Check in here if you think NO DEAL before the New Year is a VICTORY

[alcibiades_mystery]

188. Let me say this

The sequester will hurt like the Dickens. It will hurt across the board. Sunseting of various other provisions will also hurt. I'm not talking about the Bush tax cuts here. And when the pain really kicks in, I want to make sure that people can go back and look to see what they were asking for.

That said, chained CPI for Social Security is bad policy, and including it in a proposal at this time is bad negotiating and bad policy. Why? The current chained CPI index (in addition to being time inflexible...needing over a year to adjust!) is simply not very good at measuring senior/disabled/fixed income spenders. It's not good at factoring in health care costs when they are 25% or greater of out of pocket. It's not good at dealing with "substitution" fixes for inelastic commodities. So, to apply it to Social Security is bad policy. Finally, it's bad policy because what they're really trying to address is a putative 2% shortfall down the road, where chained CPI would presumably cut that by .5%: the shortfall is dubious, the effect is dubious, and the inclusion of such extraneous matters on current deficit reduction is silly. With all of that being clear to me, I think chained CPI for Social Security absent fixes should be a deal breaker; however, I remain unconvinced that the effects of what is clearly a benefits cut would be near as dire as predicted here.

On the $400,000, I'm on record elsewhere saying to be upset about it is plain silly.

To be upset over the move from $250,000 to $400,000, on the other hand, strikes me as ridiculous.

The Republicans started at "Absolutely no tax rate hikes ever."

They then moved to "OK, tax rate hikes."

They then moved to "OK, tax rate hikes at $1,000,000."

If they go for tax rate hikes at $400,000, they will have given a) the principle, and b) $600,000+ for the level. Obama will have given $150,000 for level, period. That's a loss? Indeed, it's really effectively $388,500, since that's where the top tax bracket starts. Obama will have given up $137,500 as the level in exchange for a permanent 39.5% rate on anything bigger than the top bracket? That's a loss? I'm mystified by this thinking.

Oh, well, people say, he should have just gone over the cliff! But he's giving away the payroll tax holiday! Um, what do you think happens to the payroll tax holiday if we go over the cliff? What do you think happens to middle class paychecks if we go over the cliff? Oh, we'll dare them to vote it down next year, then make them extinct! Sounds like a very plump couple of birds in a bush.

But chained CPI? It's a close call.