Social Security Cuts In Obama Budget Draw Most Attention

Social Security Cuts In Obama Budget Draw Most Attention
April 10, 2013

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)

President Obama presented his budget Wednesday, two months late. To many taxpayer watchdog groups and public policy organizations, the $3.8 trillion budget blueprint has not been worth the wait. Some solid supporters of the president also have slammed the budget proposal.

Among other things, President Obama would raise taxes approximately $800 billion over 10 years, including a requirement that “millionaires” pay at least 30 percent of their income in taxes, and place a 28 percent cap on deductions for charitable giving for taxpayers in the top 2 percent of income earners. He’d also limit how much money persons could put into retirement accounts, and raise the federal minimum wage.

On the spending side of the budget equation, Obama would cut Social Security and other entitlement spending by using a new formula to calculate inflation. This new formula, called “chained CPI,” would reduce the government’s officially reported inflation rate. The president also projects lower military spending from winding down the wars in Iraq and Afghanistan.

6% Spending Increase Next Year

But he would send spending up in many areas, including for “infrastructure,” education (including universal preschool), and alternative energy. Spending in the 2014 budget would be 6 percent higher than the current spending level.

“Barack Obama's 2014 budget, as with all of his prior budgets, is not serious. The only good thing to say about it is that he has broken the Democrat cone of silence about the need to curb the growth of entitlements,” said Ross Kaminsky, a professional securities trader, news columnist and Heartland Institute senior fellow.

“But when you see a budget which aims to limit the amount an American can accumulate in retirement accounts, or which aims to federalize the last private part of education in America, namely pre-kindergarten, and fund it by raising tobacco taxes, you know this is an ideological document first and foremost. The suggestion of going to chained CPI for Social Security cost-of-living adjustments is nothing but a smokescreen so he can claim to be offering a balanced approach.”

Kaminsky noted Obama “continues to call for upper-income earners to ‘begin to pay their fair share,’ despite that group carrying the weight for the nation under the most ‘progressive’ tax structure in America's history. He continues to call for a higher minimum wage despite that being a sure recipe to worsen the already disastrous unemployment rates among the youth and among blacks.”

Backlash to Entitlement Cuts

The proposal to cut Social Security benefits by using chained CPI has brought sharp criticism from groups that usually are reliable supporters of the liberal Democrat. Many Republican lawmakers, meanwhile, are saying it’s nearly the only good part of the budget proposal.

"The news that the Democratic President will be openly pushing for cuts to Social Security benefits is a profoundly disturbing shot across the bow for the progressives who called their neighbors, spent weekends knocking doors and donated millions to reelect him,” states the Web site of Democracy for America, a left-leaning political action committee whose chairman is Jim Dean, brother of former Vermont Gov. Howard Dean.

Democracy for America and other groups, including the National Committee to Preserve Social Security and Medicare, are organizing petition drives against chained CPI and urging their members to contact members of Congress to oppose any cuts to entitlement programs.

“Using the chained CPI to cut Social Security COLA benefits in the name of deficit reduction is nothing other than unfairly balancing the budget on the backs of America’s seniors, who have done nothing but work their entire lives towards earning the promise of Social Security’s guaranteed benefits,” said Edward F. Coyle, executive director of the Alliance for Retired Americans, in a statement.

A top Republican lawmaker agreed with that sentiment.

The president is “trying to balance this budget on the backs of seniors,” said National Republican Congressional Committee Chairman Greg Walden (R-Ore.) during an interview with CNN’s Wolf Blitzer after the budget proposal was released.

Support for Chained CPI

Other Republicans, though, support using chained CPI. Government’s officially reported inflation rates would drop under chained CPI because it adjusts for less expensive substitutes that people could buy to reduce the impact of inflation. For instance, if the price of butter rises, shoppers could buy less-expensive margarine as a substitute. If the price of beef rises, people could switch to cheaper cuts or to other sources of meat, such as chicken.

House Speaker John Boehner (R-Ohio) appeared to accept chained CPI when he said in a statement, President Obama “does deserve some credit for some incremental entitlement reforms that he has outlined in his budget. But I would hope that he would not hold hostage these modest reforms for his demand for bigger tax hikes. “

Club for Growth President Chris Chocola, whose organization is pro-business and right-leaning, chided Walden for his opposition to chained CPI.

“With nearly $100 trillion in unfunded liabilities, the last thing Republicans should attack the Democrats for is for making the most minor reforms to our entitlement programs,” said Chocola in a statement. “If anything, President Obama nibbles around the edges of entitlement reform and doesn’t do anything to put entitlements on a permanently sustainable path.

“Greg Walden ought to think about clarifying his remarks on chained CPI, and think about clarifying soon. I’m sure his constituents would like to know his opinion,” added Chocola.

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)