Obama Puts Social Security on the Chopping Block

| Wed Jan. 20, 2010 12:36 PM EST

Hope for lasting liberal change was washed away on Tuesday—not just with the loss of the Democrats' super-majority in the Senate, but with a closed-door deal that would lead to cuts in bedrock liberal programs such as Social Security, Medicare, and Medicaid. While Massachusetts voters were casting their ballots to install Republican Scott Brown in Ted Kennedy’s Senate seat, President Obama was hammering out an agreement with Democratic leaders to support a commission on the deficit with the power to propose reductions to entitlement programs. This proposal represents a capitulation to conservatives in both parties, and leaves liberals surrendering not only on health care, but on the core achievements of the New Deal and the Great Society.

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  As the Washington Post explains this morning:

Under the agreement, President Obama would issue an executive order to create an 18-member panel that would be granted broad authority to propose changes in the tax code and in the massive federal entitlement programs — including Medicare, Medicaid and Social Security — that threaten to drive the nation’s debt to levels not seen since World War II.

The accord comes a week before Obama is scheduled to deliver his first State of the Union address to a nation increasingly concerned about his stewardship of the economy and the federal budget. After a year in which he advocated spending hundreds of billions of dollars on a huge economic stimulus package and a far-reaching overhaul of the health-care system, Obama has pledged to redouble his effort to rein in record budget deficits even as he has come under withering Republican attack.

The commission would deliver its recommendations after this fall’s congressional elections, postponing potentially painful decisions about the nation’s fiscal future until after Democrats face the voters. But if the commission approves a deficit-reduction plan, Congress would have to act on it quickly under the agreement, forged late Tuesday in a meeting with Vice President Biden, White House budget director Peter R. Orszag, and Democratic lawmakers led by Senate Majority Leader Harry M. Reid (Nev.), House Speaker Nancy Pelosi (D-Calif.) and House Majority Leader Steny H. Hoyer (Md.).

Senate Budget Committee Chairman Kent Conrad (D-N.D.), who has long advocated creation of an independent budget panel, called the agreement an “understanding in concept” that holds the promise of at last addressing the nation’s most wrenching budget problems.

“This goes to the question of the country’s credibility with managing its own finances. This is essential for the nation,” Conrad said.

The commission is likely to form the centerpiece of Democrats’ efforts to reduce projected budget deficits, which have soared into record territory in the aftermath of the worst recession in a generation. Government spending to bail out the troubled financial sector and to stimulate economic activity have combined with sagging tax collections to push last year’s budget deficit to a record $1.4 trillion. The budget gap is projected to be just as large this year and to hover close to $1 trillion a year for much of the next decade.

The deal is based on a rickety interpretation of the country's basic laws governing taxation. Normally, any change in taxes must be passed first by the House, with legislation wending its way through the Ways and Means Committee up to the floor. But the proposed arrangement shortcuts—indeed appears to bypass—this procedure. The appointed commission is to make a recommendation on the budget after the November midterm elections. That recommendation will then go straight to the floor of both houses for an up or down binding vote. There are no congressional hearings and no opportunity for members of the House to weigh in on the proposals. To rub salt in the wound, this plan was largely crafted not by members of the House, but by vice president and former Delaware senator Joe Biden along with two senators: Kent Conrad, the North Dakota Democrat once considered heir to the Great Plains progressive tradition, and Republican Judd Gregg from New Hampshire.

The National Committee to Preserve Social Security and Medicare, which has been fighting the proposed commission, recently sent a letter to Congress disputing the entire premise of efforts to slash Social Security:

We appreciate the concerns of legislators who are looking for a means of reducing the federal deficit and slowing the growth in the debt. However, we have significant concerns about any process—including the Conrad-Gregg Commission—that would disenfranchise American voters and subject Social Security beneficiaries to harmful cuts in benefits. As supporters of Social Security, we are surprised to see the federal deficit and the federal debt cited as the reason a commission needs to be established to make cuts in Social Security. The truth is that neither the $1.4 trillion deficit nor the nearly $12 trillion debt has anything to do with Social Security benefits.   

For nearly three decades, Social Security has taken in more revenue each year than it has paid out in benefits. These excess funds have been invested in special issue U.S. government securities. Thus, Social Security has effectively been loaning its excess funds to the federal government to spend on other programs. Rather than increasing the federal deficit, Social Security’s annual surpluses have actually been covering up the true size of the deficit in the general fund.

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