Dean Baker: The Washington Consensus Wants To Cut Social Security Benefits With A Chained CPI

[Better Believe It]

Playing Inflation Games with Grandma: The Washington Consensus and the Chained CPI
By: Dean Baker
April 5, 2012

All the inside Washington types seem to agree, we should change the indexation of Social Security benefits to the chained consumer price index (CPI). This would supposedly make the annual cost-of-living adjustment (COLA) more accurate and save the government big bucks. Sounds great, right?

At the most simple level, the switch to a chained CPI (Consumer Price Index) is a way to reduce the annual COLA (Cost of Living Allowances) in Social Security by roughly 0.3 percentage points. That may sound trivial, but it is important to remember that this sum adds up over time. After ten years, this lower annual cost-of-living adjustment would imply a reduction in benefits of roughly 3 percent, after 20 years the reduction would be 6 percent, and after 30 years close to 9 percent. So this is real money.

The Bureau of Labor Statistics (BLS) has done research indicating that the Social Security population has qualitatively different consumption patterns than the rest of the population. This research suggests that a consumer price index based on the consumption patterns of the elderly would show a higher rate of inflation.

This is a simple way to distinguish between people who want an accurate COLA and people who just want to cut benefits. Those who want an accurate COLA advocate having BLS construct a full elderly CPI. People who just want to switch the indexation to a chained CPI simply want to cut benefits.

Read the full article at:

http://my.firedoglake.com/deanbaker/2012/04/05/playing-inflation-games-with-grandma-the-washington-consensus-and-the-chained-cpi/

[xchrom]

1. du rec. nt

[kenny blankenship]

2. Here it comes

And soon "moderate" Democrats will insist that the only "responsible" thing to do is to phase out Social Security altogether for Individual Retirement Accounts, in the manner of the Insurance Act's Individual Mandate.

[fasttense]

3. The Washington elite want to steal our earned Social Security benefits

Why do they think our Social Security money is theirs? We paid into it more than the wealthy slobs in DC. We worked for it,we earned it. Now, after taking our money for years, they want to renege on the deal.

Our earned benefits should not be up for reduction. Instead, let's cut back on banker's bail outs and oil corporation's subsidies.

[anti-alec]

25. Chained CPI - MY ASS.

I think the COLA needs to be 1,000% raised, and remove all caps to cover this.

The COLA is still stuck in the 1970s. I can't earn no more than $1,000 a MONTH under my SSDI.

[hughee99]

39. Want to steal it? They stole it decades ago.

Now they're trying to figure out how to avoid paying it back.

[Fawke Em]

52. That's it...in a nutshell.

[ProSense]

4. Anyone

who is following the Republicans' actions and logic know they want to cut Social Security. Dean Baker

If we want to know whether that is a big deal we need only turn to the Republicans who are screaming about President Obama’s plan to end the Bush tax cuts. For high end earners this would raise the top marginal tax rate by 4.6 percentage points. Since most high-end earners will have most of their income taxed at lower rates, the switch to a chained CPI would probably have more impact on the income of most Social Security beneficiaries than the ending of the Bush tax cuts would have on the income of most high-end earners.

Interesting point.

[woo me with science]

6. And Obama proposed the chained CPI in April of last year.

Spin, spin, spin.

He put 650 billion in cuts in Medicare, Medicaid, and Social Security on the table and then publicly bemoaned the fact that the Republicans did not accept his "big deal." And we learned afterward that the "big deal" absolutely DID include benefit cuts including a proposed chained CPI. By reports from multiple sources (including Nancy Pelosi, btw), the deal, which was agreed upon except for the revenue component, included the following:

http://krugman.blogs.nytimes.com/2011/07/23/what-obama-was-willing-to-give-away/?utm_source=Blog&utm_medium=twitter
http://www.tnr.com/blog/jonathan-cohn/92539/obama-boehner-debt-ceiling-press-conference-concessions-revenue


"Medicare: Raising the eligibility age, imposing higher premiums for upper income beneficiaries, changing the cost-sharing structure, and shifting Medigap insurance in ways that would likely reduce first-dollar coverage. This was to generate about $250 billion in ten-year savings. This was virtually identical to what Boehner offered.

Medicaid: Significant reductions in the federal contribution along with changes in taxes on providers, resulting in lower spending that would likely curb eligibility or benefits. This was to yield about $110 billion in savings. Boehner had sought more: About $140 billion. But that’s the kind of gap ongoing negotiation could close.

Social Security: Changing the formula for calculating cost-of-living increases in order to reduce future payouts. The idea was to close the long-term solvency gap by one-third, although it likely would have taken more than just this one reform to produce enough savings for that.

