Economy

Obama Appears to Have Abandoned the Idea of Cutting Social Security — For Now

Progressive victory over the austerity agenda could start a larger and needed conversation.

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A progressive political victory emerged in Washington in the fight over future funding of Social Security on Thursday, as news reports said President Obama will not propose using a new and stingier cost-of-living adjustment (COLA) formula that would cut future benefits when presenting his 2015 federal budget.

“The White House says President Barack Obama’s upcoming budget proposal will not include his past offer to accept lowered cost-of-living increases in Social Security and other benefit programs,” the Associated Press reported. “Those had been a central component of his long-term debt-reduction strategy.”

The AP report, later confirmed by the White House, is the latest twist in what has been a week of contradictory signals from top White House officials who said that Obama was still open to reductions in future Social Security benefits as part of a major budget deal with Republicans.

"This offer from the President remains on the table, Deputy Press Secretary Josh Ernest said Thursday, who went on to explain that the stingier COLA was not in the White House's proposed 2015 budget because Republicans never made a serious offer to end tax breaks for the rich.

"The President is not going to be in a position where he is going to ask senior citizens and middle-class families to make sacrifices in pursuit of reducing the deficit and not ask the wealthy and well-connected to make some sacrifices, too; that it’s just not fair and it’s not good policy," he said.

But the White House spokesman said that Obama was still open to future Social Security cuts if the Republicans got serious about closing tax loopholes. "If Republicans hearing this exchange are thinking to themselves, well, you know what, that makes a lot of sense, maybe I should call the White House and say, 'Hey, look, I’m willing to close some tax loopholes if you’re willing to put some entitlement reform changes on the table,' then I would encourage those Republicans to call the White House right now.  I’m sure we can set up a meeting and we can have a conversation about that. But that offer has been on the table for more than a year and we have not seen any constructive engagement from the other side."

The AP report prompted many progressive advocacy groups to issue press releases calling it "welcome news" and declare victory.

"We are thrilled," said Richard Fiesta, Executive Director of the Alliance for Retired Americans. "Our voices were heard. Nationwide, grassroots actions and people-powered politics worked. We applaud the President for doing the right thing: listening and keeping this unjust cut out of his budget proposal. A negotiating tactic or not, cuts to Social Security’s earned benefits will only serve to increase income inequality and hurt the most vulnerable members of our society."

In recent days, a groundswell of opposition has arisen in anticipation that Obama would include the so-called chained CPI in his fiscal year 2015 budget. Sixteen U.S. senators and 117 representatives have signed letters urging him to drop the proposal. Advocacy groups launched e-mail campaigns and were ramping up pressure Thursday morning—when the AP report broke.

The chained CPI would lower Social Security benefits by 6.5 percent over 20 years, the National Women’s Law Center found, saying that  equals 16 weeks of lost groceries for a single 85-year-old woman.

Since the mid-1980s, Congress has repeatedly cut back spending on Social Security by proactively instituting stingier cost-of-living formulas. Last fall, economist Dean Baker testified in Congress that benefits for retirees, averaging $1,290 a month in 2014, would be more than 25 percent higher without these cutbacks since 1983. In January, Congress similarly cut back future increases to veterans’ pensions.

The White House is expected to release its 2015 budget in early March. In the past week, top officials were equivocating on whether the chained CPI would be included.

On Thursday, Gene Sperling, outgoing White House Director of the National Economic Council and Assistant to the President for Economic Policy spoke at the “Morning Money Breakfast Briefing” in Washington organized by Politico.com and the Peter G. Peterson Foundation, which has spent millions on p.r. campaigns to significantly cut Social Security and other safety net programs to retire the federal debt without a tax increase. Tweets reported, “Sperling won’t say whether budget will include chained CPI [the stingier COLA]. Says potus [president of the United States] has been willing to compromise.”

Last Friday, top White House Spokesman Jay Carney was asked about the chained CPI and the 2015 budget and appeared to endorse it, saying, “What I can tell you is the president has demonstrated in the past and continues—and will continue to demonstrate his commitment to achieving additional deficit reduction that addresses our medium- and long-term challenges through a balanced approach.”

Progressives can claim a political victory because it will signal a shift in the framing of the discussion around strengthening Social Security. What progressives will likely do next is try to turn the political discussion to expanding Social Security benefits and raising taxes on the wealthiest Americans ensuring the program is solvent for decades.

In the Senate, Iowa Democrat Tom Harkin has introduced a bill to do just that. It would increase current benefits by about the same amount that the chained CPI would have cut—about $70 a month, shift to another COLA that more accurately tracks the elderly’s annual expenses, and raises Social Security taxes for people earning more than $117,000. Most Americans are not aware that only the first $117,000 of income is taxed for Social Security; capital gains are not taxed for it.

In contrast, debt-obsessed Republicans attacked Obama for not showing fiscal discipline and embracing austerity.

"The withdrawal by the President on this specific issue, and his general pivot away from focusing on the nation's medium and long-term fiscal challenges, reflects a dangerous trend," said Maya MacGuineas, head of the Peterson-bankrolled Campaign to Fix the Debt. "The nation needs the President to lead on this issue. The clear pullback on his part is a disturbing sign that he will not."

It will be a curious to watch if the issue is raised by Republicans in a 2014's congressional elections, as polls consistently find that upwards of 80 percent of Americans, regardless of party, support Social Security and back steps to strengthen it—including raising taxes on wealthier Americans.

Steven Rosenfeld covers national political issues for AlterNet, including America's retirement crisis, democracy and voting rights, and campaigns and elections. He is the author of "Count My Vote: A Citizen's Guide to Voting" (AlterNet Books, 2008).