While lawmakers wrangle over the budget, investors have focused on an improving economy. The benchmark Standard & Poor’s 500 Index has risen about 9% so far this year. The S&P added 0.3% at 3:12 p.m. in New York, rebounding from yesterday’s 1.1% retreat from a record.
The Bloomberg Consumer Comfort Index increased to minus 34.1 in the week ended March 31 from a six-week low of minus 34.4 in the prior period. The comfort readings from January through March were the strongest on average of any first quarter since 2008 as a pickup in hiring and record stock prices helped consumers overcome an increase in the payroll tax.
Even though the president’s budget is more than two months late, because of tax-and-spending-legislation at year’s end known as the “fiscal cliff,” Pat Griffin, former President Bill Clinton’s lobbyist in Congress, said the timing “may be just right.”
“If there’s one more chance this year to ignite this conversation, this would be it,” Griffin said.
That’s because House Republicans and Senate Democrats have passed non-binding budget resolutions that are far apart, and there’s little likelihood they will be reconciled. Obama plans to dine with Senate Republicans the evening of April 10, just hours after his budget plan is released.
The chained CPI was a centerpiece of failed negotiations between Obama and Boehner over a “grand bargain” budget deal in the summer of 2011, and it was also the key tradeoff Obama was willing to make as part of the so-called fiscal cliff negotiations in December in the context of a broad debt- reduction package.
Unlike the consumer price index, chained CPI adjusts for consumers’ tendency to switch products when prices rise. In that way, economists say it is a more accurate measure of the cost of living for purposes of setting tax policy and Social Security benefits. The regular CPI tends to overstate inflation because it doesn’t adjust for consumer behavior, economists say.
A concern for Democrats is whether a change can be made in a way that would protect low-income and other vulnerable groups of senior citizens. Obama’s 2010 debt commission recommended instituting a flat-dollar benefit “bump-up” for Social Security recipients who have been receiving benefits for 20 years, and a minimum benefit for lower-income beneficiaries.
Another major concern for Democrats and Republicans will be protecting disabled veterans. That could be addressed by enhancing Social Security disability benefits or increasing certain credits for low-income taxpayers.
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