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Once again, President Obama seems to be on the verge of folding a winning hand.
Widely leaked reports indicate that the president and House Speaker John Boehner are making a fiscal deal that includes hiking tax rates back to the pre-Bush levels with a threshold of $400,000 rather than the original $250,000, and cutting present Social Security benefits.
Obama, the reports say, will now settle for as little as $1.2 trillion in tax increases on the rich rather than the $1.6 trillion that he had originally sought. The difference, in effect, will come out of the pockets of workers, retirees, the young, and the poor.
Especially foolish is the cut in Social Security benefits, disguised as a change in the cost-of-living adjustment formula. Before getting to the arcane details of the formula, here’s the bottom line. The proposed change will save only $122 billion over ten years, but it will significantly cut benefits for the elderly.
Because the cut is in the form of a change in the Consumer Price Index (CPI), the longer you live, the more is the total cut. On average, the cut is about 3 percent a year, but if you live twenty years after you start drawing benefits (the average), that adds up to over ten thousand dollars.
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