Friday, July 08, 2011

Why an Offer of Social Security Cuts May Benefit Obama - And the Democrats

Given the negative reaction I've seen to President Obama's apparent willingness to negotiate Social Security cuts as part of a debt ceiling deal, I think it's a good idea to remember a couple of things.

First, President Obama's incentives in this negotiation are not the same as those of the Democrats in Congress. Just as they refused to stand behind his agenda during his first year in office out of concern for the midterm elections, he now has his own reelection to worry about. The mainstream media and beltway pundits have made Social Security reform the hallmark of seriousness - so working out a deal will help establish Obama as "serious" about budget deficits and structural reform; rejecting a deal that offers Social Security cuts may earn the Republicans a larger dose of the treatment recently dished out by David Brooks.

Second, there could be a significant benefit to Obama - and to Congress - if he manages to work out a reform of Social Security. He doesn't have to offer much - and he can offer the cuts as part of a take-it-or-leave-it package. If the Republicans take the deal, he can announce that "Social Security is now in balance through [2075 or some other date well into the future]" and for the duration of his presidency both he and the Democrats in Congress can express that the reform is a done deal and further cuts are off the table. Better yet, by opposing the deal, House Democrats can blame any compromise on the Republican majority while still benefiting from the fact that reform can be declared a "done deal". And they can run campaign ads, "The Democrats proposed a deal that would preserve Social Security for the indefinite future, protecting your benefits while ensuring its financial stability. The Republicans rejected that proposal, insisting that retiree benefits be cut to the bone."

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