Fiscal cliffhanger: Obama's unwise concessions
President Barack Obama has returned to making premature and unnecessary concessions to Republicans in the fiscal cliff debate, Reich writes.
President Barack Obama speaks about the fiscal cliff as he takes questions from reporters Wednesday at the White House in Washington. Obama is making unnecessary concessions in the fiscal cliff debate, Reich writes.
Charles Dharapak/AP
Why is the President back to making premature and unnecessary concessions to Republicans?
Two central issues in the 2012 presidential election were whether the Bush tax cuts should be ended for people earning over $250,000, and whether Social Security and Medicare should be protected from future budget cuts.
The President said yes to both. Republicans said no. Obama won.
But apparently the President is now offering to continue to Bush tax cuts for people earning between $250,000 and $400,000, and to cut Social Security by reducing annual cost-of-living adjustments.
These concessions aren’t necessary. If the nation goes over the so-called “fiscal cliff” and tax rates return to what they were under Bill Clinton, Democrats can then introduce a tax cut for everyone earning under $250,000 and make it retroactive to the start of the year.
They can combine it with a spending bill that makes up for most of the cuts scheduled to go into effect in January. Republicans would be hard-pressed not to sign on.
Social Security should not be part of any such deal anyway. By law, it can’t contribute to the budget deficit. It’s only permitted to spend money from the Social Security trust fund.
Besides, the President’s proposed reduction in annual Social Security cost-of-living adjustments would save only $122 billion over ten years. Yet it would significantly harm the elderly.
It defies logic and fairness to give more tax cuts to the wealthy while cutting benefits for the near-poor.
The median income of Americans over 65 is less than $20,000 a year. Nearly 70 percent of them depend on Social Security for more than half of this. The average Social Security benefit is less than $15,000 a year.
Even Social Security’s current cost-of-living adjustment understates the true impact of inflation on elderly recipients, who spend far more on health care than anyone else – including annual increases in Medicare premiums.
Hands off Social Security. If the Republicans are willing to raise tax rates on high earners but demand more spending cuts in return, the President should offer larger cuts in defense spending and corporate welfare.