A New Twist in the GOP Feud Over Social Security Cuts

We hope you’ve had a good Thursday! President Biden attempted to ease fears today over the three mysterious flying objects shot down over North America in recent days, saying there was little evidence they were connected to a Chinese spying program. “The intelligence community’s current assessment is that these three objects were most likely balloons tied to private companies, recreation or research institutions studying weather or conducting other scientific research,” he said at the White House.

We’ll be back in your mailbox after the coming President’s Day holiday. In the meantime, here’s what we’re looking at:

Another Twist in the GOP Feud Over Social Security and Medicare Cuts

As Democrats led by President Joe Biden continue to gleefully attack Republicans for proposals both new and old that would cut or otherwise undermine Social Security and Medicare, GOP leaders have run quickly in the other direction, loudly insisting they have no plans to cut either of those wildly popular programs, even if both are facing severe fiscal challenges in the years ahead – a point brought home by a particularly dire budgetary analysis published by the Congressional Budget Office earlier this week.

Some Republicans, though, don’t seem to be following the path laid down by Sen. Minority Leader Mitch McConnell (R-KY), who has been openly critical of a plan offered by Sen. Rick Scott (R-FL) that would require all federal programs to be renewed every five years, subjecting Social Security and Medicare to the whims of lawmakers on a regular basis. “Let me say one more time,” McConnell told reporters this week, “there is no agenda on the part of Senate Republicans to revisit Medicare or Social Security.”

McConnell no doubt wishes Scott and his supporters would stop talking about the plan, which threatens to damage the GOP politically, raising the suspicion among millions of crucial elderly voters that Republican lawmakers may not have their best interests at heart. McConnell even took a shot at his colleague, noting that “it will be a challenge for him to deal with this in his own re-election in Florida, a state with more elderly people than any other state in America.”

A new flareup emerged Wednesday as the Club for Growth – a conservative organization that advocates for tax cuts, balanced budgets and entitlement reform – offered its endorsement of Scott in his 2024 bid for reelection – an endorsement that specifically targets McConnell.

“While other Republicans have caved to massive tax-and-spend packages that have strained our economy, Rick Scott has consistently championed small government solutions centered around fiscal responsibility, and because of that he’s faced the unfounded and false attacks of liberal Democrats like President Biden and even establishment Republicans like Leader McConnell,” the head of the Club for Growth told Politico.

As if that bit of internecine warfare didn’t offer enough tension for everyone in conservative circles, another giant of the Republican Party waded into the dispute Wednesday. Former president Donald Trump – who has warned Republicans to stay away from cuts to popular social welfare programs – made his opposition to Scott’s proposal clear. “Be careful, Rick, and most importantly fight for Social Security and Medicare,” Trump said on his personal social media platform. “THERE WILL BE NO CUTS.”

Noting that Trump and McConnell have long been at loggerheads, Politico’s Ryan Lizza, Rachael Bade and Eugene Daniels tried to make sense of the situation, in which the former president seemed to be allying himself with one of his enemies. “Trump hates McConnell, but likes his position on Social Security and Medicare,” they wrote Thursday. “Trump likes Scott, but hates his position on Social Security and Medicare. Trump hates the Club for Growth, and hates the group’s position on Social Security and Medicare.”

For his part, Scott said that the resistance he is running into from Republican powers that be won’t dissuade him from talking about his plan for significant spending cuts. “I am never going to be part of the establishment,” he told The New York Times’s Carl Hulse. “I am going to keep doing what I’ve been doing. I am going to run my race. I’ve won three hard races. I will win again.”

Social Security Trust Fund Will Run Dry One Year Earlier: CBO

Here's an important detail from the new outlook released by the Congressional Budget Office yesterday: the Social Security trust funds are now expected to be exhausted one year earlier than projections made just a few months ago.

In December, CBO estimated that the trust funds will run dry in 2033, but in the latest analysis that date has moved up to 2032. Inflation has played an important role in the changing outlook, as rising prices led to an 8.7% cost of living adjustment for this year, the largest increase in benefits in 40 years.

“The Social Security solvency date — the exhaustion date for the trust fund — is now within the budget window,” CBO Director Phillip Swagel told reporters on Wednesday, referring to the 10-year period commonly used for budgeting analysis in Washington.

Other projections indicate that the trust funds may have a little bit more time. The most recent analysis by the Social Security trustees estimates that the funds will be depleted in 2034.

Quote of the Day: About That Balanced Budget

“I’d be the last person to say you can’t find savings from improved efficiency or the elimination of some programs. But there’s no way on God’s green earth you’re going to balance the budget in 10 years unless you’re talking about increasing revenues and slowing the rate of growth in some of our major entitlement programs.”

— G. William Hoagland, senior vice president of the Bipartisan Policy Center and a former Republican congressional staffer, quoted in a Bloomberg News article about the difficulty GOP lawmakers will face as they attempt to accomplish their stated goal of balancing the budget within 10 years while honoring their pledges to leave Medicare and Social Security alone and, more generally, to never raise taxes.

Wendy Edelberg, director of the Brookings Institution’s Hamilton Project on economic policy, noted that the inability to work out an agreement on the budget comes down to basic questions about values and purpose. “We have fundamental disagreements in this country over what we value in our federal government,” she said. “These are not, at the end of the day, problems for technocrats or even economists to solve. These are political.”

White House Eyes Plan to Offer Free Covid Tests and Vaccines

The Biden administration has announced that the national emergency over Covid-19 will end on May 11, but officials are looking for ways to maintain key health initiatives that were rolled out during the pandemic, including free vaccines, treatments and tests for those without health insurance.

Politico’s Adam Cancryn and David Lim report that the White House is worried that the roughly 30 million adults who are uninsured will be unable to afford the care they need in the private market, and wants to continue providing those services through 2024.

“We know that the end of the [public health emergency] is not the end of our work on Covid,” one senior administration official said. “It remains a public health priority, and a lot of people will still need these treatments.”

The burgeoning plan would involve stockpiling vaccines, tests and treatments to distribute after the transition to normal health care market conditions begins later this year. With Congress refusing to spend any more on Covid treatment and prevention, funding could be a problem, and officials are reportedly looking at ways to redirect unspent federal Covid funds to help pay for the program. Officials told Politico that the administration expects to have less than $1 billion at its disposal, which could limit the program’s duration.

Number of the Day: 0.7%

A closely watched measure of wholesale prices rose 0.7% from December to January and 6% over the last 12 months, the Bureau of Labor Statistics reported Thursday, sparking new worries about the persistence of inflation throughout the U.S. economy. The monthly jump in the producer price index was well above expectations and the largest increase since June 2022. At the same time, though, the annual increase of 6% continued a downward trend from a peak of 11.7% recorded in March 2022.

“January’s PPI report is a setback in the battle against inflation,” economist Kurt Rankin of PNC said in a research note Thursday. “Today’s producer price increases will translate into tomorrow’s consumer facing price hikes.”

Economist Tuan Nguyen of RSM said the report is yet another sign that the Federal Reserve still has its work cut out for it in its battle against inflation – and that the Fed could raise interest rates higher than most analysts currently expect. “The strong rebound in producer inflation confirms that it is too early to declare victory over inflation, and that the road toward the goal will be bumpy,” he wrote. “This means there is a significant upside risk to our initial prediction that the policy rate’s peak will be at 5.25% by May.”