Friday, April 12, 2013

Going Django on Chained CPI

The inclusion of chained CPI in the President's latest Federal Budget has caused renewed wailing and gnashing of teeth throughout the progressive community. The President has been called "deceptive" (again), he's been accused of being a lousy negotiator (just a few weeks after forcing the GOP into the first tax increase in decades) he's being called naive...

this reaction reminds me of lots of things. I keep hearing "he just handed Romney the election!"

This and unlabeled images from Wikimedia Commons

I should note first that I don't oppose chained CPI. It is opposed by MUCH smarter people than me, however. My inclination is to defer to Robert Reich and Paul Krugman, so rather than defend chained CPI I'll just make a few quick points and move on to the real topic of this post.

1) Supporters of chained CPI claim it is a more accurate measure of inflation than standard CPI. This claim is disputed, on the grounds that the elderly have a different mix of expenses than the rest of us. Except, most of those expenses are related to Healthcare. Obamacare is supposed to sharply reduce the rate of healthcare inflation, according to many of the same people arguing against chained CPI.

2) Opponents of chained CPI claim it's a cut to benefits. This is dishonest. It's a very small cut to the rate of increase in benefits. To make the reduction seem larger than it actually is, opponents have to extrapolate the cumulative effect of minor annual reductions over a decade or more. Perhaps they could spend that decade lobbying for an increase in benefits that doesn't deliberately over-state the rate of inflation?

3) Progressives OUGHT to be empiricists. If the scientists tell us they have a better way to measure something, we should at least look at the new measure, rather than reject it because it's at odds with a particular policy goal we hold.

But this is all a long digression from the thesis of this post, which is that the chained CPI issue has revealed an ignorance of Federal budgeting in the progressive community. People are outraged over a fairly insignificant early step in a long, multi-stage process.

The President's budget proposal is NOT the same thing as the Federal Budget

Here's how the process works:

1. The various Federal agencies submit spending requests to OMB. These will be cut sharply.

2. OMB goes through the spending requests, and changes them to reflect the administration's policy goals and initiatives. After further tweaking within the West Wing, the president formally submits his budget proposal. THIS IS NOT THE BUDGET!

director of OMB, Jeffrey Zients

3. Congress throws away the President's budget. And that's  only a sliver of exaggeration. The statutory authority to decide how much we spend, and on what, rests entirely with Congress. The President can't spend money without Congressional authorization. Congress takes the power of the purse very, very seriously. If the President's party has effective majorities in both chambers, AND the President has good control over the party, the final budget MAY reflect the president's budget. It probably won't; typically Presidents get their tax cuts but not their spending cuts.

4. The House and Senate Budget committees pass a "budget resolution". THIS IS NOT THE BUDGET! It's not even "law", it's an internal congressional thing instructing the committees that ACTUALLY write pieces of the budget how much money they can spend in their particular areas. An example of this is "The Ryan Budget". It sets general spending guidelines in broad categories. 

Lyin' Ryan

5. The House and Senate vote on the budget resolution. Amendments are added, some numbers get changed. THIS IS NOT THE BUDGET!

6. The authorization bills are written in the various House and  Senate committees. THIS IS NOT THE BUDGET! The ACTUAL Federal budget is in fact 12 different pieces of appropriations legislation, divided up by the type of government activity each piece is funding. There is a "defense" appropriation, and an "agriculture" appropriation, and a "Homeland security" appropriation...

but each of these activities must be authorized, by the committees with jurisdiction over each of these areas. Not surprisingly, a hypothetical politician with a seat on the 
House Armed Services Committee may have interests and priorities which are different from a hypothetical politician on the House Budget Committee. There's a constant struggle between the committees of jurisdiction and the Budget committees over how much money can be spent on special interests and pet projects. 

7. The Appropriations Committees appropriate money for the line items in the authorization bills. THIS IS NOT THE FEDERAL BUDGET. Each of the 12 bills reported by the Appropriations Committees must be voted on by the whole chamber, and may be amended, altered, changed, mutated or poisoned to death on the floor. And remember...

8. There are still 2 different versions of the budget, the House version and the Senate version. The 2 versions of each Appropriations Bill must be reconciled in Conference between the House and Senate, and then each must be passed by both chambers again, without amendment. THAT'S THE FEDERAL BUDGET.

You'll be astonished to hear that this straightforward and simple process doesn't always work perfectly. In recent years, budgeting has often been done by means of a "continuing resolution", which is simply a law that instructs Federal agencies "spend what you did last year". It's an emergency expedient to keep the Federal Government from shutting down when a budget agreement can't be reached between the 2 parties.

OMB models the Federal budgeting process. Not really.

So, in this multi-stage, complex, year-long process, the one that has the progressive community upset with the President is one aspect of step number 2, above.

People currently screaming their outrage about the inclusion of chained CPI in the President's budget lack the perspective obtained by considering the entire Federal budget process. Why so much anger at what is a mere triviality, unlikely to exert the slightest actual impact in terms of dollars and cents? In fact...

why would the President RISK such angry progressive outrage in an exercise that lacks the slightest policy significance? Why take the hit over a procedural step?

Here's a conspiracy theory for you. This budget proposal, which sparked outrage on the Left, which failed to move Republicans, which is a mere formality in a process over which the president has little influence, is aimed at the mid-terms in 2014.

This is how I see it working. The President has made a purely symbolic concession to Republicans, one which will NEVER be fulfilled. But everyone is treating this concession as real. Republicans cannot accept this concession, and the negative campaign ads write themselves. "Gary Miller would rather preserve tax breaks for the rich than balance the budget".

Likewise, the positive spots write themselves. "Mike McIntyre took on his own party's President to preserve Social Security for North Carolina Seniors."

Of course, to make this "concession" seem real, it'd be necessary for the President's base to scream bloody murder about it.