Cognitive filtering and Obama’s grand bargain

Econ and finance bloggers spend a fair amount of time talking about bias and cognitive errors on the part of investors, which is all well and good, but the political consequences of these patterns are far larger. In two recent examples, political scientists point to partisanship as a particularly strong source of cognitive filtering, in which partisans (particularly well-informed partisans) reframe incoming information to make it conform with their previous beliefs.

These papers came to mind as I was writing the post below on the clear signals that Obama and his administration intend to move aggressively toward a “grand bargain” that includes cuts to Social Security and Medicare. It would be hard for Obama to be any clearer about his intentions – he has signaled these repeatedly with both statements and policy actions over the past six years – yet there are still some who insist on framing his stance as a “great betrayal” in which he caves in to Republican maneuvers and Wall Street demands. In other cases, people who campaigned and worked for Obama’s re-election are now attempting to reorganize to apply pressure to work against any such bargain in the coming months. While the idea makes sense, it is unclear how a second-term president with a clearly and consistently articulated policy agenda can be shifted from that stance now that he has their votes, but stranger things have happened.

So with all of that in mind, I offer a timeline of positions and statements over time. It indicates to me that that the grand bargain is the official Democratic position, since it comes from the top of the party, and has over time been supported by several factions within the party. Those who don’t want to see these cuts would do well to take into account just where the policy originates.

TIMELINE

As Candidate Obama, the President was quite explicit about his view of the need to fix Social Security and Medicare.

May 2007: In an interview with George Stephanopoulos, candidate Obama says that “everything should be on the table” when considering how to adjust Social Security, though he rules out privatization.

October 2007: Under fire from Hillary Clinton, Obama reduces the scope of possible fixes to include only tax increases.

2008: After the primaries, the debate over Social Security shifts to privatization (McCain’s position) vs. no privatization (Obama’s), with the latter floating various policies during the campaign involving raising revenues only. Throughout, Obama continues to hammer on the need to fix Social Security and Medicare through bipartisan discussions, citing Tip O’Neill and Ronald Reagan in 1983 as an example repeatedly.

One of the first things Obama did after being elected was to make bipartisan approaches to deficit reduction a central issue.

January 2009: At the inauguration, Obama announces his goal of crafting a new “bargain” with the American people on Social Security and Medicare, a process likely to begin at a “fiscal responsibility summit” to be convened in February.

February 2009: The NY Times reports that Obama is intent on developing  a bipartisan plan to address Social Security, perhaps through the creation of a Social Security task force.

The plan is scrapped due to opposition to benefit reductions from Congressional Democrats, and Republican intent to block any tax increases, setting up the ‘both sides are equally extreme’ narrative.

Amidst the final stages of negotiations over the Affordable Care Act, deficit reduction returned to the fore, leading to a series of attempts by the Obama administration to frame Medicare and Social Security as deficit problems to be addressed in concert with other issues. These attempts culminated in Obama offering – not conceding, but offering – cuts to the two programs during the 2011 budget negotiations.

January 2010: The Senate votes to kill the bipartisan Conrad(D)-Gregg(R) proposal to create of a bipartisan commission designed to cut the deficit by making recommendations leading directly to a vote. The bill fails when some of its Republican sponsors jump ship at the last minute, joining 23 Democrats in opposing it.

February 2010: Obama instead creates the National Commission on Fiscal Responsibility and Reform by executive order (#13531, to be precise) with a similar mandate. The Commission, chaired by Bowles and Simpson, was designed to produce a recommendation by early December 2010 to go immediately to Congress for a vote, conditional on approval of its recommendations by 14 of the 18 members.

The Commission failed to make this hurdle, due again to Republican opposition (led by Paul Ryan) to any measures that raised taxes, leading to multiple reports from various factions within the group. Bowles and Simpson put forward their version in November 2010. Among other measures, it included:

Medicare and Medicaid

      • A welter of immediate cost controls
      • Long-term cap on total federal healthcare spending as a percent of GDP, which would (in the absence of real cost control from the healthcare industry) impose hard caps on Medicare and Medicaid.

Social Security

      • New formula for calculating benefits likely to reduce benefits for most
      • Increase in retirement age
      • Shift to chained CPI (triggering a reduction in future benefits)
      • Increase in taxable income

July 2011: The Washington Post breaks the story that Obama has inserted Social Security and Medicare into that year’s fiscal cliff showdown, something that the Republicans had not asked for:

President Obama is pressing congressional leaders to consider a far-reaching debt-reduction plan that would force Democrats to accept major changes to Social Security and Medicare in exchange for Republican support for fresh tax revenue.

At a meeting with top House and Senate leaders set for Thursday morning, Obama plans to argue that a rare consensus has emerged about the size and scope of the nation’s budget problems and that policymakers should seize the moment to take dramatic action.

As part of his pitch, Obama is proposing significant reductions in Medicare spending and for the first time is offering to tackle the rising cost of Social Security, according to people in both parties with knowledge of the proposal. The move marks a major shift for the White House and could present a direct challenge to Democratic lawmakers who have vowed to protect health and retirement benefits from the assault on government spending.

The President’s ability to get these cuts is again blocked by Republican intransigence, not by Democrats.

The role these programs will play in the upcoming debate over this year’s fiscal cliff should by now be abundantly clear. In case it’s not, Obama and his surrogates have gone out of their way to reinforce his stance.

2012 Campaign: As in 2008, the debate shifts to privatization vs. not, with some additional proposals from Romney that involve hidden cuts (e.g. shifting the inflation calculation).

September 2012: In their convention speeches, both Obama and Biden cite Bowles Simpson as a possible negotiation framework for deficit reduction.

October 3, 2012: In the first debate, Obama says that he and Romney have “somewhat similar position[s]” on Social Security, leading to a later correction from the campaign that Obama wants to “tweak” rather than “slash,” presumably referring to the nature (but not the intent) of making cuts.

October 24, 2012: The Des Moines Register releases the transcript of an off-the-record interview with Obama, in which he expresses confidence that he can pass “the equivalent of the grand bargain that essentially I’ve been offering to the Republicans for a very long time,” citing Bowles Simpson as a target.

November 5, 2012: Democratic party representatives appear in the media pushing the idea of immediate deficit talks – explicitly including the New Deal programs – coupled with public pressure from a  consortium led by BlackRock (whose CEO is a potential successor to Geithner).  I describe this in the post below.

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