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Two recent news reports indicate that the President is "strongly considering" cuts to Medicare and Social Security in his upcoming budget, which is to be released in less than ten days.The question's been asked for four years: Why would Obama want to cut these popular and successful programs, especially when there are better solutions out there (and Social Security doesn't even contribute to the deficit?)
It's time to ask a new question: Why wouldn't he cut them?Bad NewsLast Friday the Wall Street Journal reported that the President's cuts would be "aimed in part at keeping alive bipartisan talks on a major budget deal." No, you're not experiencing déjà vu. We've heard this story before.The Journal was vague on the President's specific cuts, though it did cite the "chained CPI" cut to Social Security. (The Administration described those cuts as a minor "technical change," although they're technically less accurate than the current and already inadequate formula. They'd come to 6.5 percent of a 75-year-old's benefits and 9.2 percent of a 95-year-old's.)
The New York Times reported that the President and House Republicans "have quietly raised the idea of broad systemic changes" to these programs as part of a broad "fiscal deal." It also provided more detail on the President's newest proposed Medicare cut, which would combine the deductibles for outpatient and hospital Medicare coverage. That would increase annual out-of-pocket costs for 80 percent of Medicare recipients (while typically lowering them for people who are hospitalized during the year.)
The rationale is that it will discourage the use of unnecessary medical care. That's a misguided notion. But the President and his staff has shown a proclivity toward this kind of shallow wonkery in their support for misguided concepts like the excise tax on health insurance plans with higher than average costs. The White House economic team may very well believe that this plan would "discourage people from seeking unneeded treatments" (as the Times puts it).Bad PolicyNevertheless, both cuts are bad ideas. The Medicare change is based on a model of health economics which fails to understand how health care decisions are made in the real world and relies on old (and challenged) studies, including one from the RAND Corporation, which claim such cuts reduce the use of unneeded services without reducing the use of necessary care.
As for the "chained CPI," it's already been dissected at length (we included a small compendium of critiqueshere).Seniors and near-seniors today are facing a retirement crisis of tragic proportions, which a New YorkTimes' editorial outlines. That underscores the fact that these changes are both unwise and unkind.
Bad Politics
The politics are equally disastrous. The President's early flirtations with these kinds of cuts contributed to a25-point plunge in support for Democrats on the question of who has better ability to handle Social Security. Polls in 2010 showed that President Obama was even less trusted than George W. Bush on the topic - even after Bush tried to privatize the program, which would have been disastrous after the 2008 financial crisis.
Polls continue to show that voters across the political spectrum oppose these kinds of cuts - "hate" isn't too strong a word - and would even be willing to pay more in taxes to protect Social Security. These cuts might become be the most unpopular domestic policy decision in modern history.
How would that affect Democrats? When Obama and Boehner agreed on the "chained CPI" last December,CNBC ran an article headlined "How You Could Be Affected by Obama's Social Security Plan." Not "Obama and Boehner's plan" - Obama's.Does anybody doubt how these cuts will be presented to the public - or how they'll be remembered?
Broken Record
We were told last month that the President "focused a lot on entitlements" while offering "concessions" to Republicans which included another offer to cut Social Security benefits with the "chained CPI." Senior White House official Gene Sperling told CNN that the President was "reaching out to Democrats who understand we need to make serious progress on long term entitlement reform."
In other words, the people who needed persuading were fellow Democrats, not Republicans. Nancy Pelosi tried to help him by reiterating her willingness to support the President's cuts, but the Senate's recent voice-vote rejection of the chained CPI shows that it's still a tough sell. Good.In December 2012 Obama and House Speaker Boehner agreed in principle to the "chained CPI" benefit cuts, during the same negotiations when Obama caved on his popular tax increase for income above $250,000. That particular cave-in, as we noted at the time, increased the deficit by $183 billion - much more than the estimated $122 billion the "chained CPI" cut would save (without even reducing the deficit). You could bring in more money by closing loopholes in the capital gains tax, too.
In 2011 the Washington Post reported that "As part of his (deficit-deal) pitch, Obama is proposing significant reductions in Medicare spending and for the first time is offering to tackle the rising cost of Social Security."
In 2010 a "very senior White House official" told a group of us that the Administration supports such cuts. Reports in 2010 also indicated that the President planned to announce Social Security cuts in his State of the Union message until he was pressured to back down.
And in 2009 the President appointed two adamant Social Security opponents to run his "Deficit Commission."Why?It would appear that the President supports these ideas because he thinks they're good policy, not just because he has to make a deal with the Republicans.Some say he doesn't like them but feels compelled to propose them - repeatedly, apparently- in order to get a deficit deal. This theory essentially argues that the President and his team don't understand the politics of the situation, and haven't learned from experience. It's a loyal, if not very flattering, argument.
Personally, I think the "147 people" principle is a big part of the problem. Everybody the President and his advisors know thinks this is the right thing to do. It's a herd mentality. But whatever the reason, these don't look like "concessions" to me. They look like attempts to implement the policy that "very senior official" said they supported back in 2010 - and make it look like a concession.
N=0
Then there's something which is sometimes called the "N-dimensional chess" theory, which argues that the President is so brilliant that he's playing on more dimensions than the ordinary mind can grasp. He proposes bad things knowing that they won't be accepted, outfoxing the Republicans by showing the country how reasonable he is and how unreasonable they are.
Some people used "N-dimensional chess" to defend Obama's benefit-cut chatter in 2009 and 2010. The Republicans then ran to the Democrats' left in 2010 - and took back the House.
How's that working out for you?
This year's "N-dimensional" theory says the President will predicate these benefit cuts on higher taxes for individuals and corporations, and the Republicans will refuse. Social Security and Medicare will be unharmed and the President will look like a winner.
It's a silly theory. These repeated proposals reinforce the false conservative notion that we "can't afford" these programs. And the Republicans have already indicated they're open to "revenue increases" - the only requirement for "compromise" cited by the Times - but that they'd do it through reductions in "tax expenditures." That's DC-ese for "reducing tax breaks that help the struggling middle class, while leaving millionaires and corporations alone."
The President would then have to accept this package of cuts and tax hikes in toto, which would batter the middle class, or he'd look like the intransigent one.Checkmate.
It doesn't really matter which (if any) theory's true. If these cuts are in the President's budget, he will have branded his Administration and his party for generations to come - as Social Security and Medicare cutters. People don't follow the ins and outs of budget negotiations, but they'll certainly remember who lowered their benefits.
Motive and Opportunity
Whatever their motives, we know what the President and his team intend to do. The important question now is, What do we intend to do?
Will voters raise an outcry in the next nine days? Will the Democratic rank and file shower the White House with calls and emails insisting that it back down from these proposals, or will it passively accept them - and then watch their party suffer the consequences for years to come? Will citizens across the political spectrum express their opposition to these cuts?
One day we may look back with regret on the Great Medicare and Social Security Cuts of 2013. And we won't be asking ourselves why Obama did it. We'll be asking ourselves why we didn't stop it.
It's time to stop wondering about the President's motives and take a good look at our own.
