Jeff Gelles: Keep bad ideas from talks

President Obama acknowledges House Speaker John Boehner while speaking to reporters at the White House after a meeting to discuss the deficit and the economy. The talks are still blocked, and there are fears about what ideas would be put on the table.
President Obama acknowledges House Speaker John Boehner while speaking to reporters at the White House after a meeting to discuss the deficit and the economy. The talks are still blocked, and there are fears about what ideas would be put on the table. (CAROLYN KASTER / AP)
Posted: December 17, 2012

Sometimes, the veneer of reasonableness is all that's needed to help bad ideas gain a foothold. But don't be fooled by appearances if two of the worst - cutting Social Security's cost-of-living increases and raising the Medicare eligibility age - manage to creep into a last-minute budget deal in the coming weeks.

Both were dangled by the Obama administration in mid-2011, when House Republicans were threatening to blow up the nation's finances by refusing to raise the nation's debt ceiling - a standoff that ended with real damage to the economy and the stopgap agreement that's now expiring.

As the clock winds down toward across-the-board tax increases and deep spending cuts due to take effect in January if Washington leaders don't act, it's no surprise that conservatives and even some supposed centrists are eager for a second shot at elements of what Obama proffered back then as part of a potential "grand bargain."

Let's be clear. Compromise is essential to politics, and moving the federal budget toward long-term balance should be a priority - once we've done all we can to boost demand still weakened by the housing bubble and financial crisis. Right now, our top priority should be to reduce the long-term unemployment that Fed chairman Ben Bernanke last week rightly called "an enormous waste of human and economic potential."

But let's also be clear about this: There's a reason Republicans are so reluctant to be specific about the spending cuts they want. Right-wingers have always opposed the social-insurance concept represented by Social Security and Medicare, even as mainstream Republicans have come to accept the programs' popularity - one reason they all fought so hard against Obamacare, the biggest expansion in social insurance since the 1960s, and still pine for its failure or repeal.

The right's Plan B has always been to chip away at the programs as much as possible, in hopes of undermining public support. And that's exactly what these Social Security and Medicare cuts would do if Obama breathes life into them.

Why raise the Medicare eligibility age - an idea that, during the 2011 standoff, Yale's Jacob Hacker labeled "the single worst idea for Medicare reform"?

Raising the age for access to coverage doesn't cut the cost of the actual medical care needed by 65- and 66-year-olds. It just shifts the burden of paying for it onto seniors themselves, onto less-efficient private carriers, or onto Medicaid coverage that provides bare-bones care - if it's available at all in their states. It would push some seniors to simply forgo care, as many in their early 60s do now.

Yes, but won't they at least now have access to coverage under Obamacare? That's an argument that even some liberals have put forward recently, forgetting that Republicans still vow to repeal the new system first chance they get and support Medicare's privatization.

Boston University economist Austin Frakt says the underlying problem is the philosophical one - "It's universal coverage, stupid," he wrote recently.

We still face a sharp divide between those who want America to finally join the rest of the Western world in guaranteeing universal access to care, and those on the Tea Party right who denounce it as step toward evil socialism - just as their predecessors denounced Medicare half a century ago.

At a time when Obama and the Democrats are trying to finally extend that promise to younger people even as they seek to slow increases in the cost of care, why pull coverage back from anyone?

If younger retirees would suffer from the Medicare change, those at other end of the spectrum - the oldest - would be harmed by changing the Social Security cost-of-living formula, says economist Dean Baker of Washington's Center for Economic and Policy Research.

The basic proposal is typically spun as a "technical fix" or, as a Washington Post editorial put it last month, "a quick administrative tweak." It would switch versions of the Consumer Price Index used to calculate cost-of-living increases, replacing the current index with a so-called "chained index" that takes into account consumers' willingness to make substitutions as prices rise.

Beef too expensive? Some people will buy chicken instead. Can't afford cable TV? Maybe satellite works instead, or Netflix.

These are, in fact, real phenomena. The question is whether they're reasonably applicable to the elderly - people who, as they age, are probably less able to make such changes, or shop around for the best prices, than anyone else.

Baker and other critics of the proposed switch to a chained CPI - which could also help bring in more revenue by slowing the rise in tax-bracket thresholds - note that there has long been an experimental index that actually treats the elderly, quite reasonably, as a distinct group of consumers.

Researchers at the Bureau of Labor Statistics have calculated the CPI-E since the 1980s, by re-weighting items in the broader indexes. It reflects the fact that seniors spend relatively more of their money on expenses such as medical care and housing but less on clothing, food and gasoline than younger people.

Historically, the CPI-E has risen slightly faster than its counterparts, though not always. From 1982 to 2011, it climbed an average of 3.1 percent a year, vs. 2.9 percent for the index now used to calculate Social Security recipients' cost of living.

If the goal were to actually make Social Security payments more accurately reflect seniors' expenses, it would be worth investing in a nonexperimental version of the CPI-E - an index that might, Baker says, rise more slowly if we finally get a handle on health-care costs.

Of course, Social Security shouldn't even be on the table in these budget talks. It has its own funding stream, and is fully solvent well into the 2030s. With modest changes, it can work for the rest of the century. And there are good arguments for making its benefits more generous, not less, now that private pensions have largely gone the way of the Dodo bird.

Instead, switching to a chained index would cut average benefits by 6 percent after 20 years of retirement, and by 9 percent after 30 years, Baker says.

That's not a solution to a problem. It's just a smooth veneer on a bad idea.


Contact Jeff Gelles at 215-854-2776 or jgelles@phillynews.com.

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