Paul Krugman: Obama’s proposal to cut Social Security is “cruel and stupid”

Paul Krugman writing in the New York Times on December 18:

First things first: cutting Social Security benefits is a cruel, stupid policy—just not nearly as cruel and stupid as raising the Medicare eligibility age. But sometimes you have to accept bad things in pursuit of a larger goal: health reform should have included a public option — heck, it should have gone straight to single-payer — but a flawed route to universal coverage was better than none at all.

The question about this looming deal is whether the end justifies the means. Unfortunately, it’s not nearly as clear a case as the health care deal, and I’m agonizing, big time; as of last night I was marginally positive, right now marginally negative. This is not good; there’s no good policy reason to be doing this, because the savings won’t have any significant impact on the underlying budget issues. And for many older people it would hurt. Also, the symbolism of a Democratic president cutting Social Security is pretty awful.

This is the bitter fruit of Obama’s so-called “balanced” approach. His proposal will serve those who have the most influence in D.C. (hint: not you) who want to lessen their obligation to pay taxes for social programs. In their dreams, they want to get their hands on that vast river of money and privatize it. But that’s for down the road. Slashing away at social safety nets is a start.

You may have noticed, reporting on the “fiscal cliff “ assumes social safety net programs or “entitlements” will be on the table. The news media has linked the two—tax hikes and entitlement cuts—joined like Siamese twins, reinforcing the idea that for a deal to be made they both have to be part of it. Obama will say he has to cut Social Security to make a “balanced” deal with Republicans, that he has to give them something, but make no mistake: Obama put Social Security on the table, because he wants it there.

Robert Kutner weighs in at the Americsn Prospect:

Especially foolish is the cut in Social Security benefits, disguised as a change in the cost-of-living adjustment formula. Before getting to the arcane details of the formula, here’s the bottom line. The proposed change will save only $122 billion over ten years, but it will significantly cut benefits for the elderly.

Because the cut is in the form of a change in the Consumer Price Index (CPI), the longer you live, the more is the total cut. On average, the cut is about 3 percent a year, but if you live twenty years after you start drawing benefits (the average), that adds up to over ten thousand dollars.

Put this in the context of the reliance of the elderly on Social Security. More than 70 percent of all recipients depend on Social Security for more than half their income.

The truth is, we need a higher COLA (Cost of Living Adjustment), not a lower one. The current COLA is not, by any estimation, large enough, because it does not adequately account for the large health care cost increases faced by seniors and people with disabilities.

Obama has always wanted to cut social safety nets

In 2006, in his “smoking gun” inaugural speech before Robert Rubin’s Hamilton Project, Obama telegraphed to those on Wall Street (who would play a huge role in elevating him to the presidency) that he was for “reforming” what he called the “tired, outdated” social safety net programs of the 1930s. For those who don’t know, The Hamilton Project is a neoliberal, Trojan-horse, think tank embedded at the liberal Brookings Institution. It was founded by Robert Rubin and other Clinton administration/Goldman Sachs alumnus who deregulated the banks and trashed the economy in 2008. In the inaugural speech before that group, Obama assures them he is one of them—a “free market guy.”

In December 14 appearance on Bill Moyers & Company, Yves Smith of the progressive blog Naked Capitalism and Bruce Bartlett, former advisor to Ronald Regan and George H. W. Bush, reminded Moyers that, after he was elected in 2008, Obama had dinner at with a group of conservatives at George Will’s home and assured them he would cut entitlements:

YVES SMITH: Well, This is where Obama wants to go. He just needs the Republicans to make noise so he can go where he wants to go.

BILL MOYERS: Which is where?

YVES SMITH: Obama wants to cut entitlements. He said this in a famous dinner with George Will. I think it was even before he was inaugurated. He went and had dinner with a group–

BRUCE BARTLETT: That’s right, a group of conservatives.

YVES SMITH: He met with a group of conservatives. And he made it very clear at this dinner that as soon as the economy was stabilized that he wanted to cut Social Security, well “reform.” But that’s just code for “cut” Social Security and Medicare. Obama really believes that this will be a signature accomplishment of his—which he will go down in history positively for.

My question is signature accomplishment in whose eyes? Clearly, it will not be a signature accomplishment in the eyes of Social Security recipients who will be living on less.

BRUCE BARTLETT: That’s right. If you go back to 2011 and look at the deal Obama put on the table, he was willing to make vast, vast cuts in entitlement programs. And the Republicans walked away from it, which only goes to prove that they don’t have the courage of their own convictions.

But Yves point is exactly correct. Obama really is maybe to the right of Dwight Eisenhower fiscally. And it’s really at the root of so many of our economy’s problems, because he didn’t ask for a big enough stimulus. He has let the housing sector basically fester for four years without doing anything about it. He’s really, you know, focused more on cutting the deficit than people imagine.

BRUCE BARTLETT: Fundamentally Barack Obama’s pretty conservative. He really is. He’s an Eisenhower conservative. He’s not a liberal.

YVES SMITH: I agree 100 percent. I mean, Obama has been—I’m always shocked when people call Obama a socialist, because he’s—in fact, I think you might be doing a disservice to Eisenhower.

Progressive Democrats like Sherrod Brown and Bernie Sanders have seen the Obama social safety net train wreck coming for a long time. For months they and others have been lining up support in the Senate and Congress against cutting Social Security, Medicare and Medicaid. But there are plenty of corporate Democrats ready to sign on to Obama’s deal, like Claire McCaskill of Missouri. How would the idea of cutting Social Security benefits poll in my home state of Missouri? My guess: not so well. Instead, how about cutting the bloated military/national security budget, or oil and agribusiness subsidies? How about really changing the tax code so that the wealthy and corporations pay their fair share?

It’s time to call your senators and congressmen and tell them if they vote to cut Social Security or any other social safety net, you will personally hang that mistake around their necks the next time they face a primary. Right now it’s a cruel and stupid Obama idea. Democrats should avoid making it a Democratic Party disaster.