Discretionary spending: A cut in discretionary spending equal to $1.2 trillion over ten years, some of them coming in fiscal year 2012. The remaining differences here, over the timing of such cuts, were tiny."

http://www.democraticunderground.com/discuss/duboard.php/www/:/www.youtube.com/duboard.php?az=printer_friendly&forum=439&topic_id=1660734&mesg_id=1661130

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=439&topic_id=1660734&mesg_id=1668364



The theft is bipartisan. Occupy.

[ProSense]

7. And

now the deal is done and that rumor proved untrue.

Remember: http://www.democraticunderground.com/?com=view_post&forum=1002&pid=490694

[woo me with science]

10. That is flatly, utterly, brazenly untrue.

What he put on the table is on the record, and it was most certainly not a "rumor," as my links and the history make absolutely clear.

Lying about events we were all present to witness does not help the candidate, and I am uncertain in what universe you think it would.

[ProSense]

11. Really?

"That is flatly, utterly, brazenly untrue."

Can you show where Obama signed a proposal to cut Social Security?

It was a rumor, move on.

[woo me with science]

12. This is what is happening to our party, folks.

We have reached a point where it is necessary to flat out misrepresent history in order to defend the indefensible. This is how a corporate ruling class treats its subjects: utter contempt, mockery, and assurances that what we see and experience with our own eyes and ears is not happening.

War is Peace
Freedom is Slavery
Ignorance is Strength
The chocolate ration has been increased.
We have always been at war with Eastasia,

...and President Obama never put Social Security and Medicare on the table.

Welcome to the new DU!

[ProSense]

13. Oh

how cute and hypocritical.

http://www.democraticunderground.com/?com=view_post&forum=1002&pid=528323

Remember the claim that the President would announce cuts to Social Security in the SOTU? It's on the record, it never happened.

Maybe moving beyond rumors and speculative reports would help to stop the puking.

[eridani]

21. So if a proposal never gets enacted it doesn't count?

Not in my book. Bad intentions are bad intentions, even if they don't succeed.

[indepat]

24. Woo me, you have wooed me: I despise every right-wing initiative, no matter its origin,

but unfortunately many of today's Democratic initiatives seem to be the right of what moderate Republicans of my younger days were proposing. I didn't vote for Goldwater, convinced he would bomb the north.

[nashville_brook]

35. +1

[sabrina 1]

46. I think by now, people are too smart to accept anything other than

strong statements from elected officials regarding SS and other programs that we know have been 'on the table' despite all the denials to the contrary.

Great posts as always, Woo ...

[Autumn]

14. Woo did NOT say Obama signed a proposal to cut Social Security

Obama proposed the chained CPI and that's a fucking fact. Nice twist, hope you didn't hurt your spine.

[ProSense]

15. That

"Obama proposed the chained CPI and that's a fucking fact."

...was a "fucking" rumor. The rumor came out that he was proposed something he knew Boehner would reject. Stuff like this explodes in the media and is twisted and taken for fact. If Obama wanted to cut Social Security or Medicare he would have done so.

That's a fucking fact, and it has nothing to do with my "spine."

[Autumn]

17. Not a fucking rumor, so it must have been one of

those 50gazillion dimensional chess moves he is fond of. Twist all you want.


It's really becoming quite

[ProSense]

19. Yeah,

I'm still waiting for the SOTU and smoke signals that the cuts are coming.

Chess!!!!

[sabrina 1]

45. Has he made any public statements squashing that 'rumor' yet?

Has he condemned it? Democrats need to be very clear about this, as anything that touches SS is not going to be popular with a vast majority of Americans. So, if it was just a 'rumor' and it is still floating around, he needs to come out strongly against it.

[TheKentuckian]

56. Can you show where George W. Bush signed a proposal to privatize Social Security?

It was a rumor, move on.

[ProSense]

9. .

"The theft is bipartisan. Occupy."

[girl gone mad]

28. I think you are failing to convince people.

Quick, add more rofl smilies!

[Bobbie Jo]

30. No, just the same ones...

who show up in these threads like right on schedule.

Quick, add more one-liners!

[woo me with science]

34. Oh, that's rich,

coming from you.

I'm not sure I have ever seen a Bobbie Jo post that was anything BUT a drive by.

[Bobbie Jo]

40. and I don't think I've

Ever seen a post from you that was less than 6 paragraphs. Each indistinguishable from the last 6 paragraphs of recycled material.

This must be a first.

Oh, and....

