WASHINGTON -- Congressional Democrats, led by House Minority Leader Nancy Pelosi (Calif.), signaled greater willingness on Wednesday to cut Social Security benefits, with the party now considering a change to the way inflation is calculated for recipients.
Pelosi told reporters on Capitol Hill that a cut proposed by President Barack Obama in the fiscal cliff negotiations would in fact "strengthen" the program, echoing the claims often made by Republicans about entitlement programs they want to slash.
Her remarks come a day after she said that liberals in Congress who are unhappy with Obama's concession to the GOP would nevertheless support them.
The cut involves swapping out the traditional method for calculating cost of living increases, based on the current standard for measuring inflation, for something called a chained CPI, or chained Consumer Price Index.
The chained CPI works by assuming that when the price of a product, such as beef, gets too high, consumers don't keep paying the higher prices. Instead, the model predicts they will switch to something cheaper, such as chicken, keeping their cost of living lower and leading to a lower rate of inflation, as measured by the chained CPI. The lower rate of inflation would mean a downward adjustment in cost of living, and thus stingier benefits.
The cuts would start small, but wind up costing beneficiaries thousands of dollars over time, which is why Democrats have traditionally fought the idea.
But Pelosi wrapped both her arms around it Wednesday, insisting she does not regard it as a "cut."
"No, I don’t," she told reporters. "I consider it a strengthening of Social Security, but that’s neither here nor there."
"There’s no use even discussing that because we don’t even know if we have plan," she continued. "And if the savings that the Republicans are talking about is $300 billion, then the cuts to be made on the other side are far lower. And that’s how we see it. But it is interesting to see that even with the concessions on cuts and, what you just described, the chained CPI and things like that -– the president put on the table what everybody has been discussing for quite a long time. And once again, as he did 18 months ago, the speaker walked away. The speaker walked away. There’s an attempt to try to put it at the president’s doorstep, which is completely ridiculous. In fact, some would say, 'befuddling.'"
Earlier in her press conference Wednesday, however, Pelosi seemed to be expressing opposition to the concession. "I’ve said to the members: 'express yourselves,' you know, 'speak out against,' because I’m not thrilled with the president’s proposal, I mean, it is what it is in order to save the day," she said. "But that doesn’t mean that we’ll all identify with every aspect of it. So, they go forth with my blessing."
She also noted that Obama’s plan protects low-income individuals from the Social Security changes, which should quell some of the concerns among Democrats.
Pelosi, in being open to the inflation calculation concession, has some liberal company. Bob Greenstein of the Center on Budget and Policy Priorities has written on behalf of it, and notes that the Center for American Progress, as well as the late Bob Ball, a revered defender of Social Security, have also put forward plans that included it.
She's also far from the only Democrat sending confused signals, decrying Obama's proposal while remaining open to it.
Sen. Tom Harkin (D-Iowa), a longtime defender of Social Security, said Wednesday his support depends on how the proposal is packaged. "A chained CPI that's attached to Social Security, for example, that does not protect lower income, those that are just barely above the minimum in terms of what they're making in Social Security would not be something that I could support," Harkin said. He continued that such a measure should not be part of the current fiscal cliff discussion.
But later is another matter.
"You want to talk about chained CPI, we'll do that later when we talk about the solvency of Social Security," Harkin said.
Others used similarly strong, but vague, language. Sen. Sherrod Brown (D-Ohio) told reporters Tuesday regarding members discussing the chained CPI: "They shouldn't be." But he also added that he didn't know if he'd vote against it. "I'd vote on a whole package," he said. "I very much don't like that [chained CPI]."
Sen. Carl Levin (D-Mich.) said, "It'd be a problem for Democrats," and added that his vote would depend on the overall package.
"I think chained CPI needs to be considered on its own merits," Levin said. "I prefer not. I think we need to look at how it would be implemented. There needs to be considerably more work done. My strong preference is that it not be included."
Pelosi's reasoning on Social Security focuses on the costs of the program. Logically, a way to strengthen it even further would be to cut it much deeper. It's no coincidence that Rep. Paul Ryan (R-Wis.), who takes that argument to its logical extreme, also employs the term "strengthen" when talking about his plan, which slashes Medicare spending. While weakening a program to strengthen it may seem at first to be wholly counterintuitive, it begins to make sense from a different perspective. For beneficiaries, the program is weaker, as it pays out less. But for taxpayers, it's stronger, because the program can meet its obligations for a longer period of time without taxes being raised. The extra costs are borne instead by seniors.
