Paul Krugman has a personal dilemma.
That's because President Barack Obama's most recent proposal for a fiscal cliff deal includes extending unemployment benefits and boosting spending, as well as a stingier inflation measure for Social Security benefits, which Krugman describes as a "a cruel, stupid policy" in his blog post.
"Am I dead set against? No, I'm still agonizing. Very uncomfortable times," the Nobel Prize-winning economist wrote Tuesday of Obama's plan on his New York Times blog.
Many economists have warned of the negative economic impact of going over the fiscal cliff, but Krugman argued in an interview with WNYC in November that going over the fiscal cliff -- or letting the scheduled tax hikes and spending cuts take place -- could be preferable to cutting a deal now.
President Barack Obama and House Speaker John Boehner met on Monday to continue talks on how to avoid the fiscal cliff. They appeared to draw closer to a deal, but Obama rejected Boehner's latest offer on Tuesday morning. Obama's offer on Monday would tie the cost-of-living adjustment for Social Security to the chained CPI, end the Bush tax cuts on annual incomes above $400,000 and let the payroll tax cut expire.
Switching to chained CPI, a stingier inflation measure, would slash the elderly's Social Security payments as they age. The average worker retiring at age 65 would receive $1,130 per year less at age 85 if the proposal is implemented -- nearly twice the yearly amount cut at age 75, according to a recent paper by the Center for Economic and Policy Research.