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Liberals double down: No entitlement cuts

In a story already making waves across Washington, Politico’s Jim VandeHei and Mike Allen reported on Thursday that a bipartisan “grand bargain” is emerging from talks between the White House and Republicans. The contours of the deal are this: About $1.2 trillion in new tax revenue, most likely from an rate increase on income over $250,000, along with at least $400 billion over 10 years in entitlement cuts “and perhaps a lot more,” mostly from Medicare.

Liberals have drawn a hard line against entitlement cuts and $400 billion is a lot of money, so some progressives are not pleased with the idea.

Rep. Keith Ellison
REUTERS
Rep. Keith Ellison

Democratic Rep. Keith Ellison, the chairman of the 77-member Progressive Caucus, told Salon that his members would not support entitlement cuts. 

“Any agreement to meet our end-of-the-year deadlines will need a large portion of the House Democratic Caucus to pass. Progressives will not support any deal that cuts benefits for families and seniors who rely on Medicare, Medicaid and Social Security to put food on the table or cover their health costs,” he said.

Outside groups took an even tougher line.

“If this report in Politico is correct, then some ‘senior Democrats’ are sorely misguided about where their base stands. So let me be crystal clear. Any benefit cuts in Medicare, Medicaid, or Social Security, including raising the retirement or eligibility age, are absolutely unacceptable,” Ilya Sheyman, the campaign director at MoveOn.org, told Salon.

“More than 80 percent of MoveOn’s 7 million members say they want us to fight a deal that cuts those benefits, even if it also ends all of the Bush tax cuts for the top 2 percent. And that’s a mainstream position everywhere except in the lobbyist-cash-infused D.C. cocktail circuit,” Sheyman continued.

There will be consequences, he warned, for Democrats who support a deal that cuts entitlements. “Bottom line: Any Democrat who votes to cut Medicare, Medicaid or Social Security benefits does so at his or her own peril, and shouldn’t be in the least bit surprised to be held accountable by MoveOn members in the next primary election.”

Open to other means

However, there’s an important caveat that’s missing from the deal described by Politico. While Ellison and progressives have said they oppose benefit cuts, they’re open to other means of cutting costs in entitlement programs.

“There are better options that protect seniors, children and disabled Americans,” Ellison said, citing the elimination of the income cap on Social Security taxes or letting Medicare negotiate drug prices with pharmaceutical companies, something Illinois Democratic Sen. Dick Durbin also floated.

The details of the cuts in the Politico article were vague, and it’s unclear if they represents real cuts to benefits or not. “That’s a crucial distinction,” said Adam Green, the co-founder of the Progressive Change Campaign Committee. “What’s worried some about the Politico article is that it kind of tossed in reforms or efficiencies along with talk about raising the Medicare retirement age or adjusting the cost of living adjustment — those two things would essentially start a nuclear war on the left,” Green said. “Those are the two big things. Those are benefit cuts. Those actively hurt seniors.”

But Green said he was encouraged by Durbin’s speech on Wednesday, and he doesn’t think raising the retirement age is a real possibility. The cost of living adjustment is another matter.

Calculating the COLA

That is wonky, but important and represents a shift of billions of dollars, so stick with us. Basically it comes down to how you calculate the cost of living adjustment (COLA), which is meant to ensure benefits keep pace with inflation. Inflation is measured by looking at the change in the price of a basket of common consumer goods, which creates a measure called the Consumer Price Index (CPI).

There are lots of slightly different variations of the CPI, and liberals fear the final deal will shift from the current measure — called the CPI-W — to a different measure called the chained CPI. Many economists agree the CPI-W overstates inflation, so some people want to change that formula, which would save Social Security money. The chained CPI has emerged as the most likely replacement. It assumes that beneficiaries will change the goods they purchase as prices change (e.g. if chicken prices go up, they’ll buy more beef), but liberals and some economists say that this change isn’t fair to Social Security beneficiaries. They warn that it represents a devastating cut to monthly checks and that it’s not practical to assume that seniors will adjust to cuts by constantly altering their spending habits in response to subtle price variations.

Alex Lawson, executive director of Social Security Works, an advocacy group that works to protect social safety programs, told Salon the chained CPI is “unacceptable.”

