Fiscal Cliff Countdown : Unchain Us, Senator Reid, From Chained CPI

Fiscal Cliff Countdown : Unchain Us, Majority Leader Reid,
From Chained CPI

Michael Matthew Bloomer, December 30, 2012

On Friday I wrote that a fiscal cliff deal that would appeal to enough GOP House and Senate legislators to provide a winning margin, particularly in the House, would invite a flanking movement from the left. ¹ That may indeed be brewing. Today’s reports² portray Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell at impasse over both the $250,000 income ceiling for maintaining the Bush era tax rates, and the proposal sought by all Republicans and some Democrats (including the President) to use a new inflation indexing equation when adjusting social security benefits and tax rate income levels, the so-called Chained CPI. Dylan Matthews at the Times perfectly summed up its real attraction to our punch drunk pols this way:

Here is a sentence you won’t hear politicians or policy wonks saying in the next few weeks: “We should pay Social Security beneficiaries less in the future and push a lot of people into higher tax brackets.” Here is a sentence you almost certainly will hear: “Let’s adopt chained CPI.”³

For Republicans, though, there’s a schizophrenic quality to their Chained CPI hucksterism:

• We all recognize their delight in anything that would reduce social security benefits, and a linking of benefit increases to the Chained CPI would do that, and immediately (unless they delay it for a certain period of time in the legislation that might emerge). This is simply a part of their long term strategy to defund social safety net programs, nothing new here; but
• the Chained CPI, so helpful to GOP efforts to make the social security dependent poor poorer, will lead, through the operation of hardhearted mathematics, to more people becoming upwardly mobile, but in these cases, in the wrong way: i.e. upwardly mobile in tax bracket. The chained CPI has this double edged quality, its use will cause more taxpayers into higher tax brackets sooner than would the CPI presently used by the IRS when setting income to tax bracket benchmarks. Why? Because Chained CPI equations result in lower measured rates of inflation than the one presently used, thus putting upward pressure on bracket creep.

The Tax Policy Center did the math⁴, and below is the Chained CPI effect across income levels. As you can see the tax is very regressive with incomes in the median range of American families most adversely affected, and the upper two wealthiest groups barely nudged. Funny how that works.

Bad Chained CPI, bad! Go to your room!

So here we have the GOP, the “no new taxes, no old taxes, no taxes forever more” party, the party created in the darkly lit laboratory of demented scientist Herr Doktor Norquist, openly advocating a policy that raises taxes through the operation of applied mathematics, something they really have little grasp of. It’s like a stealth weapon aimed at their own supposed principles. Yet, it does have a certain winning charm for Republicans of our era. It’s this: If taxes are going to rise anyway, then let it be on the lower and middle economic groups! It’s their federal government. Let them pay for it! Enrichissez-vous!

As for Democrats, why do some buy into the Chained CPI? Rather than any animus toward the income groups that would be so badly affected, their unfamiliarity with IRS math explains it with more precision. Indeed, the Democratic party and Obama administration have been actively – and now, desperately – crusading for middle class tax rates to stay where they are and, instead, to return upper income earners to higher Clinton era tax rates. Also, being Democrats of this millennium, they tend to squirm in learned helplessness even when they have a decided lead in polls of Americans. They have shown signs in the past year of a backbone growth spurt, especially the once far more cautious and soft spoken Harry Reid, and our own President Obama as well. But still Democrats are always one misstep away from snatching defeat from . . . well, you know.

In the past 48 hours, though, and especially today, Reid and the President have perhaps downed a few Red Bulls. The President, for example, called out the Republicans by name for their stubbornness over agreeing to a balanced fiscal cliff agreement.

“The offers that I’ve made to them have been so fair that a lot of Democrats get mad at me. … I offered to make some significant changes to our entitlement programs … They [Republicans] say that their biggest priority is making sure that we deal with the deficit in a serious way. But the way they’re behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected. That seems to be their only overriding, unifying theme. …”⁵

He’s playing hardball again. Campaigning.

Progressives too have, I believe, deftly lobbied behind the scenes during the past two days for Harry Reid to push against the Chained CPI proposal, a proposal that however one looks at it is a loser for 95% of Americans. Recall that just a day or two ago Chained CPI was assumed to be a done deal, particularly given President Obama’s reluctant support for it. As I wrote on Friday,⁶ progressives have signaled they will not approve any deal that endangers social security or pushes the tax burden onto the middle class and those seeking to enter the middle class. The Chained CPI would do both, and for progressives that’s a lose-lose proposition. There are enough progressives in the House to endanger passage of a bill that gives too much away to those who seek to make most Americans poorer and, in doing so, less restive. Or so Republicans think . . .

And who knows, if Democrats hold the line on this issue Grover’s GOP Frankenstein just might blink . . .

Can we talk, Senator McConnell?

Please follow and like us: