Maddow Picks a Fight with FDR, and the Facts About Social Security in Obama's Budget

I was a little taken aback to hear Rachel suggest on her show on Wednesday that President Obama was "picking a fight with the Left" by endorsing a slightly smaller inflation measure called "Chained CPI" his budget with respect to calculating cost of living adjustments for Social Security recipients (as well as other purposes of government measure of inflation).

I am not saying that every liberal needs to fall in love with the idea of using a more accurate measure of inflation to calculate cost of living increases in Social Security which would result in minutely smaller increases, but picking a fight with the Left? Come on, Rachel. If Rachel thinks Obama is picking a fight with the Left, Rachel quite certainly is picking one with Franklin Delano Roosevelt. You know, the FDR who instituted Social Security and
  • Set the income threshold for which taxes are collected.
  • Provided for NO cost of living adjustment. That's right. The original Social Security Act provided for no COLA whatsoever. In fact, until 1975, there was no automatic cost of living adjustments and benefits only increased when Congress acted to specifically address benefits.
Of course, it's not really true that by opposing chained CPI, Rachel is actually picking a fight with FDR. And she of all people should be able to see that supporting it as a part of a broader fairly progressive budget (but still a compromise budget) should is not "picking a fight with the Left."

Be that as it may, that history Social Security, and the fact that automatic cost of living adjustments weren't even part of Social Security for 40 years after enactment are pertinent pieces of information in putting in context President Obama's compromise proposal to use this measure of price inflation. First of all, I hardly think slightly reducing something that wasn't even part of Social Security for 40 years qualifies as an "attack on Social Security." Secondly, it is important to remember that the President has made very, very clear to Republicans that he would agree to this only if they agree to additional tax revenue coming from the wealthy.

Contrary to Maddow's assertion and despite Republican offers to just take the chained CPI part of the budget, then, it should be clear that the president has no intention of decoupling the two.

But the increased effective taxes on the rich aren't President Obama's only precondition to agreeing to the new method of price indexing. As the White House has stated in no uncertain terms:
But, the Budget makes clear that the openness to chained CPI depends on two conditions. The President is open to switching to the chained CPI only if:
  • The change is part of a balanced deficit reduction package that includes substantial revenue raised through tax reform.
  • It is coupled with measures to protect the vulnerable and avoid increasing poverty and hardship.
So what are these protections that the president is proposing, nay, demanding? For older seniors and those who rely on Social Security for long periods of time, the president's budget would boost benefits by 5% of average retiree benefits (that would be $800 per year today) from age 76 to 85 (or a lump sum at age 85). Starting in another 10 years (for the currently retired, at age 95), beneficiaries would be eligible for another boost of the equal amount.

Now, this actually slightly reduces poverty rates for seniors, the White House notes, according to the Social Security Administration. How come? Because when retirees become eligible for the boost, the boost itself is not based on what their Social Security checks are, but what the average Social Security check is. So for the bottom 50% of beneficiaries actually get a boost that is greater than what they would have gotten if it were based on their checks. Given that the seniors with the greatest risk of falling into poverty also get the smallest Social Security checks, some of their benefit boosts will actually be greater than what they are currently scheduled to get. For example, if this proposal were law today, during the boost, someone whose annual benefit is, say, $10,000 would get an $800 boost (since the average benefit is about $16,000), or 8% of their benefit.

I would also have liked that the president included a base benefit at 125% of the federal poverty level, as was recommended by the Bowles-Simpson commission, but he did not. I should however note that the Fiscal Commission essentially paid for that by indexing the retirement age to longevity increases, which is not something the president is proposing.

But in lieu of creating a minimum benefit, the President is exempting all means-tested programs from chained CPI, including Social Security's Supplemental Security Income for low-income and low-resource seniors, foodstamps, and means-tested veterans benefits. The exemption includes the poverty line itself, so that eligibility for programs like SSI, SNAP, etc. is not affected.

The president's budget also includes a measure that is a longer term benefit to future low-income beneficiaries. By raising the minimum wage to $9 and indexing it for inflation, the president effectively creates a floor on Social Security benefits too, since those are based on income.

So when it comes to the President's budget proposal on Social Security and Chained CPI, this is what we're talking about. This is not about picking a fight; this is about a compromise package conditioned on additional revenue as well as protections for the neediest. This is not a radical makeover of Social Security that the president's Leftist detractors and media figures would have you believe. It is a modest compromise offered in the broader interest of governing.