GOP.  Another funny thing: people don't realize the extent to which benefits for the elderly are already means-tested -- or, if I'm using that term imprecisely, more expensive for the wealthy (and in one case, available only to the poor).  A few facts, then, about our core elderly benefits:

Julianna Goldman questioned Obama's debt ceiling cred to his face. His response...

I noted in a prior post that as the debt ceiling approaches, I'm getting foreboding flashbacks from this familiar process: 1) Obama articulates his position forcefully and with precision; 2) progressives note with glee that he's boxing Republicans in; 3) stalemate sets in as a deadline looms; 4) a flurry of reported Obama concessions augurs a deal; 5) the deal is announced, headlined with those concessions if backloaded with some Obama priorities.

Today's press conference may augur a similar pattern.  At greater length than ever, and with top-of-his-game precision, Obama laid out his case for a clean debt ceiling hike and "balanced" deficit reduction.  When asked why we should believe that this time he would not blink at the brink, however, he was less convincing.

Two lengthy exchanges tell the tale. In the first, challenged on the consistency of his debt ceiling position and the irresponsibility he alleged in Republican conduct, he was precise and masterful, catching Republicans in a rhetorical pincer: Threatening default is extremist and unprecedented. And doing deficit reduction by spending cuts alone is extremist and unprecedented. One threatens to blow up the economy and destroy the nation's privileged position as the world's default currency. The other threatens to sell the nation's public benefits and seed corn to preserve tax breaks for the wealthy. As the TV hosts say, let's listen:

At least chained-CPI is chained to reality

The good folks at WonkBlog have been castigating the proposed move to a "chained-CPI" to slow the rate of Social Security benefit growth as "obscurantist,"  as Dylan Matthews called it this morning.  Three hours later, Ezra Klein elaborated the complaint:

Chained-CPI, in [Bowles-Simpson's] telling, is simply an effort to correct a measurement error in the way we calculate inflation. It’s a tweak, a fix, a policy designed to achieve a higher level of technical precision. And who could be against that?

There’s something to this line of argument. The way we measure inflation right now really does mismeasure inflation. Chained-CPI really is a bit more accurate. But that’s not why we’re considering moving to chained-CPI. If all we wanted to do was correct the technical problem, we could make the correction and then compensate the losers.

But no one ever considers that. The only reason we’re considering moving to chained-CPI because it saves money, and it saves money by cutting Social Security benefits and raising taxes, and it’s a much more regressive approach to cutting Social Security benefits and raising taxes than some of the other options on the table.

The question worth asking, then, is if we want to cut Social Security benefits, why are we talking about chained-CPI, rather than some other approach to cutting benefits that’s perhaps more equitable? The answer is that chained-CPI’s role in correcting inflation measurement error is helpful in distracting people from its role in cutting Social Security benefits.

Klein may well be right that there are better ways to cut Social Security than moving to chained-CPI and leaving benefits otherwise unaltered (or that we're better off not cutting Social Security benefits at all).  But there's something fundamentally wrong with his critique, too. If he's right on policy, he's wrong on semantics. And frankly, I'm still trying to figure out whether the semantic error may also imply a policy error.

If loophole closures are benefit cuts, are benefit cuts tax hikes?

Eduardo Porter suggests that raising new tax revenue by cutting loopholes opens up a semantic loophole:

Though the offer to raise money by closing loopholes has a bipartisan pedigree — based on a plan proposed last year by the Democrat Erskine Bowles and the Republican Alan Simpson, the chairmen of President Obama’s deficit commission — it relies on rhetorical sleight of hand. If tax breaks are equivalent to government spending, eliminating them is equivalent to spending cuts. Mr. Boehner’s offer to do away with tax breaks in exchange for cutting entitlements raises no new revenue. It amounts to cutting spending twice.

Porter goes on to point out that a) Democrats have opened many "loopholes" for the poor and middle class because it's often the only form of social spending that Republicans will allow, but b) on balance, tax deductions disproportionately benefit the wealthy. His main point: we should consider each break on its merits, not make a shibboleth out of closing out as many as possible.

I would add a couple of wrinkles. First, Republicans are conflicted about whether to regard tax breaks for the nonwealthy as spending or tax cuts.  On the one hand, they've not only acceded to Democrat-initiated lower-income tax breaks, but sweetened their own wealthy-tilted tax cut goodies by cutting taxes and expanding loopholes for the nonwealthy as well.  On the other hand, they've come to regret the low-end largess, as all that bitching about the 47%, the lucky duckies who pay no income taxes, demonstrates.

