Why the Pelosi Rule MAY not be a sell-out on Social Security

by Bruce Webb

There is a huge disturbance in the Force, at least as sensed by the Jedi of FireDogLake, Democratic Underground, AMERICAblog, and OpenLeft, which is to say among the Obama-skeptics of the Left. The substance is this, in a last minute move prior to adjournment Nancy Pelosi pushed through the rule for handling the recommendations of the Obama Deficit Commission, and on the surface they mirror that of Cooper-Wolff or its Senate counterpart Conrad-Gregg, that any recommendations coming out of the Deficit Commission has to be voted up or down without amendments. The actual language is here:

“Commits the House to vote on any Senate-passed recommendations of the bipartisan Fiscal Commission and that net savings from any Commission recommendations will go to deficit reduction.”

Meaning on the FDL reading that any Commission proposal focusing heavily on Social Security benefit cuts can simply sail through with Republican and Blue Dog support. Simple sell-out right? Well maybe. But whatever the intent of the players, including Pelosi, the effect might be much different. Because despite strong and deliberate similarities the Obama Deficit Commission is NOT the same as either Cooper-Wolff or Conrad-Gregg. Argument below the fold.

The entire Peter G Peterson backed argument as manifested in both Cooper-Wolff and Conrad-Gregg is that the major threat to the economy going forward is long-term deficits, that the major cause of those deficits are projected to be entitlements, and that the only solution is major cuts to those benefits. In this vision the disease and the medicine are determined beforehand and the whole purpose of the Commissions is to give bi-partisan cover backed up by a requirement that any proposal coming out of such a Commission is subject to an non-amendable up or down vote. And if this vision was still controlling the entire debate then this would look like total surrender by Pelosi. But I argue that it isn’t, that the Obama Commission was formally given a much different mission, and one that in the end conflicts and subverts that of PGP.

The main impetus for the Obama Commission was not the structural long-term deficits seen as the result of ‘unsustainable’ entitlements, instead it was the very large, as in more than a trillion a year, deficits starting with FY 2009 as a result of the worldwide economic crisis, that is the crisis is not defined as intergenerational but instead in the here and now with the main expressed fear is that without action the Invisible Bond Vigilantes and the Chinese Central Bank will stop buying our debt. Well I’ll leave that bigger argument to Prof K, the result was that the Obama Commission was given a specific charter, that of getting the deficit down to 3% of GDP by 2015. And the problem in a nutshell is that you can’t get there via benefit cuts to Social Security, one because Social Security is not actually projected to contribute to the deficit over that time period and two because even the most draconian proposals don’t start operating by then.

It has been an accepted principle since the Leninist Strategy of 1983 that benefit cuts shouldn’t come at the expense of people in or nearing retirement, a principle that was also the first one listed by Bush’s CSSS (Commission to Strengthen Social Security) in 2001, and followed by the various proposals fronted by Alan Simpson, the Ryan Roadmap, and even Michelle Bachmann. Each would give varying periods of grace ranging from seven years (Simpson) to not effecting people over 55 (Ryan Roadmap) to as much as 20 years. But what all share in common is that none of them show any savings under CBO scoring prior to the mandated target of 2015, they simply CAN’T bend the short term deficit path.

It is not clear that any of PGP, the Obama Commission, or Speaker Pelosi quite get this because the whole argument has been framed in terms set by the Social Security and Medicare Trustees where the score is generally expressed over the 75 year actuarial window, or since 2003 over the Infinite Future Horizon. Under those long-term scoring windows new revenues or benefit cuts get scored in the current year even if the actual incidence of the tax increase or benefit cut doesn’t occur for years or even decades. Well all of that is fine in its own place but it doesn’t cut any ice when it comes to projected deficits in 2015, when CBO scores whatever recommendations come out of the Commission, 2015 won’t (or shouldn’t) get credit for savings that won’t be seen until 2030 and later. Now the argument can and will be made that future cuts add current confidence to those nervous (but as yet invisible) Bond Vigilantes, but at most the real effects in 2015 could only be seen in lower interest rates, and those rates are rock bottom now.

How does this play out in practice? Assume the worst, that the real intent of the Catfood Commission is to slash entitlements and particularly Social Security, the question is whether they can present a package that does that yet doesn’t do anything for 2015’s bottom line? Can they get away with putting forth a ‘deficit reduction’ proposal that under CBO scoring doesn’t actually lower the deficit by 2015 or within the standard 10 year scoring window? Well I don’t see that they can, not without revealing their true colors. And this is where the Pelosi Rule might actually work to protect Social Security.

Cooper-Wolf and Conrad-Gregg were both to be established pretty much openly as ‘Entitlements Commissions’ along the lines of the 1994 Kerrey-Danforth ‘Entitlement and Tax Reform Commission’ http://www.ssa.gov/history/reports/KerreyDanforth/KerreyDanforth.htm , a package entirely focused on entitlements would not only not be surprising but expected giving the framing. But the Obama Commission has a different framing, that of near term deficits, requiring a different approach, the Commission has to at least present some measures that will actually address their charter of reducing the 2015 deficit. Which means revenue enhancements and spending restraint OUTSIDE of Social Security. (Or just biting the bullet and cutting current SS benefits, something most concede would be political suicide). Now the examples of the Stimulus and HCR Bills tells us how this could work, the Commission introduces a balanced proposal of short and long term revenue increases and cuts with a focus on both 2015 and 2083 and that proposal gets whittled down bit by bit ostensibly to gain the votes of Conservadems and Blue Dogs, but really just to eliminate any tax increases or defense cuts leaving only entitlement ‘reform’ intact. The Pelosi Rule, by intent or not, prevents that whittling process.

Seen in this light Pelosi would be simply calling the Blue Dogs bluff, is it really about deficit reduction? or about slicing away at the social safety net?

I don’t believe the Commission can get away with a package that only slashes future entitlement payments but does nothing about near term deficits, it would just be too raw in light of their mandate. Yet the more cover they add in the way of truly bi-partisan measures to increase revenue and cut discretionary spending, including military, the more support will bleed from Conservadems and Blue Dogs, to say nothing of Republicans, while Progressives are not going to jump on board an entitlements cut only program. Where they might have gotten away with a straight out Entitlements Commission whose focus was on 75 year and Infinite Future savings, they are handcuffed by a 2015 target and attendant CBO scoring.

My opinion anyway. For anyone else, well that is what comments are for.

Tags: , , Comments (32) | |