8 Tips on How We Could Cut the Deficit, Since Slashing Social Security Benefits Won't Help
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AlterNet Editor's Note: The "chained CPI" or "chained Consumer Price Index" referenced in this report would calculate the cost-of-living increases in Social Security benefits by using a new formula that amounts to a cut in benefits.
News reports say the president’s proposed deal includes the “chained CPI,” which would impose drastic Social Security cuts and tax hikes for everybody but the wealthy. And House Minority Leader Nancy Pelosi says that “Democrats will stick with the president.”
They should both think again.
The “chained CPI” is being offered as part of a “deficit reduction” deal, even though Social Security is forbidden from contributing to the deficit. Even if you accepted this unreasoned act, it remains morally unacceptable to reduce spending on the backs of the elderly, women, the poor, veterans, disabled Americans, and the poor.
It’s even more unethical to do it when other options available could save much more money, And it’s even worse when we see who isn’t “sharing in the sacrifice” – a list that includes hedge fund managers, Wall Street gamblers, billionaires, drug companies, defense contractors, and tax-dodging corporations.
Independent estimates say that the “chained CPI” will slash Social Security benefits by $122 billion over the next ten years. Here are eight solutions that will save more money - and really will reduce the deficit – without compromising either our ethics or our sense of fairness:
1. Close multiple loopholes in the capital gains law: $174.2 billion. (1.42x)
Lawmakers could save nearly one and a half times as much money as they’ll get from stripping seniors, the disabled, veterans, and children of their benefits - 1.42 times as much, to be precise – by closing capital gains loopholes.
They include the “carried interest” loophole, which taxes hedge fund managers’ service fees at the low “investors’” rate; the ‘blended rate,’ which taxes some quick derivatives trades as if they were long-term investments; the ability to ‘gift’ capital gains to avoid taxation; a dodge for bartering capital gains; and the ability to ‘defer’ gains to future years.
A more aggressive approach – eliminating the capital gains altogether – could yield more than $900 billion in savings, but that might affect middle-class families and seniors. By using the “chained CPI,” America’s seniors, vets, and disabled are taking a hit so that hedge fund managers can keep their loopholes.
(Source: Calculations based on figures cited by the Center for Budget and Policy Priorities.)
2. Refuse to compromise on the president’s $250,000 figure for increased taxation: $183 billion (1.5x)
The president’s initial tax plan – the one he and his party ran on, the one that voters endorsed - called for letting the Bush tax cuts expire for income above $250,000. That would bring in an estimated $366 billion in added revenue over the next ten years. Now, say reports, he and the Republicans will agree on a figure that’s “somewhere in the middle.”
If true, the deal’s deficit reduction impact will be reduced by $183 billion. That’s one and a half times as much as the “chained CPI” will take from seniors, the disabled, veterans, and their dependents. They’ll pay — so that people earning $250,000 and up don’t have to.
(Source: CBPP estimate, divided in half.)
3. Reduce the budget for U.S. overseas military bases by 20 percent: $200 billion. (1.6x)
The United States maintains 702 military ‘installations’ in 63 foreign countries (it has 4,471 bases altogether), according to the Defense Department’s annual budget statement.
These figures don’t include bases in Iraq and Afghanistan. We’re talking about our military presence in nations like Germany, South Korea, and Japan. While the total cost of these bases is kept secret, the best analysis I’ve seen estimates their ten-year cost at approximately $1 trillion.