Second, if Republicans are pulling the wool over by treating loophole closures as tax hikes, they've got themselves fooled as well.  When such tax "increases" were being bruited in the debt ceiling negotiations of 2011, Tom Coburn and others struggling to wriggle out of Grover Norquist's embrace experimented with casting  loophole closures (e.g., the ethanol subsidy) as "spending cuts."  It didn't fly; Norquist screamed that any phased out tax break would have to be offset by another tax break, and the GOP fell in line.

In which Henry Aaron talks himself into supporting a raised Medicare eligibility age

Henry Aaron of Brookings, one of the nation's top healthcare economists, has a rather odd perspective on the current brewing battle over so-called "entitlement reform." On the one hand, he focuses his concern on the older elderly, with their ever-dwindling purchasing power, which leaves him less hostile to raising the Medicare eligibility age than other left-of-center economists who acknowledge a need to trim benefits. He is more distressed by proposals to trim cost-of-living increases, e.g. the so-called chained CPU, which seem to strike most observers as a milder, more gradual mode of trimming benefits. Indeed, in the fullness of time, when the ACA is fully up and running and providing affordable care to the uninsured, Aaron favors raising the Medicare eligibility age to expand the ratio of working to retired adults.

On another front, Aaron at once provides historical and comparative data to demonstrate that U.S. senior health and pension benefits are unduly skimpy, and effectively concedes that given our political culture, we need to plan how best to make them skimpier still. He suggests that only by agreeing to benefit cuts can Democrats forestall more radical proposals to shred the safety net, e.g. via private accounts for social security or voucherization of Medicare. At the same time, he argues for benefits that increase with age, with offsets for lower-income younger elderly for whom raised retirement ages are a burden, and for a variety of formulas to shift costs onto the wealthier elderly (his Medicare reforms look something like those proposed by Senators Lieberman and Coburn: providing catastrophic insurance but ending Medigap as we know it, and making the wealthy elderly pay a much higher percentage of the actuarial value of their coverage).

I find it odd that Aaron argues, in effect, for preemptive concessions -- proposing policy choices he regards as less than optimal as a means of forestalling more radical, Paul Ryanesque attacks on safety net programs: 

If you were a Supreme Court justice...

Joan Biskupic, on of Reuters' Supreme Court reporters, has a circumspect article about how vain it is to speculate about how the Court will rule on the constitutionality of the Affordable Care Act.

Of course, salted into the nutritious helping of info about the Court's august procedures for guarding confidentiality are two bits of well-sourced speculation, one on each side.  The second set me off on a thought experiment. Here it is:

Tom Goldstein, a Washington lawyer and founder of the website SCOTUSblog, said he briefly thought he was observing a sign when he argued a case before the nine justices on April 16 - their first day back after the late March healthcare hearing. When the justices ascended the bench, Goldstein thought the four liberals seemed in particularly fine moods.

He caught himself thinking - only fleetingly - that their good spirits might have meant a majority had voted to uphold the law. "But," added Goldstein, "it flashed through my mind just as quickly that what I saw meant nothing."

Four justices, one mood. That set me thinking about the degree to which actual legal arguments are likely to have an effect. So then I thought: suppose I were one of the nine -- with my existing political propensities. Before I'd read any of the case pleadings, how open would I be to persuasion by the plaintiffs?

Perry keeps skidding on smears

Give Rick Perry credit for consistency. His primary mode of political communication remains the smear.  To be more precise, his default mode of attack is the inflammatory insult used to articulate a garden-variety policy disagreement.

Note the structural similarities between two Perry attacks, one made in today's New Hampshire debate
and one made four months ago. Today:

HILLER: Governor Perry, your party’s last nominee, John McCain wrote in the Washington Post in an op-ed about a year ago, his words, “I disagree with many of the president’s policies but I believe he is a patriot, sincerely intent on using his time in office to advance our country’s cause. I reject accusations that his policies and beliefs make him unworthy to lead America, or opposed to its founding ideals.” Agree?

PERRY: I make a very proud statement and, in fact that we have a president that’s a socialist. I don’t think our founding fathers wanted America to be a socialist country. So I disagree with that premise that somehow or another that President Obama reflects our founding fathers. He doesn’t. He talks about having a more powerful, more centralized, more consuming and costly federal government.

