Obama released a new budget request Wednesday, and it's probably going to dominate the news cycle for the next week or so at least. With that in mind, it falls to us as intelligent news consumers and producers to understand what is going on here. So, without further ado, let’s break down the budget.
Who cares? Don’t we pass a budget every year?
Sadly, no. Thanks to the split between our Republican House and Democratic Senate, as well as some quirks of parliamentary procedure, a new budget has not been passed by the Senate in more than 1000 days. The House has managed to pass several budgets, but those have not been binding on the Senate. A properly reconciled budget (i.e. one that has the same language in both its Senate and House versions) has not been passed in several years.
In all honesty, it looks like this budget is not going to get passed either, at least not in full.
Why does this budget matter?
In the past, President Obama’s budget requests have not been particularly realistic. They have accurately depicted the budget that Obama wanted, but have not been at all amenable to Republicans.
This budget, on the other hand, has been carefully tailored to appeal to Republicans. That does not mean that Obama intends to spend less; there are plenty of spending increases in the budget, along with some tax hikes. Those have been covered in detail elsewhere if you want to know more about the exact numbers. Obama hopes, though, that instead of focusing on spending, everyone will focus on his brand-new commitment to entitlement reform.
What entitlement reform does this budget contain?
The primary reform contained in this budget is a change to Social Security known as chained CPI. Social Security benefits are adjusted every year in response to increases in the consumer price index, or CPI. CPI maps the prices of various basic goods, like food and housing, from year to year. Social Security uses it as a measure of inflation to keep benefits from falling too low to be useful to retirees.
Obama’s new budget proposes a switch in how CPI is used in Social Security benefits. The short version is that Social Security currently uses a specific form of CPI called CPI-W, while Obama’s budget proposes a shift to C-CPI-U, or chained CPI. Chained CPI accounts for what are “substitutions” on the part of consumers. If the price of bus fare goes up, for example, consumers will switch to taking the train. That keeps CPI from rising too high from month to month. The Bureau of Labor Statistics has a more technical explanation, if you’re curious.
Chained CPI rises less than CPI-W does. Obama’s budget projects that switching to chained CPI will save $230 billion over the next fiscal year. Those “savings,” looked at another way, are effectively a cut to Social Security benefits.
So who does chained CPI appeal to?
Republicans in Congress, of course. Switching to chained CPI means cutting entitlement spending, but doing so in a way that seems more innocuous. Saying that Social Security will be undergoing an adjustment to more accurately reflect inflation sounds much nicer to voters than straightforward cuts do.
Voters, on the other hand, are substantially less satisfied. A poll from the AARP (which has a vested interest in seeing Social Security benefits stay where they are) claims that two-thirds of poll respondents say they are less likely to vote for anyone who backs chained CPI.
Democrats are also very frustrated. A cut to Social Security is a cut to entitlement programs, and along with cuts to Medicaid, the Obama budget does not look particularly liberal. Lobbying groups are disgruntled, and are busy making their displeasure clear to legislators. The AFL-CIO, America’s largest federation of trade unions and therefore usually a strong backer of Democrats, has called the budget “wrong and indefensible”. They see Obama as backing down on this issue, at a time when Democrats thought they had the momentum to demand more progress.
Is the dissatisfaction of Democrats worth the boost with Republicans?
That’s the million-dollar question right now. If Obama can bring Republicans to the table, he may be able to pass a joint budget for the first time in years. That could be the “grand bargain” Obama has been pursuing to help secure his legacy, and it would also reduce some of the criticism aimed at Democrats over inability to pass a budget.
At the same time, though, it may not mean anything. Speaker of the House John Boehner has recently admitted that this may be a starting point for further negotiation, but had rejected it out-of-hand last week. It is currently unclear which Boehner will be coming to the negotiating table. The budget could fail to impress anyone at all.
That assumes, of course, that Obama is not playing some sort of long con meant to expose Republicans as unwilling to compromise on the budget. That seems unlikely (since “Republicans are not willing to compromise” was already a refrain in the last election), but it could be the case.