“The chained CPI would cut significantly the benefits of all current and future Social Security beneficiaries, including retired and disabled veterans, even after politicians promised repeatedly that any changes to Social Security would not affect current beneficiaries,” the group warns in a fact sheet. Veteran benefits are calculated used the Social Security Administration’s COLA measure.

That said, it’s entirely possible that a grand bargain remains out of reach, but that Democrats were happy to have Politico run a story showing their willingness to make serious entitlement cuts. When the deal falls apart, they can boast that they made a good faith effort to work with Republicans, despite the protestations of their base.

Indeed, House Speaker John Boehner just told reporters that “no substantive progress” had been made in fiscal cliff talks, despite the story.

In this, perhaps conspiratorial scenario, the $400 billion trial balloon would be designed precisely to elicit angry liberal responses such as those above, so as to make Democrats seem at once more reasonable and less able to make a GOP-favored deal. It should be stated that there is zero evidence supporting this notion and there’s plenty of evidence to suggest that Obama really does want to cut entitlements, but planting the story would be classic “triangulation” — and Obama seems to understand how to play this game a lot better than he did during last year’s budget talks.

Alex Seitz-Wald is Salon's political reporter. Email him at aseitz-wald@salon.com, and follow him on Twitter @aseitzwald.

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Comments (16)

Can somebody please explain . . . . .

WHY is there an income cap on Social Security payroll contributions? Seriously - I'm having a hard time understanding not only why it exists, but why it is placed where it is (around $110,000 I believe).

It just seems like removing (or adjusting - but I'd be more in favor of removing) that cap is a no-brainer.

Why not

If you remove the cap are you going to increase the return for those who pay more? Also, the social security tax increases the cost per employee and thus increases the total cost of goods or services sold. Who in their right might would want to do that to our products and services markets?

I would have no problem increasing benefits for the affluent

if it meant that benefits for low-income people were also protected.

Payments

were capped because benefits were capped and the program was intended to have some correlation between the amount paid in and the amount paid out, although this was always weighted so that those contributing the least got a higher rate of return (so to speak) than those paying the most. Taking the cap off is not without consequences, for employees or employers, even with the current;y reduced rates. Will we than raise the maximum benefit? If not, why not?

Removing OR adjusting

I don't know why these always have to be couched as "all or nothing" choices. In my original post, I inquired about thoughts on either removing OR adjusting the cap. Lots of thoughts here on the effects of removing. Not much discussion on the potential benefit of adjusting.

So if instead of removing the cap, it were instead adjusted upwards (presumably with the maximum benefit proportionally raised?) - what then?

And yes, I know that the less you raise it, the less effect it will have on solving the problem. But again, this gets back to the "all or nothing" thinking I keep seeing.

For example - all sorts of discussion on other threads on why taxing the rich won't solve the problem. Or why capping deductions won't solve the problem. Or why adjusting retirement/eligibility ages won't solve the problem. Etc.

But who said any one of these things ALONE had to be responsible for solving the entire problem? What happened to looking at how doing some or all of them to some degree in some combination would add up?

Going back to the dreaded "kitchen table" metaphor - a family looking to manage expenses doesn't look at just one area to reduce spending ("No more carryout pizza!") to get the budget under control. They look at ALL the ways they can spend less and save more, and by making appropriate adjustments in all the constituent parts, hopefully they can come up with a manageable whole.

Why then do politicians (and commenters on threads) always seem to insist that a single prong solution has to be found and implemented rather than taking a multi-pronged approach to incrementally chip away at the overall problem?

Anyway, with all that said, how about thoughts on adjusting rather than removing the cap on SS payroll contributions?

Attacking Medicare fraud is the way to cut its costs

Last year, according to CMS, Medicare shelled out about $500 billion in payments, and most estimates of what proportion of this is due to overpayments or outright fraud come in around 10%, or roughly $50 billion - ANNUALY.

So the proposed 10 year program to cut benefits by $400 billion, or about $40 billion per year, is SMALLER than the current erroneous payments.

Why not attack Medicare fraud and overpayments FIRST ?? Then let's see where we're at.

A good next step would be to eliminate Medicare payments which are perfectly legal but UNREASONABLE. No one really knows how much this could produce in savings, but it's safe to say it would be a very big number.

I'm with Keith Ellison when he objects to cutting aid to people who need it.

What do you consider unreasonable?

The amount paid or the services paid for? No one pays less for a specific service than Medicare.

Here's one example...

I have sleep apnea of a type requiring a specialized machine, costing more than the usual biPAP machine.

