The Next Obama Budget: The Chained CPI and the “Era of Austerity“

The Next Obama Budget, Part I: Yes, the Left Killed the Chained CPI

There are two major debates currently underway about President Obama’s upcoming budget, scheduled for next week: One involves the President’s proclamation that this budget will signal the “end of austerity,” while the other involves the decision to abandon the chained CPI cut to Social Security benefits. We’ll deal with the “end of austerity” in an upcoming piece. But first: What does a presidential budget even mean? Is it merely a symbolic document, or is it an actual working template for the federal government’s coming year?

For some people, the answer to that question seems to depend on the point they’re trying to make. For the right, the president’s budget is an empty rhetorical exercise – except when it comes to Social Security, in which case his reversal on the chained CPI has doomed us all.

“This reaffirms what has become all too apparent,” said House Speaker John Boehner’s spokesman. “The president has no interest in doing anything, even modest, to address our looming debt crisis.”

The White House said that it removed the chained CPI cut, which appeared in his budget for the first time last year, because it was there to pave the way for a “grand bargain,” and that prospect looks increasingly unlikely. Nevertheless, the administration made it clear that it would still be willing to accept this cut were such a deal to ultimately prove feasible.

The president has repeatedly said that he would accept this cut in return for some revenue increases, and he reiterated that last week. So why would Boehner claim that Obama “has no interest in doing anything”? Doesn’t that really mean that it’s Boehner who has no interest in doing anything?

To be clear: That “anything” was likely to have been an anti-growth, pro-austerity agreement which further harms the middle class. But, at least from the looks of things, it’s the GOP and not the White House that is standing in the way.

It’s not as if the president’s inclusion of this cut provoked a lot of warm and friendly rhetoric from Republicans last time around. In fact, it took congressional Republicans only 15 minutes to attack the president for what was described as “a shocking attack on seniors.”

And Boehner may only be holding the Speaker’s gavel because presidential talk of Social Security and Medicare cuts allowed the Republicans to recapture the House in 2010 on what they called a “seniors’ Bill of Rights.”

What’s more, it’s disingenuous for Boehner – or, for that matter, anyone in either party – to suggest that Social Security cuts are a way to “address our looming debt crisis.” Social Security is forbidden by law from contributing to the federal deficit.

As for the president and his supporters, it is clear that the chained CPI is well-liked by both the White House’s key economic players – and by many of the commentators who support them. That’s unfortunate, because it is inaccurate, unjust, and economically unwise. But like it, they do.

It appears that both the Republicans and the White House like it, but neither wants such a politically unpopular measure hung around their neck – especially in an election year.

Yes, a number of progressive leaders and groups campaigned aggressively to have the White House remove the chained CPI from this year’s budget. They did so for perfectly rational and coherent reasons – namely, because they view the president’s budget as both a rhetoricaland a practical document.

When the president affixes his name and his prestige to an idea like this one, he lends it a weight and legitimacy it does not deserve. He also ties his party to an unpopular policy. And he potentially lays the groundwork for precisely the kind of “bargain” that has proven so harmful to the middle class in recent years. For these reasons, the president’s decision was precisely the progressive victory that America’s Future co-director Roger Hickey and others have claimed.

And yet, a number of White House-friendly commentators have resorted to self-negating arguments to claim otherwise. Some of those arguments could be found in a piece from The Washington Post’s Obama-friendly “WonkBlog” headlined “Liberals didn’t kill Obama’s Social Security cut; Republicans did.”

Why? Because, argues writer Zachary Goldfarb, Obama was only “willing” to accept the cuts as part of a broader agreement. And yet, a few short paragraphs later, Goldfarb states that “many liberals didn’t understand … that Obama kept (the benefit cut) on the table not just as a token to Republicans – many of his advisers believed that chained CPI, with protections for poor seniors, was a good policy that used a more accurate measure of inflation.”

Actually, most “liberals” pushing the president on this issue clearly understood that this was a policy he liked. That’s one reason why they pushed so hard to have it excluded from this budget, so that the President would be forced to stop pushing it so aggressively this time around.

It’s Goldfarb, not liberals, who has a consistency problem. Obama wasn’t “willing” to accept the chained CPI – he supported it, as Goldfarb himself acknowledges. If he supports it, why was it removed from his budget? If the answer to that question isn’t policy-based, it must be political.

And if it was a political decision, who but the left could have been providing the political pressure?

Nevertheless, Jonathan Chait, writing in New York magazine, claims, “The disappointed deficit scolds sitting just to Obama’s right, and the joyous progressives just to his left, are committing the same fallacy. They are mistaking a step premised on an impossibility for a semblance of reality.”

Chait’s argument is based on the premise that the last budget was an act of meta-strategy on the president’s part (part of a presumed presidential omniscience that is sometimes sardonically described by skeptics as “11-dimensional chess”). Chait suggests that the President knew the Republicans would never strike a “grand bargain” and merely included the chained CPI to illustrate the GOP’s intransigence.

That argument flies in the face of both logic and the historical record. Obama did more than just include the chained CPI in his budget. He argued for it, forcefully. He gave every indication that he considered a grand bargain attainable. Chait’s argument is undercut by Goldfarb’s more accurate observation that this is a policy that the President and his team appear to support.

Besides, if the chained CPI was merely a one-time fake-out that had already been discarded, why were the president’s aides so evasive on the topic in recent weeks? This has all the hallmarks of a last-minute decision, driven by escalating political heat from the left.

Liberals have been clear on both the rhetorical and political dimensions of the chained CPI. A number of us (Dean Baker, Digby, this author, and others) have written extensively on both aspects of its presence in Obama’s last budget, and many of us have discussed policy, political tactical reasons for its exclusion this time around. A number of progressive organizations have pushed for its removal on just such moral, tactical, and political grounds – mustering facts and figures, commissioning polls, and doing the other spade-and-mortar work of activism.

