Mitigating the Damage on Chained CPI?

Confirming a variety of earlier hints, in today’s Wall Street Journal, John McKinnon reports that when the president’s FY 2014 budget is formally unveiled tomorrow, his toxic-to-progressives proposal to embraced Chained CPI for Social Security COLAs will be mitigated by “protections” for the very poor and the very old:

White House officials have said they would propose adopting chained CPI with “protections for vulnerable” Americans, but haven’t released details on the protections or how they define that group.

Obama senior adviser Dan Pfeiffer said Sunday on ABC it would include “the oldest seniors.”

On Monday, a person familiar with the situation said very-low-income seniors and veterans also would be shielded, but didn’t say how. Other protections also would be included, the person said.

We’ll have to wait for the exact proposal, but earlier administration talk about a mitigated version of Chained CPI provoked a detailed pre-buttal by the Strengthen Social Security umbrella group.

It seems the likely vehicle for protecting the poorest-of-the-poor (and the disabled) is to exempt Supplemental Security Income payments. That, claims the “pre-buttal,” ignores the millions of “dual-eligibles” who rely on both SSI and Social Security benefits, and also the poor and near-poor who don’t qualify for SSI.

As for the “oldest of the old,” the administration has been considering what is called a “birthday bump” (a modest benefit increase) for beneficiaries–overwhelmingly women–who have been in the program for 20 years. That would not, says Strengthen Social Security, make these beneficiaries whole, and those who continue to live into their 90s will gradually lose significant benefits.

You can read the whole “pre-buttal” if you want, but the political implications are that progressives angry at Obama for “going there” on Chained CPI are not likely to draw in their horns if the administration includes such mitigating measures. For one thing, their strategy has always been to take Social Security entirely off the table in deficit reduction discussions on grounds that the program really isn’t (in contrast to Medicare) part of the
problem, at least until far down the road. For another, the political opposition to any Social Security benefit cuts is heavily centered among beneficiaries who would not get “protected.” And finally, the meta-argument against this step by Obama is that no matter how carefully he crosses the line, Republicans will declare Social Security (and other entitlements) fully on the chopping block as a matter of bipartisan consensus, and proceed to demand more radical benefit cuts.

We’ll see if the administration gains anything from including mitigating measures alongside Chained CPI with any distinct group in or out of Congress. The other thing to watch tomorrow is the scope of programs and tax adjustments to which the administration would apply chained CPI. Federal employee pensions could also take a hit, and as we are reminded today at Wonkblog (in a reprint of a December piece by Dylan Matthews), Chained CPI could also have negative tax consequences for a lot of middle-class folks.

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.