On Twitter this morning I observed the irony that after an anemic jobs report the chattering classes would spend the rest of the day talking about whether the president’s budget (a summary of which was leaked today; the actual document is due to be released next Wednesday) offered enough spending cuts to be taken seriously.
The big news, if you want to call it that, is that the budget will formally propose what Obama has offered hypothetically as part of a “grand bargain” in exchange for significant new revenues: a shift to a “chained CPI” for Social Security COLAs (and other federal pensions and benefit programs, it seems), and some additional means-testing of Medicare benefits.
Whether or not chained CPI (which assumes consumers will switch to lower-price alternatives in purchases as overall prices rise) is a more accurate estimate of inflation, there’s no doubt utilizing it would operate as an across-the-board benefit cut—albeit one that occurs very slowly over time—something Obama and virtually all Democrats have opposed as a matter of principle in the past. There will be howls of outrage from Democratic members of Congress and progressive advocacy groups about this fresh Obama endorsement of the idea, some based on categorical rejection of Social Security benefit cuts, some based on the argument that Obama is offering a crown jewel and getting very little if anything in exchange from Republicans.
What may temper this reaction is the knowledge that this budget is entirely symbolic, and that it is certain to be rejected and denounced by House Republicans immediately for its inclusion of new revenues and its failure to project an actual balanced budget. It appears the White House is again trying to show a willingness to compromise for purposes of strengthening his hand in future fiscal battles, though some think it’s related to Obama’s effort to kick-start “grand bargain” negotiations with those Senate Republicans who are willing to consider some new revenues in exchange for “entitlement reform.”
For the record, there is actually some new spending in Obama’s budget: a pre-K initiative and this week’s “brain research” proposal, both paid for by a tobacco tax increase and a cap on the size of Individual Retirement Accounts. But there’s little in the way of “stimulus.” While the budget would cancel the appropriations sequester, it would in other ways achieve even lower defense and non-defense discretionary spending. Aside from the “offsets” just mentioned, new revenues in the budget—the usual reductions in “loopholes” theoretically supported by some Republicans—come in at $580 billion, a pretty low figure.
How you view this budget depends almost entirely on how you view Obama’s overall fiscal strategy. Is he maintaining the “high ground” on the budget, or making unilateral concessions to an opposition that is just going to pocket them without making any of their own? And is this budget connected to the forced fiscal negotiations that might occur in May or June if House Republicans decide to make a play on a new debt limit increase, despite warnings from the business community not to do so?
In any event, there’s zero that is self-executing about this budget, so it will mostly just represent another maneuver in a budgetary chess game that now seems increasingly disconnected from the economy.
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