Cliff Hanger: The President’s Unnecessary and Unwise Concessions

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.

This piece is cross-posted from Robert Reich’s blog with permission.

2 Responses to “Cliff Hanger: The President’s Unnecessary and Unwise Concessions”

princess1960December 20th, 2012 at 2:42 pm

President Obama have power for veto but this give to him all the responsibility after all.Ithink will be much better with close vote (and this give to him choice for take action ..) for both side. My opinion (is ligo poli) the same measures… so i don't understand where is the big problem ?
thank you

carlyleDecember 20th, 2012 at 5:51 pm

What we really need is a lot more revenue and a lot more spending. Every dollar of federal, state and local spending cuts comes in part, from the pay check of some American worker. American workers are already in trouble after a terrible decade of declining real income.
This weak President does not seem to know that if we continue a low growth, high unemploynent economy, Democracy will die. There is no plan by our President or the Republican Party to correct our dismal, slow growth trend.

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Richard has published papers on wages policy, the taxation of financial arrangements and macroeconomic issues in Pacific island countries. Views expressed in these articles are his own and may not be shared by his employing agency. He is the author of How to Solve the European Economic Crisis: Challenging orthodoxy and creating new policy paradigms