Well ok then: cutting vital programs won't hurt anyone
... at least that's what Erskine Bowles says. And that's because the Simpson-Bowles plan is "sensitive" to the poor:
It's big of them not to cut food stamps and unemployment insurance. But that's more than a little bit misleading since unemployment insurance and food stamp costs are largely related to the state of the economy at any given time. It might make sense if they were factoring in the inevitable, austerity induced long term economic slump in their model, but they aren't. He threw that out there to pretend that they are somehow being generous by not doing something that doesn't make sense in terms of long term deficit reduction.
As for the 80 year old (mostly women) who will be hurt by the Chained-CPI, I'm afraid old Erskine was being a little bit disingenuous there. The problem is not that their private pensions run out. (Not very many people have private pensions anymore.) The problem is that the Chained-CPI reduces the cost of living adjustment down by 0.3 percentage points annually. That translates into a cut in benefits of 3 percent for those who have been retired ten years, 6 percent after 20 years, and 9 percent after 30 years. The people who have been retired the longest and are, therefore, the poorest, will see the largest cuts. A 1% "bump" isn't going to make much of a difference.
This is a cut. And it's substantial. It will affect the poor the most and it's going to take a lot more than "tweaking" to make up for it. Moreover, it's not just the poorest of the poor who will be affected. There seems to be some belief in Washington circles that 70 year olds who are living on 25k- 35k a year won't feel a cut in their incomes, which just goes to show how distant they are from the way people really live. Some wonkish corners believe that this is really a tactical argument because tax rates will also be subject to this new inflation index and therefore we'll be able to pay off our debt more quickly and start doing good things for the people again. Apparently, the anti-tax fanatics are going to go quietly into this good night and make no attempts to reverse this back-door tax hike. (I guess we are supposed to believe they aren't really serious about this whole small government thing --- even to the extent they would like to raise taxes but they just want to do it quietly.) I don't know why anyone thinks that's true, but it's a more widely held belief than you might think.
Anyway, let's not kid ourselves. The Bowles-Simpson deficit reduction proposal will hurt a lot of people, and not just the poor and elderly. It is a hardcore austerity program that will make people needlessly suffer and make the economy worse in the process. They have tried this is Europe and it's not working. And yet they are hanging tough assuring everyone that eventually all will be well and they just have to stay the course. (The British government has even officially told the people they will have to maintain their stiff upper lips until at least 2018!)
There's a reason why Keynes said, "the long run is a misleading guide to current affairs. In the long run we are all dead." It's because this blase notion that we can all just wait for the invisible hand to do its work means that we consign our lives and many others to needless suffering. Although with all this talk of cutting of Social Security far in to the future, you have to wonder if the worst of the deficit scolds aren't counting on all the money they can save from people dying sooner than they have to.
*To understand why the "bump" in the Chained-CPI is inadequate, read this report.Update: Oh my
The new deficit reduction plan from Alan Simpson and Erskine Bowles calls for $5 trillion in savings this decade, roughly the same as their outline in December 2010. So it's basically the same plan, right?
Wrong. Look at where the cuts come from this time. Whereas the first plan was a roughly even mix of higher taxes and lower spending, the new plan calls for 54 percent less revenue and 31 percent more spending cuts to get us past $5 trillion in total savings this decade.