[woo me with science]

41. No, actually I'm perfectly serious, Bobbie Jo.

Last edited Mon Apr 9, 2012, 07:35 PM - Edit history (1)

The more I look around, the more I realize that that's really all I see from you here. Just vitriol and mocking. I am having trouble finding a single post by you that contains any content other than that.

Do you engage in any actual political discussion here at all? Or do you merely go around making nasty comments about other DUers?

Now, why would an adult do that?

[Bobbie Jo]

42. As was I...

Your posting style is not only condescending and confrontational, it's exceedingly tedious.

I appreciate your interest and taking the time to research and critique my posting history, I'm truly flattered.

Nonetheless, you will probably continue to see me pushing back against the vitriol, mocking, and attacks that have been coming from the "holier than thou" clique for the last 3+ years.

Either deal with it, use ignore, or alert to your heart's content. Your attempt to "put me in my place," just illustrates my point. I'm sure the "mocking" poster I responded to appreciates your comments.

Have one of those nice days, now.

[woo me with science]

44. How nice.

A defense of the pattern of vapidity and insults, a few more insults thrown in, and a promise to continue that way.

Welcome to the new DU!

[Bobbie Jo]

48. Of course

Your insults were of a superior nature. Extra points for the use of "vapid," the sexist connotation wasn't lost on me.

I can assume I've been sufficiently dismissed now.

[woo me with science]

50. No, the point is that your posts are virtually *always* drive-by nastiness about other DUers,

with no other content whatsoever. Let's be clear about that. That is the vast majority of your posting. Maybe all of it.

That IS vapid. It is also juvenile, and it degrades the discussion board.

[Bobbie Jo]

53. No, let's be clear about this.

Last edited Wed Apr 11, 2012, 09:09 AM - Edit history (2)

You don't have a clue about me, period. An arrogant, self-righteous tone permeates the vast majority of your posting. Maybe all of it.

You don't own this discussion board, nor do you decide who is allowed to participate or to what extent. It is, in fact, arrogant hacks who degrade the discussion board.

Now, you can climb back on that high horse of yours and take a long ride.

I'll post as I damn well please.

[woo me with science]

54. Welcome to the new DU! nt

[Bobbie Jo]

57. Indeed.

...and welcome to ignore.

I've only done this twice in 6 years. The other was TS'ed a long time ago. He was quite impressed with himself too.

[woo me with science]

59. Mirrors can sometimes be more uncomfortable

than any insult.

[inna]

62. yep. it's a fact. nt

[Hoyt]

5. I like idea of developing an "elderly" CPI.

We are in a different economy and I'm not going to go ape-chit crazy if REASONABLE people look at SS, Medicare, Medicaid, etc. Of course, Republicans aren't reasonable.

But, if we don't get some things better aligned for the future, we are ALL going to be in a world of hurt. As someone just about to go on SS, I'll feel a whole lot better about the future if the economy is improved (not necessarily like the 1990s or anything) and younger people have better hopes for their future. I'm not saying cuts are the way to go, but I think we have to consider everything -- including taxing wealthy.

[Better Believe It]

18. By "elderly CPI" you mean one that more accurately reflects the need for higher COLA benefits.

I believe that's what you're proposing, right?

[Hoyt]

20. Not necessarily. For example, if we figured out a reasonable way to control/lower medical, housing,

transportation and other costs for seniors, got kids employed in decent jobs so the wage base is expanding, etc., I might take a cut. You can't just look at SS -- or anything else in this world -- in isolation from what else is going on in the USA and the world.

This is a different time, and some big changes need to be made for the future. Everything should be discussed and solutions developed that make us all better off in the long-run.

[HiPointDem]

58. Today's average SS benefit is $1230. And that average is right-skewed a bit, meaning most

beneficiaries get less.

There's no "reasonable" way to use a chained CPI that won't result in more old people on the streets.

Cutting SS won't result in more kids getting better jobs. It's not like young people's payroll taxes would be used to create more and better jobs if benefits were reduced. They'd just be spent by the young people, same as they're currently being spent by the old people.

Both kinds of spending support more or less the same jobs. Withholding the money from one spender and giving it to another spender doesn't increase jobs.

The dearth of good jobs has nothing to do with SS.

[Hoyt]

60. Except, folks on SS depend on the younger folks putting money into system.

That may not be the way it's suppose to work, but in effect it does. I'm not much for cutting lowest/average recipients without something in return. But I think this new economy - spawned by repubs - requires looking at everything.

Admittedly, there are things I'd target first.

[HiPointDem]

61. That *is* the way it's supposed to work & is the way it's always worked. What's new

about this economy? Same economy as ever, the ruling class is trying to pick your pockets, and they're not all republicans.