That logic, however, is only ever applied to entitlement programs that have their own revenue streams. Nobody would attempt to argue that the military was strengthened by cutting its budget, or that education was strengthened by slashing funding for it.
Social Security was created in the 1930s to combat elderly poverty. It worked: Giving money to older Americans made them less poor. Shrinking benefits would correspondingly lower their standards of living.
Members of the Congressional Progressive Caucus stood by their opposition Wednesday, pointing to a letter signed last week by 102 Democrats that demanded the chained CPI be kept out of any deals.
“Reducing cost of living adjustments is a Social Security benefit cut," said Rep. Charlie Rangel (D-N.Y.), one of the CPC members. "Any deal that cuts Social Security, Medicare or Medicaid benefits is unacceptable and I will oppose it.”
Ryan Grim and Arthur Delaney contributed reporting.
The U.S. incarcerates its citizens at a rate roughly <a href="http://www.parade.com/news/2009/03/why-we-must-fix-our-prisons.html" target="_hplink">five times higher than the global average</a>. We have about 5 percent of the world's population, but 25 percent of its prisoners, according to The Economist,. This status quo costs our local, state and federal governments a combined $68 billion a year -- all of which becomes a federal problem during recessions, when states look to Washington for fiscal relief. Over the standard 10-year budget window used in Congress, that's a $680 billion hit to the deficit. Solving longstanding prison problems -- releasing elderly convicts unlikely to commit crimes, offering treatment or counseling as an alternative to prison for non-violent offenders, slightly shortening the sentences of well-behaved inmates, and substituting probation for more jail-time -- would do wonders for government spending.
End Of The Drug War
The federal government spends more than <a href="http://www.cbsnews.com/8301-18563_162-20072096.html" target="_hplink">$15 billion a year</a> investigating and prosecuting the War on Drugs. That's $150 billion in Washington budget-speak, and it doesn't include the far higher costs of incarcerating millions of people for doing drugs. This money isn't getting the government the results it wants. As drug war budgets balloon, drug use escalates. Ending the Drug War offers the government two separate budget boons. In addition to saving all the money spending investigating, prosecuting and incarcerating drug offenders, Uncle Sam could actually regulate and tax drugs like marijuana, generating new revenue. Studies by pot legalization advocates indicate that fully legalizing weed in California would yield <a href="http://canorml.org/background/CA_legalization2.html" target="_hplink">up to $18 billion annually</a> for that state's government alone. For the feds, the benefits are even sweeter.
Let Medicare Negotiate With Big Pharma
The U.S. has <a href="http://www.reuters.com/article/2009/06/01/us-healthcare-costs-sb-idUSTRE5504Z320090601" target="_hplink">higher health care costs than any other country</a>. We spend over 15 percent of our total economic output each year on health care -- roughly 50 percent more than Canada, and double what the U.K. spends. Why? The American private health care system is inefficient, and the intellectual property rules involving medication in the U.S. can make prescription drugs much more expensive than in other countries. Medicare currently spends about $50 billion a year on prescription drugs. According to economist Dean Baker, <a href="http://www.cepr.net/documents/publications/intellectual_property_2004_09.pdf" target="_hplink">Americans spend roughly 10 times more than they need to</a> on prescription drugs as a result of our unique intellectual property standards. These savings for the government, of course, would come from the pockets of major pharmaceutical companies, currently among the most profitable corporations the world has ever known. They also exercise tremendous clout inside the Beltway. President Barack Obama even <a href="http://www.huffingtonpost.com/2012/09/02/barack-obama-politics_n_1847947.html" target="_hplink">guaranteed drug companies more restrictive -- and lucrative -- intellectual property standards</a> in order to garner their support for the Affordable Care Act.
Offshore Tax Havens
The U.S. Treasury Department estimates that it loses about <a href="http://www.ctj.org/pdf/stopact.pdf" target="_hplink">$100 billion a year</a> in revenue due to offshore tax haven abuses. Sen. Carl Levin (D-Mich.) has been pushing legislation for years to rein in this absurd tax maneuvering, but corporate lobbying on Capitol Hill has prevented the bill from becoming law.
