The Chained CPI Is Bad for Seniors and for Accuracy

[marmar]

from Dollars & Sense:


The Chained CPI Is Bad for Seniors and for Accuracy
BY John Miller | May/June 2013

The word “thuggish” comes to mind. “I’m not a number,” says the older man in a television ad funded by the seniors’ lobby AARP. ... “But I am a voter. So Washington, before you even think about cutting my Medicare and Social Security benefits, here’s a number you should remember: 50 million.”

This unyielding position, undergirded by a multimillion-dollar ad campaign, is as wrongheaded as the equivalent line-drawing of Grover Norquist and the no-new-taxes crowd. ...

The brutal fact is that Social Security cannot pay all promised benefits, and a debt discussion is a useful place to make reasonable tradeoffs.

—Washington Post, “Congress should reject AARP’s self-centered appeals on Social Security,” Nov. 4, 2011.

That AARP television ad sure raised the hackles of the Washington Post editors back in 2011. The editors called AARP’s threat—to vote out any politician who supported a reduction in the cost-of-living adjustment (COLA) for Social Security benefits—”thuggish,” “self-centered,” in denial about the crisis of Social Security, and as “wrongheaded” as conservative power-broker Grover Norquist. That last one had to hurt.

Back then, the proposal to reduce the Social Security COLA by switching to the “chained” Consumer Price Index (CPI) didn’t come to pass. But now it’s back, this time as part of the 2014 Obama budget proposal and going by its technical economic name—the “superlative CPI.” Make no mistake, though. It’s the same idea now as then, and would reduce the COLAs for Social Security and veterans’ benefits, as well as the inflation adjustment for income-tax brackets.

What’s all the fuss about? The Social Security Administration currently uses the CPI–W, a measure of the price of a basket of goods and services typically purchased by urban wage-earners and clerical workers, to calculate COLAs for Social Security recipients. The “chained CPI-U,” as it is officially designated by the Bureau of Labor Statistics (BLS), grows at a slower rate than the CPI-W. Therefore, calculating the COLAs using the chained CPI will reduce future Social Security benefits by more and more each year. If that sounds to you like a roundabout way to hold down spending on Social Security, you’ve got it right.

The proposal is meant to establish Obama’s deficit-reduction bona fides and to lure Republicans and conservative Democrats into a “grand bargain” boosting tax revenues and cutting entitlements spending. For good measure, the Obama administration is selling the superlative CPI as just that—“a more accurate measure of the average change in the cost of living than the standard CPI.” And the Washington Post is once again on board, endorsing the Obama proposal for “Social Security spending restraint” as part of the “worthy end” of entitlement reform. .....................(more)

The complete piece is at: http://www.dollarsandsense.org/archives/2013/0513miller.html

[eridani]

1. Resolve to pester your legislators at least once a week n/t