Notwithstanding the White House claim that the fiscal-cliff deal is "A Victory for Middle Class Families and the Economy," we worry that it will play out as a defeat for both. Intended or not, the deal set the agenda for negotiations that will threaten the future of Social Security, Medicare, and Medicaid -- three programs that are core to economic security of working Americans.
The potential impact on Social Security, Medicare, and Medicaid of the fiscal cliff deal reminds us of the old joke about the man who fell off a cliff and was halfway to the ground. When asked how he was, he replied, "So far, so good."
The "so far, so good" is that the negotiators expressly rejected the cut to Social Security in the form of the so-called chained-CPI and excluded from the package all changes to Social Security, Medicare, and Medicaid. But it set up another destructive fight over spending to occur in two months, when the debt ceiling must be raised to prevent the nation from defaulting on its obligations. And when the White House will no longer have the leverage of an impending automatic tax increase.
Sequestration -- the across-the-board spending cuts to defense and domestic discretionary programs -- is now set to happen automatically just as the government must either increase the debt limit or default. Once again, we anticipate that the chained-CPI will be thrust into the discussion even though Social Security doesn't add a penny to the debt. Imposing huge, unnecessary cuts on current and future beneficiaries would not change by even a day when the nation hits the debt limit. Nevertheless, the debt limit is a powerful tool for those wanting to take Social Security and other critical programs hostage, because defaulting is unprecedented and would undermine the full faith and credit of the United States.
Opponents of Social Security, Medicare, and Medicaid are already serving notice of their intent to demand cuts in exchange for their votes to raise the debt ceiling, with, for example, Republican Senator Lindsey Graham (SC) saying that his vote won't be had unless the Social Security retirement age goes up, the COLA is cut and the program means-tested, and Senator John McCain telling CNN's Wolf Blitzer that he expects a "showdown the next time around when we go to the debt."
The American people do not want to see these vital programs cut. With the exception of the White House offer which included a Social Security cut in the form of the so-called chained-CPI as well as hundreds of billions of dollars in Medicare cuts, Democrats stood firm against cutting these vital programs -- and won. The question is whether they will stand equally firm in the sequestration/debt limit hostage-taking. Opponents will seek to substitute cuts to Social Security, Medicare, and Medicaid for the automatically-scheduled cut to the military.
When asked whether they would rather cut Social Security, Medicare, and Medicaid or cut defense, the American people respond in polls that defense should be cut. The National Rifle Association has thwarted the will of the people on gun control. We are concerned that the powerful defense lobby can thwart the will of the people on Social Security, Medicare, and Medicaid.
Instead of focusing on unemployment, the nation is poised to engage in more fiscal showdowns. But this time, Social Security, Medicare and Medicaid will be in the cross-hairs. Stay tuned.