The Center's work on 'Reform Proposals' Issues

Greenstein on the New Ryan Budget

April 1, 2014 at 5:09 pm

CBPP President Robert Greenstein just issued a statement on House Budget Committee Chairman Paul Ryan’s new budget plan.  Here’s the opening.

House Budget Committee Chairman Paul Ryan’s new “Path to Prosperity” is, sadly, anything but that for most Americans.  Affluent Americans would do quite well.  But for tens of millions of others, the Ryan plan is a path to more adversity.

The budget documents that Chairman Ryan issued today laud his budget for promoting “opportunity,” even as his budget slashes Pell Grants to help low- and moderate-income students afford college by more than $125 billion over ten years and cuts the part of the budget that funds education and job training (non-defense discretionary funding) far below the already low sequestration levels.  The budget documents also claim to help the poor, even as the Ryan budget shreds key parts of the safety net; for example, it resurrects the draconian benefit cuts in SNAP (food stamps) that the House passed last fall and adds $125 billion of SNAP cuts on top of them.

The budget also swells the ranks of the uninsured by at least 40 million people.  It repeals the Affordable Care Act (ACA), taking coverage away from the millions of people who have just attained it, and cuts Medicaid by $732 billion (by 26 percent by 2024) on top of the cuts from repealing the ACA’s Medicaid expansion.  Yet it offers no meaningful alternative to provide health coverage to the tens of millions of uninsured Americans.

That’s only a partial list of its cuts.  The budget cuts non-defense discretionary programs by $791 billion below the sequestration level, shrinking this part of the budget to less than half its share of the economy under President Reagan.  These cuts are entirely unspecified, as are more than $500 billion of cuts in entitlement programs.

Meanwhile, the budget aims to cut the top individual tax rate and the corporate income tax rate to 25 percent, eliminate the Alternative Minimum Tax, and repeal the ACA’s revenue-raising provisions.  These tax cuts would cost about $5 trillion over ten years, based on past analyses by the Urban-Brookings Tax Policy Center.  Yet the Ryan plan doesn’t identify a single tax break to close or narrow to cover the lost $5 trillion, even though his budget assumes no revenue losses overall.  And it ignores the hard fact that, in his recent tax reform plan, House Ways and Means Committee Chairman Dave Camp only lowered the top individual tax rate to 35 percent even after identifying scores of politically popular tax breaks to narrow or eliminate.

The Ryan budget is thus an exercise in obfuscation — failing to specify trillions of dollars that it would need in tax savings and budget cuts to make its numbers add up.  No one should take seriously its claim to balance the budget in ten years.

It’s also an exercise in hypocrisy — claiming to boost opportunity and reduce poverty while flagrantly doing the reverse.  Here’s just one example: Ryan has criticized some of the poor for not working enough and says that he wants to promote work and opportunity.  But his budget eliminates Pell Grants entirely for low-income students who have families to support, must work, and are attending school less than half time on top of their jobs.

Click here for the full statement.

Greenstein on President Obama’s New Budget

March 4, 2014 at 1:47 pm

CBPP President Robert Greenstein has issued a statement on the President’s fiscal year 2015 budget:

President Obama’s new budget is a solid blueprint that would reduce deficits, alleviate poverty, and boost investment in areas needed for future economic growth, such as infrastructure, education, and research.

On the deficit front, the budget confounds the recent predictions of some pundits by including, rather than eschewing, deficit reduction.  While offsetting the costs of its new investment initiatives by cutting spending and scaling back tax breaks, the budget goes further by reducing deficits enough to put federal debt as a share of gross domestic product (GDP) on a declining path.  With about $1.7 trillion in deficit reduction over the next ten years (excluding the savings from winding down operations in Afghanistan), the budget would reduce the debt-to-GDP ratio to 69 percent in 2024.

As previously announced, the budget doesn’t include the proposal in the President’s budget last year to switch to the “chained Consumer Price Index” in calculating annual cost-of-living adjustments in Social Security and other programs.  It does, however, retain the $400 billion in Medicare savings in last year’s budget, including about $60 billion in Medicare beneficiary reductions (through increases in premiums for affluent beneficiaries, increases in some co-payments, and changes affecting Medigap coverage).

