STOCK MARKET WATCH -- Monday, 11 March 2013

[Demeter]

5. Beware Obama's Dealmaking George Zornick

http://www.thenation.com/blog/173221/beware-obamas-dealmaking#

...The default position among center-left pundits is that if Obama gets Republicans to agree on a grand deficit reduction package that includes new revenue, he’s “won.” But that assumption really needs to be interrogated, and each concession examined.

Sequestration is a terrible policy; the cuts will touch a number of vital government functions and inflict unnecessary pain on many Americans. But here’s what Obama is proposing: an unbalanced package of $930 billion in cuts and $580 billion in revenue, with an additional $100 billion in deficit reduction through Chained CPI. This is the formula that would cut Social Security benefits $1,000 per year for some seniors and take $1,400 per year from disabled veterans.

Is that truly better? The sequestration cuts are damaging, but money taken away can always be restored later. (In this case it would involve scrapping the Budget Control Act, which is no doubt more difficult.) Chained CPI, however, permanently cuts the safety net, and that’s much harder to ever undo—and the fact that a Democratic president did it opens the door to even more cuts down the road.

It also presents serious political risks for the Democratic Party. Obama is currently being blamed by Republicans and many in the media for the idea of sequestration, as he was blamed relentlessly during the 2012 campaign for the $700 billion Medicare cuts—both things he ostensibly proposed to appease Republicans. He will almost certainly be blamed for cutting Social Security as well if his plan is enacted...