And on September 15, in a Time Magazine interview:

You can't fact-check a dog whistle

Factcheck.org is unduly literal-minded when it protests that Perry, contra his critics, never "advocated"  for Texas seceding from the United States:

Some may question the prudence of Perry entertaining the suggestion of secession, or talking too loosely about such a radical idea, but any fair-minded reading of Perry's fuller quote, and its context, makes clear that Perry was not advocating for Texas to secede. And Perry has repeatedly said since then that he did not, and does not, advocate secession.

Of course Perry didn't 'advocate' secession. He just took advantage of the emotional valence the idea held for his audience.  He left it floating as a pleasant fantasy or reserve contingency if current trends persist:

Our next Great Communicator

Having made something of a study of our current President's rhetoric, I owe some attention to that of the man perhaps likeliest to be our next President, Rick Perry. Time's Richard Stengel and Mark Halperin just posted an interview with Perry. Below, some thoughts on responses revel much about Perry's approach to policy, politics, and the rules and purposes of political discourse.

Now that you’ve been in the race for while, do you feel pressure to temper some of your rhetoric, like calling the Obama administration socialist?

No, I still believe they are socialist. Their policies prove that almost daily. Look, when all the answers emanate from Washington D.C., one size fits all, whether it’s education policy or whether it’s healthcare policy, that is, on its face, socialism.

Let's grant Perry his definition of socialism -- he does have one -- and look at his signature method of characterizing opponents' policies. The Obama administration's education policy is embodied in Race to the Top, which invites states to compete for extra federal funding by submitting their own plans to raise performance according to standards that they propose.  As for healthcare policy: the Affordable Care Act does create a template for states to achieve near-universal coverage by two means: expanded Medicaid, 80-90% financed by the Federal government, and healthcare exchanges composed of private plans that meet minimum coverage standards, made available to citizens via premium subsidies provided by the federal government. But it also grants waivers to the states to design their own plans, as long as they meet basic coverage standards, and Obama has proposed moving up the date for granting such waivers.  In neither case do "all the answers emanate from Washington."  A candidate minimally concerned with veracity would not "temper" the socialism charge with socialism thus defined -- he would eschew it. But that of course implies a by-now-Utopian reality standard for any GOP candidate. Let's move on to Perry's more specific m.o.

Okay, he's 'leading'....

Leaving aside for the moment Obama's policy positions, does anyone still think that he's too passive/failing to lead/afraid to confront Republicans? In a sense, he is out-crazying them: embracing negotiation under the debt ceiling sword of Damocles as a "unique opportunity"; insisting on a $4 trillion grand bargain; promising to veto any short-term debt ceiling fix; and, via Geithner, ruling out a "14th Amendment solution" in which the Treasury simply ignores the debt ceiling. Insisting under all these conditions that he will not agree to any deal that does not raise new revenue is brinkmanship in the extreme. In fact, we seem to be headed straight over the brink.

Subtleties of life expectancy, cont.

Today, Aaron Carroll joins Ryan Grim and Jonathan Chait in highlighting a subtlety in the calculation of the effect of increased longevity on social security costs. Ever-increasing longevity has been used to justify raising the retirement age in the Bowles-Simpson deficit reduction plan (to 69 by 2075 for full retirement).  The catch is this: life expectancy for those who reach age 65 has risen far more modestly than life expectancy from birth:

First, if you made it to 65, even back in 1950, you could expect to be on Social Security for 14 years... life expectancy for someone who lives to 65 and qualifies for these programs, hasn’t gone up as much, or as quickly, as people think.

The reason that Social Security has become more costly is not nearly as much that people are living longer on the program, as it is that many more people were born into the generation approaching 65. They aren’t getting more benefit individually; as a group there’s just more of them. When you argue that you want to raise the age at which they start to 68, instead of 65, you’re basicly giving them as many years on the program as a person who hit 65 in the mid 1970′s. That’s a pretty big change [i.e., we've been getting more years in recent decades?].

There's a further subtlety, though, that's been left out of this discussion. It's true that life expectancy before age 65 does not affect the total size of the benefit that retirees collect.  I presume, however, that it does affect the ratio of active workers to beneficiaries -- though I will note at the outset that that ratio has been remarkably stable since 1975, ranging from 3.2 to 3.4 in every year except 2009, when it dipped to 3.0. And I would guess that that dip occurred mainly because the number of employed workers dropped so precipitously in the Great Recession. 

