Meanwhile, Back at the Fiscal Cliff Talks …

This editorial in the New York Times explains the current state of the fiscal cliff talks pretty well, IMO. In a nutshell, the President offered to split the difference over tax rate increases, and called for raising tax rates on people making $400,000 instead of $250,000. He also proposed a lot of spending cuts, including a plan to change the way Social Security cost-of-living increases are calculated so that benefits won’t increase as much as in the past.

As I understand it, Social Security increases currently are increased according to the cost of goods and services paid by urban wage earners. If the price of steak goes up, the CPI goes up and Social Security goes up. But the proposed change assumes that people will stop buying as much steak and will opt for chicken instead, so that version of the CPI wouldn’t go up. I’m seeing a race to the bottom, from porterhouse to Purina.

But never fear: it looks like Boehner is rejecting this proposal, never mind a lot of congressional Democrats.

BTW, the story that the President was going to agree to an increase in the age of Medicare eligibility turned out to be wrong, as I suspected. I think it’s unlikely there’s going to be a deal at all.

10 thoughts on “Meanwhile, Back at the Fiscal Cliff Talks …

  1. Obama got more votes than Romney. He needs to roll over the Repubs. No more Mr. Nice Guy

    Elections have consequences. It is time to help out the middle class and those striving to enter the middle class.

  2. No deal?
    Over the “Fiscal Molehil… er, uhm, Cliff” we go!
    That’s fine with me.
    Because the only good deal that “We the people” will get, is if all of the present ones expire.

    As for CPI and COLA, let me ask this:
    From Purina, you go to the house brand of cat food.
    And then what?

    What do you eat, when house brand cat food is too costly?

    For easier access, will they make laws that dumpsters have be in the ground, because seniors and the handicapped have a tough time climbing up on them, and then back down?

    If it doesn’t happen in a few days, I hope the Mayans were only off by a few weeks or months – because this “Death By a 1,000 Earned Income Cuts” will take too long.

  3. As I understand it, for me, the post-Cliff tax increase will shrink each paycheck by roughly $40.00. A bit crunchy since I’m paying for a new car, but lucky me– I have a paycheck and a new car.

    It’s spending cuts for the unemployed, the poor and the elderly that scare me. I hope the Dems of the 2013 Congress are ready to scramble to patch those holes. This Republican idea that there is some sort of equivalence between restoring pre-2001 tax rates on the wealthiest Americans, and cutting the safety net for the poorest Americans, is BS of the lowest order.

  4. Well, so much for those of us who thought the campaign rhetoric and the re-election meant that Obama was done with his compulsive desire to “be reasonable” with unreasonable people. Boehner and McConnell responded to Obama’s first proposal with crude ridicule, despite it being essentially what he won re-election on. And then the GOP offered nothing serious. So, now Obama is offering them more? He really doesn’t understand how to play this game, does he?

  5. I think you’re pretty much spot on – the idea is to change the measure of inflation from one that measure *inflation* to one that measures *absolutely required spending*.

    So, if the price of beef and pork goes up, but chicken is cheap, then they give you enough of a raise in social security that you can buy enough chicken to replace the beef and pork you can’t afford. So, basically, although social security is just barely enough to live on[1], they won’t have COLAs that keep it at that level. They’ll have COLAs that suggest that you scrimp constantly, just to avoid losing ground.

    [1] Technically, it was never expected that people “should” live on Social Security. It was intended that it would be one leg of the three legged stool: Social Security, private pensions, and personal savings. Now, a lot of people have 401(k) plans that are the only pension they have – and sometimes, these are the only savings people actually have. So, they’re shaving one leg of the stool, while knowing full well that most people only have one other “leg”.

  6. And the real scam, as it applies to switching to chained CPI, is that the “substitution effect” doesn’t really apply to medical expenses, which are what comprises a lot of the spending for these recipients. You can’t just switch out your heart surgery for a cheaper toe surgery, or switch from insulin to plain water.

    If we were to switch to an adjusted measure of the “real” inflation felt by seniors, it would be HIGHER than regular CPI, not less, as is the “chained CPI”.

  7. Hey, here’s an idea. What if the taxes on “job creators” were tied in some fashion to the number of jobs they actually create? It shouldn’t be too hard to calculate the net number of jobs an individual or a corporation has created in a given year. If they really are helping the economy, that would entitle them to a tax break, but they should have to earn it. We’ve got very powerful computers these days, so there’s no reason to rely on an untested assumption that jobs magically appear whenever tax rates go down. You can quantify these things.

  8. I’m not invited to sit in on strategy sessions at the White House. So this is just speculation. If you view the election as a status-quo event – which it was and if you anticipate GOP obstruction as the most likely outcome – which seems likely THEN the prospects for legislative solutions in the next two years are bleak. Yeah, there are some things that can be done by executive decree, but to really turn things around, ya got to get rid of the Tea Party obstructionists in the House – in 2014. If anyone thinks that’s wild speculation, tell me where I went off the rails.

    So the object of the game is to mug the radicals in the House – or better yet, have them mug themselves. There has to be a clear contrast between the WH and the radical fringe in the House – clear enough that even the low-information voter will get it. The goal is to have the WH look sane and moderate and have the teabaggers frothing in front of the cameras. This is politics as theater – where voters are the audience – having to figure out who is the villain by what they DO on the stage.

    My guess is that the WH knows what the bottom line for the GOP is – what they will accept without revolting against Boehner. Obama is going about halfway to that point. That makes him look moderate and willing to bargain – it might even force Boehner into accepting and trying to sell a deal to his party. Boehner is up for election – or his seat as speaker is up – in January. If he is replaced it will probably be Cantor – who is much less reasonable than Boehner. So if negotiations fail (by design) and Obama looks like he was willing to deal – the House might act on the belief that they need someone MORE conservative than Boehner. That looks like a disaster, but the goal is to draw a contrast clear enough for a low-information voter in 2014. So Obama works to look ever-so-reasonable offering what the public might accept but the Teabaggers will reject – repeatedly and rudely for the cameras.

    I think Obama is ‘playing’ the teabaggers and the democrats because nothing strengthens Obama’ hand with moderates like criticism from his own party.

  9. The job creator issue is a bit of a red herring. In a small business or partnership, salaries and benefits are fully deductible… no need to calculate additional tax breaks. Plus, as many have pointed out, we don’t have supply side issues… or, if we do, it’s on the side of creating real jobs, rather than seeking Bain style investments.

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