According to the most current DME fee schedule used by Medicare (publicly available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSFeeSc...) , it will reimburse at $530 per month for 13 months, or a total of about $6,800 - but ONLY so long as I get it through a particular class of distributor, a home medical equipment vendor, who have seen to it to line themselves up with this kind of payment. I'm not going to quote the cost to that home medical equipment vendor here, but suffice it to say there is a FANTASTIC markup on this machine when bought in this way. And we all pay for that $6,800.

I found an alternative route to buy the exact same machine, NEW IN BOX, for $800. But Medicare would not approve this purchase for $800 - only the $6,800 fee schedule amount !!

THAT is what I'm calling unreasonable. Multiply this difference by many thousands and see what kind of number you come up with. And here we're talking about only one type of equipment. The same kind of markup and Medicare nonsense applies to numerous different classes of equipment. There is no doubt we're talking about many billions of wasted dollars here, which is what I'm calling unreasonable. It's all perfectly legal.

There is more to say about this whole subject matter, such as what services the approved home medical equipment vendors provide, amongst which is selling add-ons and maintenance services, etc., and these are not worth nothing. But are they worth $6,000 in the case of a single patient ??

Exactly

And it's not just Medicare...insurance companies do this, too. My dad has recently been confined to a wheelchair due to a complete spinal injury. He's got all his marbles, so he's been looking into the costs for the various medical items he needs. He's found that the insurance company restricts purchases/leases to certain types of vendors, when it's clear that the markup is outrageous. It only stands to reason that his and everyone else's premiums reflect the..well...premium costs of limiting sources.

Cuts to Soc Sec and Medicare

If the Dems give up any benefis to the poorest Americans, I will never contribute anything to a dem candidate or the party!

Where is the sense

in having different ages for eligibility for Medicare and Social Security? One can begin collecting reduced SS benefits as early as age 62 and Medicare at 65, but full SS benefits are not available until age 66 or 67, depending upon one's date of birth. What if we were to raise the age at which one qualifies for reduced SS benefits or reduce the level of benefits available before full retirement age, or both? What's the tradeoff in employment of younger people?

Age for SS benefits

People who sit at a desk all day doing mental work love to talk about raising the age of eligibility for Social Security. I sit at a desk, translating documents, and I could easily see myself working till 70.

However, I also know that someone who works in a warehouse, makes beds in a hotel, tends kids at a daycare center, lifts bedridden patients at a nursing home, or does any of the other physically demanding jobs that keep our society running is physically worn out by age 62, and often before. To tell such people, "Sorry, but you can't collect any benefits until you're 65" is clueless and cruel.

There's another group that NEEDS to collect at 62: people who lose their jobs after age 50. Thanks to age discrimination and a generally poor labor market, even people with good work records are having trouble finding full-time jobs. They hang on by their fingernails, working at part-time and temporary jobs, selling their houses, exhausting their savings, and dipping into their 401(k)s. I'm just one person, and I know five people in this situation. By collecting Social Security at age 62, they can finally make a decent living--i.e. afford food, shelter, and transportation without running out before the end of the month-- on a combination of their benefits and part-time or temporary jobs.

Just because you would be fine with a raised age for benefits doesn't mean that everyone else would.

entitlement reform

I truly support preserving benefits for those under a certain income, but it is counterproductive for ANY congressman to draw lines in the sand and keep any program sacrosanct. There is no program or dept which could not be scrutinized or reorganized to save money thru various efficiencies. Drawing lines in the sand only aggravates the other side of the aisle. Stop grandstanding, please, whether you are conservative or liberal! This is not what we elected you to do.

why ?

Help me grasp the reason for the 111,000 dollar cap on SSI and the 250,000 dollar no tax increase after adjustments side by side. Where is the equity in that ? Also Krugman cranks it out today at:

http://www.nytimes.com/2012/11/30/opinion/krugman-class-wars-of-2012.htm...

His solution?

He wants no cuts or raising of ages to collect benefits, but offers no answer as to how to keep any of the programs solvent. He does favor raising the income tax on the rich, but as an economist he has to know that the amount of money generated won't put a dent in fixing the entitlements. Besides, that money is to be used to pay down the debt or pay for more stimulus.

Do they know that the programs are running out of money?

It would be great to keep paying out in exactly the same way, but when we run out of money no one will get anything.