On the poverty-fighting front, the budget features an important proposal to boost the Earned Income Tax Credit (EITC) for low-income workers who are not living with minor children — a measure many analysts across the political spectrum believe holds considerable promise for reducing poverty and also increasing labor-force participation, including among young minority men.  Single low-wage men and women are the one group of Americans whom the federal tax code literally taxes into — or deeper into — poverty.  The Obama proposal, which builds on a long bipartisan tradition of support for the EITC, would substantially address that problem.

No one should declare this budget “dead on arrival,” for two reasons.  First, under the Murray-Ryan agreement of last year, both parties have agreed on the total amount available for appropriated programs this year, and the Obama budget includes program-by-program requests that hit that total.  Consequently, the budget’s appropriations requests will likely play an important role as the Appropriations Committees craft the annual funding bills this year.

Second, with no big budget showdowns or deadlines looming this year, 2014 likely won’t be a year of significant budgetary action beyond the appropriations bills.  But 2015 may well be.  Policymakers likely will seek to negotiate another budget deal to ease the scheduled sequestration budget cuts for 2016 and beyond and also may consider tax reform and other measures.  Both the new Obama budget and the budget proposal that House Budget Committee Chair Paul Ryan will unveil in a few weeks will offer dueling frameworks for a year-long debate on where fiscal and program policy should go, in advance of larger decisions next year.

The vision reflected in the Obama budget will provide a much sounder course than the one we’ll likely see in the Ryan budget.  That’s because the Obama budget curbs lower-priority spending and unproductive special-interest tax breaks in order to make investments that the nation needs for future prosperity, reduce poverty and better reward low-paid work, and give many young children a better chance of success, while reducing mid-term and long-term deficits at the same time.

Don’t Forget What Happened When Obama First Proposed Chained CPI

February 24, 2014 at 3:17 pm

Most media coverage of the President’s decision not to include the “chained CPI” for cost-of-living adjustments in Social Security and other retirement programs in his 2015 budget has left out a key point to understanding the announcement.

When the President was preparing his 2014 budget early last year, Republican leaders strongly urged him to include the chained CPI, and he did.  But House Budget Committee Chairman Paul Ryan then failed to put the proposal in his budget, which included no Social Security savings (and fewer Medicare savings over ten years than the Obama budget).

More importantly, Representative Greg Walden, chair of the National Republican Congressional Committee, called the President’s chained CPI proposal “a shocking attack on seniors,” attacked the President for “trying to balance the budget on the backs of seniors,” and signaled that Republican challengers in 2014 would attack Democratic incumbents over it.  He and other Republicans also noted that their budget — the Ryan budget — did not include the proposal.

To be sure, House Speaker John Boehner distanced himself from Walden’s remarks.  But the message was clear: after urging the President to include the chained CPI in his budget, Republicans left it out of theirs, and various Republican challengers were likely to use it to portray Democrats as seeking to cut Social Security (and themselves as the defenders of Social Security beneficiaries).

Coming on top of the Ryan budget, the Walden statement had a toxic impact on congressional Democrats.  That combination may have been one of the most important political developments that ultimately brought us to the Administration’s announcement.

Chained CPI Makes Sense Only Under Certain Conditions

February 20, 2014 at 3:04 pm

We’ve long said that the chained Consumer Price Index (CPI) for cost-of-living adjustments in Social Security and other retirement programs could be a reasonable part of a comprehensive deficit-reduction package — but only under certain conditions.  In the absence of those conditions, the President’s decision not to include the chained CPI in his fiscal year 2015 budget is a sound one.

Many economists believe the official CPI overstates inflation and view the chained CPI as a more accurate measure of overall inflation (although not of inflation faced by the elderly).  On average, the chained CPI grows about 0.25 to 0.3 percentage points more slowly than the official CPI.

Using the chained CPI to index Social Security and other programs would mean that benefits would be a bit lower than under current law.  The proposal in the President’s fiscal year 2014 budget would have reduced benefits for future Social Security beneficiaries by an average of 1 to 2 percent over the course of their retirement.