So why are we seeing a ritual oversimplification of the progressives’ work in this area?

Without these efforts there was no reason to exclude it from this year’s budget – especially given the friction and bad press that would cause with Republicans, budget hawks and self-proclaimed “centrists.”

It’s change, not stasis, that provides evidence of an outside force. That force almost certainly came from progressives. Surely it wouldn’t hurt President Obama and these commentatorstoo much to acknowledge that the left deserves a little credit this time around.

Would it?

The Next Obama Budget, Part 2: Is the “Era of Austerity” Really Over?

The nation has been treated to a sneak preview of President Obama’s 2015 budget, scheduled to be released next Tuesday. As we asked in Part 1 of this two-part budget update, that’s an occasion for reflecting on the nature of a White House budget. Is it a negotiating document? A vision statement? A “political treatise”?

According to the Wall Street Journal, next week’s budget will fall in that last category.”Obama Budget Plan Reflects Partisan Lines,” says the Journal, which says that it will “serve more as a political treatise than as a fiscal blueprint.” That’s consistent with an apparently well-sourced item in The Washington Post that says that “Obama will call for an end to the era of austerity that has dogged much of his presidency and to his efforts to find common ground with Republicans.”

“President Obama’s budget will be a powerful statement of Democratic principles,” added Senate Majority Leader Harry Reid. This budget comes only a few weeks after President Obama declared inequality to be “the defining moral challenge of our time.”

Early reports about the White House budget show no signs of such broad moral sweep or scope. The language is bold. But, at least based on current reports, the proposals don’t match up. It’s one thing to proclaim the “end of the era of austerity.” It’s another to explain precisely what that era was, why it came into being, and what we’ve learned from its tragic failures.

We’ve been given no indication that the president or his advisers understand what a grave mistake it was to embrace the deficit-cutting rhetoric of the right, to appoint austerians to lead a presidential deficit commission, or of extending the austerity framework even to programs like Social Security (which does not contribute to the federal deficit).

Instead we’re being told that the president’s planned spending increases (more about those in a moment) are “fully paid for,” a phrase that suggests that austerity’s ghost still lingers.

To be sure, the president’s abandonment of the “chained CPI” Social Security cut is a big step in the right direction. And to the extent that the president’s new budget really is a “political treatise” and not a preemptive declaration of compromise, that’s a welcome development. But the specifics that have been leaked sound more like a fallback position that a declaration of principles.

Take that Social Security cut. While the President’s budget will reportedly abandon it, the Post report and others have taken pains to emphasize that the White House economic team still thinks it’s good policy (it’s not) and that they say it’s still on the table as part of a potential future deficit-reducing deal. That doesn’t sound like an era has ended. It sounds more like it’s gone into hibernation.

This doesn’t sound like a “deal-making” budget, and that’s good news. But it doesn’t sound like a “vision” budget either. If anything, it’s beginning to shape up like a “let’s act as if nothing happened” budget, one that ignores the ongoing wreckage from the 2008 financial crisis.

The president has proposed a 1 percent pay increase for federal employees. After an extended pay freeze, a significantly larger adjustment would be warranted. This low figure leaves the strong impression that austerity, not equality, is calling the shots.

We’re told that the president will call for $56 billion in additional spending. But half of that will consist of defense spending. Meanwhile, the Defense Department has made headlines by proposing to cut troop levels to their lowest point since before the start of World War II. Bases will be closed. Pensions and other military benefits will also reportedly be cut, a move that would reduce consumer spending at a time when it’s badly needed. Base closures will affect local economies, costing additional jobs.

Some weapons systems are reportedly to be mothballed. But, as Politico reports, major defense procurements like the F-35 Lightning II, a new Air Force bomber, the Pegasus tanker, new jet research, and a new Navy frigate will still be on the menu. That seems precisely backwards. If our nation’s post-austerity objectives are jobs and wages – the engines of equality – then expensive weapons systems should be cut while troop levels, benefits and pay are maintained.

The military budget isn’t the best way to create jobs. But cutting it this way, without added stimulus spending elsewhere, will make a bad situation worse. (There’s are also strong noneconomic arguments against cutting military pay and benefits.)

And while the president will reportedly drop the chained CPI, we’re told that his budget will still call for means-testing Medicare benefits. That, too, is an austerity holdover. Statistically, there are very few ultra-wealthy people collecting Medicare benefits. It would be far more efficient fiscally to simply tax the wealthy.

There’s more: “new corporate tax rules aimed at preventing companies from moving profits overseas to avoid U.S. taxes,” according to the Post. That certainly sounds like an improvement from past White House proposals regarding corporate taxation, but further details are needed. And the White House would curb IRA tax breaks for high-earning households – a good idea, if hardly transformative.

But what is most conspicuous about these early glimpses of the budget is what we don’t see in it. A true “post-austerity” budget would pivot to bold action on the crises that are still gripping so many millions of Americans: Persistent joblessness and underemployment. Wage stagnation. Lack of social mobility. The unaffordability of higher education. Our decaying infrastructure. The swelled ranks of the impoverished. The daily struggle just to get by.

Nobody expects the president or his advisers to wear sackcloth and ashes. But our national deficit obsession was a disaster – and it was – they should tell us what went wrong. If an era is truly ending, they should have taken this opportunity to tell the public why. And if austerity is really dead, as it should be, the President should explain why activist government must take its place.

A post-austerity budget should do more, much more, to address the critical problems our nation still faces. Until one of the parties presents a proposal like that, our society won’t get the fundamental debate – or the choice of ideologies – that it so richly deserves. As long as our leaders refuse to embrace time-tested methods for restoring jobs and growth, the Era of Austerity will still be with us.