An alternative to raising the retirement age for Social Security

Alan Simpson, of Bowles-Simpson fame, is a die-hard for raising the eligibility age for social security, as the Bowles-Simpson plan proposes.  Ryan Grim reports (hat tip: Chait) that Simpson is a tad unreceptive to to information furnished by the Social Security administration to the effect that life expectancy for those who reach age 65 has risen only modestly since 1940 (about five years each for men and women).  Meanwhile, the retirement age for receiving full social security benefits has been raised from 65 to 67 -- so the system is paying people for an average of three more years than it did for retirees in 1940. 

The Bowles-Simpson plan calls for a roughly proportionate rise in early and full retirement ages -- to 68 in 2050 and 69 in 2075 for full retirement, an to 63 and 64 at the same points for early retirement.  Opponents of that change point out that it is implicitly regressive, since lower income people have shorter life expectancy, and those who do manual labor find it harder to work to older ages. Besides, few people want to work deep into their sixties, and there are other ways of making social security solvent. In Bowles-Simpson as in other plans, raising the retirement age is only one in a broad menu of ways to raise further revenue or reduce the growth of benefits.

The social security segment of the deficit reduction plan put forward by the Bipartisan Policy Center does take increased life expectancy into account, but in a different way.  The BPC proposes to index the benefit formula to longevity : "Specifically, the replacement rates used to calculate benefits each year for new beneficiaries will by 99.7 percent of what they were in the previous year -- which offsets about two-thirds of the additional costs associated with estimated longevity increases." This plan treats social security like an annuity, which is calculated on the basis of life expectancy. 

Two approaches to Social Security reform

Ezra Klein has recommended the deficit reduction plan put forward by the Bipartisan Policy Center* as "easily the most thoughtful, detailed and credible deficit reduction plan on the table. On social security, the BPC plan overlaps in two major features with the  that of the Bowles-Simpson commission. But one major difference is instructive.

First, the two major points of overlap. Both plans would gradually lift the cap on earnings subject to social security to the range of $180-190k in today's dollars, the level needed to restore a target set in 1977 of taxing 90% of Americans' wage earnings.  Both also propose to slow down the cost-of-living adjustment by moving from the current Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to a so-called "chain-weighted" CPI (CPI-U) that aims to account for changes in consumers' habits when the prices of particular items goes up. According to the BPC plan, the "chained" CPI-U is estimated to grow .3 percentage points more slowly (I assume annually) than the CPI-W. According to the Bowles-Simpson plan, these two measures would close 61% of the existing shortfall over 75 years.


The most instructive difference is in changes to the benefit formula -- the percentage of their lifetime average indexed monthly earnings (AIME) that workers in various income brackets earn as a permanent social security pension.  Both plans, it should be noted, eschew so-called "means-testing" of benefits -- that is, proportionately reducing benefits for those who have significant other sources of retirement income. Means-testing is a GOP talking point for reasons I can't fathom, since it constitutes a major disincentive to accumulate wealth and would raise only modest additional revenue, since the vast bulk of social security payouts go to non-affluent Americans. 

Annals of busted blog posts

I was going to propose an alternative to raising the social security retirement age: reducing the cost of living adjustment (COLA) as beneficiaries get older.  My thought was that as people get older, they spend less. And they do, except for one thing: health care. But that little exception does effectively kill the idea. Here's what I learned from a 2009 paper by Mariacristina De Nardi, Eric French, and John Bailey Jones:

Our model predicts that average out-of-pocket medical expenditures rise from $1,100 at age 75 to $9,200 at age 95. While a 95-year-old in the bottom quintile of the permanent income distribution expects to spend $1,700 on medical expenses, a person of the same age in the top quintile expects to spend $15,800. Medical needs that rise with age provide the elderly with a strong incentive to save, and medical expenses that rise with permanent income encourage the rich to be more frugal.

I was motivated by Ezra Klein's point* that raising the retirement age disproportionately affects lower-income Americans, whose life spans have not increased nearly as dramatically as the more affluent, and is particularly hard on those who perform bodily labor, which becomes increasingly excruciating with age. Better, I thought, to have a viable retirement income earlier, and only lose some growth in the payment gradually.  But never mind...