Back in November 2012, with the Bush tax cuts scheduled to expire and sequestration looming, liberals were divided among two and a half significant schools of strategic thought.
One (mine) was that President Obama should let all of the cuts expire, allow sequestration to kick in, then return from a restful Christmas break with an "Obama tax cut" bill in hand. As a gesture of goodwill to Republicans, that bill would have reinstated all of the Bush tax cuts for the first big chunk of everyone's income, but in return they'd have to agree to rescind sequestration entirely, and partially offset the cost of all this new spending and tax cutting with a cap on tax expenditures for high earners.
The other (and a half) was that Obama should cut a deal of some kind before the New Year's "cliff." Some of the people in this camp believed Obama should pocket the expiration of the Bush tax cuts for top earners and call it a day, fight sequestration separately (which is essentially what happened). Others, including Obama, believed the best option was to reach a big fiscal accord, built up from the baseline of higher taxes on rich people, from which he'd agree to some entitlement cuts, Republicans would agree to close some tax loopholes, and the parties could put sequestration and budget brinkmanship behind them for years.
This is how a Democratic president ended up supporting a Social Security cut called Chained Consumer Price Index, which reduces spending by indexing benefits to a less generous measure of inflation. One of the White House's most poorly kept secrets is that many of Obama's economic advisers support Chained CPI on the merits, or believe it to be the least-bad benefit cut Obama could offer Republicans. It's how Chained CPI ended up in Obama's budget last year as a partial sequestration replacement. And if the metaphysics of conservative tax policy hadn't prohibited further budget wheeling and dealing between the White House and GOP, Republicans could've pocketed a big win.
But the metaphysics of conservative tax policy is a serious business. And now that the budget deal Obama wanted isn't going to happen; that deficits have plummeted; that sequestration has been partially lifted; that Obama supports an immigration reform bill that would reduce deficits as much as Chained CPI; and that Democrats must once again invoke the referendum that resulted in Obama's reelection; Obama's dropping Chained CPI from his budget.
Liberals are celebrating, with good reason, but I think the strongest emotional response should come from reasonable conservatives who have let an inflexible anti-tax orthodoxy destroy the right's longer-standing goal of slashing and devolving entitlements. The only way they'll get there with Democrats in power is to pony up some tax revenue. Failing that, they'll need to recapture the entire government and do the slashing and devolving all on their own. But there's every reason in the world to doubt they have the chutzpah to do that. So the dream is dead. Driving that point home to the right is just as valuable as granting a reprieve to the left.
Whatever your view of the wisdom of chaining CPI in last year's budget, dropping it now is the obviously right move.