President Barack Obama is taking another stab at the “grand bargain” he wants to strike with Congressional Republicans. Yet again, he wants to cut Social Security benefits for low- and middle-income seniors in exchange for token tax increases on the wealthiest Americans. He is offering this deal despite evidence that Social Security benefits are a growing percentage of retired Americans’ total income.

Obama’s biggest fans need to stop deluding themselves about “eleven-dimensional chess” and acknowledge that for whatever reason, the president wants Social Security cuts to be part of his legacy.

The White House will formally release the president’s new budget next week. Jackie Calmes reports for the New York Times that Obama is hoping Republicans will agree to replace the “sequester” federal spending cuts that started to take effect in March.

Besides the tax increases that most Republicans continue to oppose, Mr. Obama’s budget will propose a new inflation formula that would have the effect of reducing cost-of-living payments for Social Security benefits, though with financial protections for low-income and very old beneficiaries, administration officials said. The idea, known as chained C.P.I., has infuriated some Democrats and advocacy groups to Mr. Obama’s left, and they have already mobilized in opposition.

As Mr. Obama has before, his budget documents will emphasize that he would support the cost-of-living change, as well as other reductions that Republicans have called for in the popular programs for older Americans, only if Republicans agree to additional taxes on the wealthy and infrastructure investments that the president called for in last year’s offer to Mr. Boehner.

Mr. Obama will propose other spending and tax credit initiatives, including aid for states to make free prekindergarten education available nationwide – a priority outlined in his State of the Union address in February. He will propose to pay for it by raising federal taxes on cigarettes and other tobacco products.

Changing the annual cost of living adjustment (COLA) for Social Security recipients to the “chained Consumer Price Index” is a horrible idea, for reasons Bleeding Heartland has discussed before. Dean Baker walks us through the problem again today.

Switching the basis for the COLA to the chained CPI is one of the most beloved policies of the Washington elite. The idea is that it would reduce scheduled benefits for retirees by 0.3 percentage points annually. This amounts to a cut of 3 percent after ten years, 6 percent after 20 years, and 9 percent after 30 years.

If a typical retiree lives to collect benefits for twenty years the average cut in benefits over their retirement ends up being around 3 percent. This is a much bigger hit to the typical retiree, who relies on Social Security for more than two-thirds of their income, than the tax increases put into law this year were to the typical rich person.

But the magic of the chained CPI is that everyone gets to run around saying that they are not really cutting benefits, they are just “adjusting” the cost of living formula. And the media do their best to assist the politicians pushing these cuts. They almost always uses euphemisms like “changing” or “restructuring” Social Security, trying to conceal the simple reality that politicians are pushing cuts to the program.

It is also worth noting, in contrast to the claims of the pretentious elites, there is no, as in zero, nada, none, basis for the claim that the chained CPI would give a more accurate measure of the rate of inflation experienced by seniors. Research by the Bureau of Labor Statistics (BLS) shows that the rate of inflation seen by seniors is actually higher than the CPI that provides the basis for the current COLA.

While this research is far from conclusive, the answer for those interested in accuracy would be to have the BLS construct a full CPI for seniors. But the Washington elites don’t give a damn about accuracy, which is why not one of them has called for a full elderly CPI. The elite want cuts to Social Security; accuracy is just something they talk about to children and reporters for major media outlets.

During a lengthy debate over the federal budget last month, the Senate approved by voice vote an amendment putting the Senate on record opposing the chained CPI. Iowa Democrat Tom Harkin has been one of the loudest voices against this benefit cut, noting that Social Security does not contribute to the federal deficit.

I have no idea why Obama is so determined to cut Social Security. Maybe he wants to gain the approval of “serious” thinkers inside the beltway, as Paul Krugman suspects. Greg Sargent has a different theory about the politics behind the White House strategy.

Either way, it’s blatantly unfair to ask seniors to take a bigger hit than the top 0.5 percent.

I am seeking comment from Iowa Democrats Bruce Braley (IA-01) and Dave Loebsack (IA-02) on whether they could support Obama’s bargain. I will update this post as needed.

P.S. According to David Dayen, Obama’s budget would also limit tax preferences for retirement savings accounts.

UPDATE: Loebsack’s office responded with this comment via e-mail:

“Growing up, my grandmother relied on Social Security benefits to put food on the table and provide for our family.   Iowans pay into Social Security all their lives for the promise of security in retirement. The President should not be pushing to switch to the ‘chained CPI’.  I strongly believe we must balance the budget, but not on the backs of seniors, the middle class, and the most vulnerable.”

GOP House Speaker John Boehner immediately rejected the grand bargain.

Boehner said Friday that Obama should not “make savings we agree upon conditional on another round of tax increases.”

“At some point we need to solve our spending problem, and what the president has offered would leave us with a budget that never balances,” Boehner said. “In reality, he’s moved in the wrong direction, routinely taking off the table entitlement reforms he’s previously told me he could support.”

Aides to Boehner emphasized that the president’s chained CPI proposal would affect not just benefit increases, but also the way tax brackets are adjusted annually. They pointed to an Associated Press analysis that found that while the inflation adjustment would reduce federal spending by about $130 billion over the next decade, the change in how tax brackets were calculated would generate $100 billion in higher taxes.

“It’s not just a concession on spending,” said Boehner aide Brendan Buck. “In fact, the way the administration proposes doing it, it’s nearly equal parts [tax] revenue and spending cuts.”

Several progressive Democrats in the House and Senate are promising to fight any cuts to Social Security benefits. Democracy for America plans to support primary challengers against any Democrat who “votes to cut Social Security, Medicare and Medicaid benefits.”

SECOND UPDATE: The AARP’s blog weighed in with “5 Reasons Chained CPI is Bad For Social Security.

Senator Tom Harkin’s political action committee TOMPAC organized an online petition drive against the chained CPI proposal. As of April 8, nearly 9,700 people had signed. From Harkin’s mass e-mail of April 7:

Dear [first name],

We need to act quickly.

News broke on Friday that President Obama’s budget proposal will include cuts to Social Security via a mechanism called “chained CPI” — a move I strongly oppose. Call it whatever you want — it’s still a cut to those who need help the most. We can’t let it happen.

While there are large portions of the President’s budget that I strongly support, cutting Social Security is a bridge too far. It’s an unnecessary attack on a critical program that, by law, is unable to add to the deficit.

It’s not too late to stop this. Join me and call on President Obama not to cut Social Security before he unveils his budget on Wednesday!

Social Security already underestimates the cost of living for seniors by ignoring the fact that health care costs — a larger portion of their income — are increasing at a faster rate than other costs.

If anything, the Social Security benefit should be increased, not cut. And we can readily do that while still strengthening the long-term solvency of Social Security through means which don’t harm the vast majority of beneficiaries.

Speaker Boehner has shown time and time again that he’s not interested in reaching a balanced agreement to reduce the debt. President Obama has nothing to gain from these concessions.

He needs to remove chained CPI from his budget right now and stand up for Social Security.

Join with me — call on President Obama not to cut Social Security!

Sincerely,

Senator Tom Harkin