Cutting social security benefits with a chained cpi or anything else = the ruling class picking your pockets, young people as well as old people. It won't create more jobs, it just gives rich people more money to ship overseas.

[woo me with science]

8. Of course they do. It is a sustained assault,

and it is bipartisan.

Occupy now.

[HiPointDem]

23. +1

[Zalatix]

32. Occupy now, Occupy always.

Occupy when the President is doing things right, to cheer him on.
Occupy when he's not, to bring his feet to the fire.

The price of freedom is eternal vigilance.

[MineralMan]

16. 'All the inside Washington types seem to agree'

Whenever I see a lead like this in an editorial, it's a signal that the writer is just using his own ideas, rather than actual information. It's an old trick, and a common logical error. Who are the "inside Washington types" to whom Baker is referring? He doesn't really say. In editorial writing, that means he's pulling it out of his ass, rather than quoting real sources of information.

This is typical of FDL editorials. Opinions without backing information. When I see such tactics used, my journalistic background makes me go, "WTF? More bullshit!"

This "chained CPI" thing has been bandied about for quite some time, yet there don't appear to be any actual plans to implement any such thing.

My conclusion: More FUD. There's a lot of FUD being posted on DU as the election year progresses. Expect more, and from the same sources over and over again.

[Ikonoklast]

37. It is exactly the same tactic as "Some people say..." bullshit.

And the gullible fall for it, every single time.

[MineralMan]

38. Precisely the same.

It's a red flag as the opening sentence of an opinion piece. It says, "I have no real facts, but here's what I want you to think."

Critical thinking is in short supply these days.

[malaise]

22. The Washington Consensus has fucked up the entire planet

Fight back America! Occupy!!

[Better Believe It]

26. What we need is more bi-partisanship! I'm sure we'll see a lot of that after the election.

We're in trouble folks!

[Uncle Joe]

27. Kicked and recommended.

Thanks for the thread, Better Believe It.

[fascisthunter]

29. to DU readers: unless you are the upperclass... you are screwed

now, why would I listen to some ashore tell me not to help you when you couldn't survive on your own. Socialism is evil after all... right?

[Better Believe It]

31. For Sunday DU'ers

[KG]

33. reflexively recc'ing without reading article...

[Yo_Mama]

36. Some of the data behind the article

CPI-U index:
http://www.bls.gov/news.release/cpi.t01.htm

CPI-W index (this is currently used to figure SS COLAs):
http://www.bls.gov/news.release/cpi.t04.htm

C-CPI-U index (the chained index proposed for use for SS COLAs):
http://www.bls.gov/news.release/cpi.t07.htm

The current annual changes:
CPI-U: 2.9
CPI-W: 3.1
C-CPI-U: 2.6

Obviously this will leave many SS recipients in dire straits over time. I heartily second Baker's opinions - this has been widely suggested and keeps popping up.

Because many social security recipients are living on a small income, more of their total incomes goes to basics such as food and medicine.

The current annual changes for food at home:
CPI-U: 4.5
CPI-W: 4.6
C-CPI-U: 4.4

If DU'rs are wondering why CPI-U and CPI-W are different, when they use the same methodology, they are constructed using a sample of consumers with different incomes. The consumers with lower incomes are used for CPI-W. When you take a sample of consumers with lower incomes, they spend more on things like food and energy, so the weighting for inflation components is different.

Weighting for food:
CPI-U: 15.256
CPI-W: 15.940
C-CPI-U: 15.084

I think what I have given here is proof enough that adjusting the incomes of persons living on 1K a month using C-CPI-U would basically be a cruel fraud.

[sabrina 1]

55. Good post, thank you.

The way I see it, CPI is simply a deceptive way of cutting SS without seeming to. I guess I would have more respect for someone who made their intentions clear so that the people know what is going on and have a chance to fight back. These are the most vulnerable Americans, and I agree, the word 'fraud' definitely applies.

[jwirr]

43. Am I correct in thinking that some of the most vital items to life (food) are not included in the

numbers used to figure the inflation rate that determines the COLA? Wouldn't it make more sense just to measure the things that really make a difference in our lives?

[librechik]

47. "consensus"

That doesn't mean OUR consent, BTW. It means all the corporate stooges in Congress have banded together to fight the rights of ordinary people under the guise of "helping" the country.
All for profit, and the revolving door.

[Oilwellian]

49. For those who question Obama's intent

How quickly we forget the word games Obama and the republicans played on cutting SS, Medicare & Medicaid.

[cottonseed]

51. Unhook and inflate away.

It's the only way to get out of the mess we're in. Inevitable and I say go for it.

[HiPointDem]

63. called it, baby