Deprivatize Government Contract Work
In recent years, the federal government has privatized an enormous portion of public projects to government contractors. Over the past decade, the federal government's staffing has held steady, while the number of federal contractors has <a href="http://pogoarchives.org/m/co/igf/bad-business-report-only-2011.pdf" target="_hplink">increased by millions</a>. This outsourcing has resulted in much higher costs for the government than would be incurred by simply doing the work in-house. On average, contractors are paid <a href="http://pogoarchives.org/m/co/igf/bad-business-report-only-2011.pdf" target="_hplink">nearly double</a> what a comparable federal employee would receive for the same job, according to the Project On Government Oversight.
Print More Money
There's an old saying in economics: You have to print money to make money. <a href="http://www.huffingtonpost.com/2012/10/09/underwear-sales-growth-economy_n_1952214.html" target="_hplink">Okay, there's no such saying</a>. Nevertheless, the great boogeyman of many conservative economic doctrines -- inflation -- isn't such a bad idea during periods where much of the citizenry is drowning in debt. Inflation is by no means a perfect remedy: it's a stealth cut to workers' wages. But it also has many benefits that are often unacknowledged by the Washington intelligentsia. Inflation makes housing debt, student loan debt and any other private-sector debt more manageable. Today, when <a href="http://www.corelogic.com/about-us/researchtrends/asset_upload_file448_16434.pdf" target="_hplink">10.8 million</a> homes are underwater -- meaning borrowers owe banks than their houses are worth, moderate inflation could ease that debt burden. By effectively reducing monthly bills, moderate inflation could actually put more money in the pockets of these homeowners to spend elsewhere, thus stimulating the economy. Moderate inflation -- 5 percent or so -- could also help alleviate the <a href="http://www.cbsnews.com/8301-505145_162-57555780/student-loan-debt-nears-$1-trillion-is-it-the-new-subprime/" target="_hplink">$1 trillion</a> in student debt currently plaguing America's graduates. Make no mistake -- hyperinflation of 20 percent, 30 percent or more -- is bad. But the U.S. has ways to crush inflation when it gets out of hand, as proven by the Federal Reserve under then-Chairman Paul Volcker in the early-1980s.
Print Less Money
The government prints a <em>lot</em> of $1 bills. But it turns out that minting $1 coins is much, much cheaper. Over the course of 30 years, the government could save $4.4 billion by switching from dollar bills to dollar coins. Here's looking at you, <a href="http://www.usmint.gov/mint_programs/nativeamerican/" target="_hplink">Sacagawea</a>.
Immigration: Less Detention, More Ankle Bracelets
The government spends <a href="http://newamericamedia.org/2012/04/ice-slow-to-embrace-alternatives-to-immigrant-detention.php" target="_hplink"> $122 per person, per day</a> detaining immigrants who are considered safe and unlikely to commit crimes. The government has plenty of other options available to monitor such people, at a cost of as little as $15 per person. For the first 205 years of America's existence, there was no federal system for detaining immigrants. The process began in 1981.
Financial Speculation Tax
Wall Street loves to gamble. In good times, financial speculation is the source of tremendous profits in America's banking system, but when the bets go bad, the government picks up the tab, as evidenced by the epic bank bailouts of 2008 and 2009. Unfortunately, this speculation is difficult to define in legalistic terminology and even more difficult to police. One solution? By taxing every financial trade at the ultra-low rate of 0.25 percent, the U.S. government can impose a modest incentive against gambling for the sheer sake of gambling. If there's an immediate cost to placing a bet, a lot of traders will choose not to bet. What's more, this tax could raise about <a href="http://www.ips-dc.org/media/why_a_financial_transaction_tax" target="_hplink">$150 billion a year</a> for the federal government.
Taxing greenhouse gases would generate $80 billion a year right now, and up to $310 billion a year by 2050, <a href="http://www.brookings.edu/research/papers/2012/07/carbon-tax-mckibbin-morris-wilcoxen" target="_hplink">according to an analysis by the Brookings Institution</a>. It would also help avert catastrophic ecological and economic damage from climate change.