Since Social Security benefits are modest, and since most beneficiaries have little other income, no one should propose a cut in benefits casually.  We’ve said time and again that the chained CPI is worth considering only if two crucial conditions are met:

  • First, measures to protect the very old and low-income people must be an essential part of the chained CPI; the Administration included these features in last year’s proposal.
  • Second, even with such protections, the chained CPI must be part of a larger budget package that shrinks long-term deficits significantly and does so in a fair and balanced manner by including measures that raise significant revenue in a progressive manner.

This second condition remains well out of reach.  That’s why CBPP President Robert Greenstein stated when the President’s budget was released last year, “Politically speaking, I had thought the White House should not put these concessions [including the chained CPI] in the budget, as distinguished from offering them in negotiations if and when Republicans agreed to dedicate substantial savings from curbing tax credits, deductions, and other preferences (known as ‘tax expenditures’) to deficit reduction.”

Greenstein also predicted, “I am concerned that Republican leaders will adopt the cynical approach of labeling the chained CPI an ‘Obama proposal’ they are willing to accept but only as part of a package that raises little or no revenue and, thus, does not force them to make any sizeable compromises of their own.”  Such an approach would fail to share sacrifices in an equitable manner.

Since that’s exactly what has happened, removing the chained CPI proposal from the budget — while remaining willing to consider it in the context of broader budget negotiations — is an appropriate response.

Policymakers Should Sift Facts on Disability Insurance Carefully

October 1, 2013 at 3:59 pm

Critics continue to offer potentially misleading claims about the Disability Insurance (DI) program — a vital part of Social Security that pays modest benefits to people who can no longer do substantial work due to a severe medical impairment — and a recent Washington Post editorial gave some of them wider attention.

The critics whom the Post cites give short shrift to the role of demographic factors in growing the DI rolls. As we’ve noted, three big demographic factors — the aging of the baby boomers into their 50s and 60s (the peak ages for DI receipt), the rise in women’s labor force participation (which means more women now qualify for DI benefits), and the rise in Social Security’s full retirement age (which delays DI beneficiaries’ reclassification as retired workers) explain most of the growth.

While the number of disabled workers tripled between 1980 and 2012, the Social Security Administration’s (SSA) actuaries show that — when properly adjusted for age and sex — they represented 3.1 percent of the insured population (people who have worked long enough to qualify for DI in the event of a severe medical impairment) in 1980 and they represent 4.6 percent today.  (See graph.)  That’s not “explosive growth,” as the Post claims.  Several of the academic researchers in question express DI receipt as a share of the entire population aged 20 to 64, a different measure that — especially over certain time periods — tends to downplay the impacts of demographic change.  In particular, a recent study by the Federal Reserve Bank of San Francisco, which the Post cites, may leave the mistaken impression that 44 percent of today’s cases can’t be explained.  That would mark a misreading of the study (as we’ll examine in a forthcoming paper).

The critics also suggest that eligibility standards are lax. In fact, most applications are denied.  That’s especially true in economic downturns, when applications soar.  The agency requires convincing medical evidence from qualified sources.  The disability criteria are so strict that most beneficiaries — despite significant work incentives — do not work to supplement their modest benefits, and even rejected applicants struggle in the labor market.  And SSA regularly reviews beneficiaries to weed out those who have recovered, though Congress has stymied this effort by starving the watchdogs.

While some benefit and eligibility rules merit review, the program does its job pretty well.  It pays modest, but vital, benefits to severely impaired workers, mostly in their 50s and 60s with limited education and high mortality rates.  Policymakers should therefore approach reform with caution, as an earlier Post editorial argued convincingly.  For example, proposals to turn DI into a block grant or require employers to pay more of the cost raise serious concerns about the resulting erosion of benefits and possible discrimination in hiring and retention.  And as a practical matter, such ideas should be carefully tested and analyzed in small-scale pilots.  That’s not feasible before the separate DI fund needs to be replenished in 2016, a date that comes as no surprise and poses no crisis.

As eight former Commissioners of Social Security from both parties recently wrote, “With the lives of so many vulnerable people at stake, it is vital that future reporting on the DI and SSI programs look at all parts of this important issue and take a balanced, careful look at how to preserve and strengthen these vital parts of our nation’s Social Security system.”  We agree.