Reality Bytes

In discussing economic recovery from the Great Depression, Franklin D. Roosevelt made the following statements to Congress: ".. in addition to these immediate tasks of relief and of recovery we have properly, necessarily and with over-whelming approval determined to safeguard these tasks by rebuilding many of the structures of our economic life and reorganizing it in order to prevent a recurrence of collapse." 
     Currently, the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama a little more than three years ago has yet to be implemented. Regulators now claim the provisions of Dodd-Frank will be implemented, beginning this month.

"We can never insure one-hundred percent of the population against one-hundred percent of the hazards and vicissitudes of life. But we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age. This law, too, represents a cornerstone in a structure which is being built, but is by no means complete.... It is...a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness." -- Franklin D. Roosevelt, August 14, 1935

     Today we are in the grips of an argument over Social Security we should have retired months ago. President Obama proposes the government tie Security benefits to the Chained Consumer Price Index. According to Mr. Obama this is a technical matter. First, he argues, the proposed change will not cause benefits to be cut; it is a merely a slowdown in the rate of benefit increases. The problem is Cost of Living Adjustments are not benefit increases; they prevent benefit decreases over time, due to inflation. We call this payment reduction. 

     Second Mr. Obama contends the change will not result in higher taxes. The fact is, the current formula is designed to avoid bumping taxpayers into higher income brackets, while they are not earning more in actual dollars (i.e., post-inflation income.) Under President Obama's proposal, the CPI will land taxpayers in higher brackets more quickly. People will pay more taxes, although they actually are not making more actual money. We call this a rise in taxes.

  With regard to the federal deficit, Obama's budget proposal will not pass. Republicans will not close tax loopholes, nor will they eliminate deductions for the nation's top earners. Is this a presidential gambit? Or is the President, as he contends, trying anything and everything to get to a compromise with Republicans? One thing is certain, if the budget does not pass, we'll hear nothing more of the CPI. The GOP will be the obstructive ones, because, after all, Mr. Obama is bucking his own party, to try to accommodate some of their demands. 

     Someone once said, "Comparisons are odious." Roosevelt declared, "Among our objectives I place the security of the men, women and children of the Nation first." I'll let you draw your own conclusions about the genuine and the disingenuous.