What’s In A Name? Dems Support Social Security Benefit Cut — By Calling It Something Else

[t0dd]

Source: TPM

Social Security benefit cuts may be a bridge too far for House Minority Leader Nancy Pelosi (D-CA). But what if Republicans and Democrats alike just agreed to refer to a benefit cut by another name.

That's how key negotiators have decided to treat one policy proposal, popular in Washington, that would simultaneously raise tax revenues and reduce Social Security benefits. As explained at length here, the idea is to peg federal Cost of Living Adjustments to a new, stingier measure of inflation.

Experts say the new index (the so-called Chained Consumer Price Index) is a more realistic metric for measuring inflation's impact on peoples' behavior. But the fact remains that if the change goes through as part of a grand bargain to lower deficits and raise the debt limit, retirees will receive less money each month than they're currently promised.

Read more: http://tpmdc.talkingpointsmemo.com/2011/07/whats-in-a-name-dems-support-social-security-benefit-cut----by-calling-it-something-else.php

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[Brickbat]

1. Well, at least it's not slashing. Just like they said.

;)

[DJ13]

2. a more realistic metric for measuring inflation's impact on peoples' behavior

How about we tie the pay of all DC politicians to the chained CPI for 5 years as a trial run to show those elderly freeloading bastards on SS that its not so bad?

If its so accurate, let them go first.

[defendandprotect]

25. +1 --- basically any $1 anyone had pre W is now worth 50 cents .....

and if Obama doesn't know that he shouldn't be in Oval Office !!

[global1]

3. Am I Reading This Graph Correctly?........

It looks like the older one gets the bigger the cut to monthly benefits. Does that make any sense whatsoever? The older one gets the needier and more dependent they become. Are they thinking that this is ok because the older one gets the less likely they are able to get out and vote? Do they think that - it won't effect their prospects for getting re-elected because these old folks won't be able to vote anyway. This is such a travesty. So sad.

[DJ13]

4. Does that make any sense whatsoever?

No, it doesnt make any sense, but the point of the chained CPI is its effects are compounded the longer your COLA is tied to it.

The number crunchers have free reign to substitute those items represented within the CPI continuously, which in effect would mean almost never seeing a COLA that even came close to keeping up with real inflation.

[t0dd]

5. Here's a summary

According to a coalition of seniors groups, Social Security Works, a change in the way Social Security cost-of-living adjustments are calculated would cost seniors hundreds of dollars a year in benefits. The Congressional Budget Office estimates adoption of the so-called “Chained-CPI,” which would be used to determine Social Security’s annual COLA, would cut benefits by $112 billion over 10 years. The Social Security Administration chief actuary estimates the effects of this change would be that beneficiaries who retire at age 65 and receive average benefits would get $560 less a year at age 75 than they would under current law and get $1,000 less a year at age 85 – a 3.7 percent cut and a 6.5 percent cut, respectively. The proposal would cut $1.6 trillion over Social Security’s 75-year valuation period – mainly from the oldest of the old, primarily women and those who are disproportionately poor.

http://vtdigger.org/2011/07/08/sanders-hands-off-social-security/

[TwoTap]

6. ...

http://www.sacbee.com/2011/07/08/3755377/obama-social-security-on-table.html

[pinto]

7. Somewhat confused, tell the truth. Is this cut in baseline benefits or cut in annual COLA increases?

i.e. - Is this the cut to your total monthly income, or the cut to the COLA that would be added to your baseline monthly income? Thanks.

The two are different ways to look at the situation.

:hi:

[KittyWampus]

16. It's the later. It compounds.

[pinto]

23. What I thought. Thanks. The press isn't "framing" this issue effectively, or usefully.

:hi:

[Xipe Totec]

8. It's the Chained-Consumer Price-Index nt

[t0dd]

9. aka a benefit cut.

http://news.firedoglake.com/2011/07/08/chained-cpi-not-only-a-social-security-benefit-cut-but-a-regressive-tax-increase/

[oNobodyo]

10. As infrequently as those COLAs actually come...

Does it even matter if they take .25 cents out of a 20$ per month cola that you might get every couple years if lucky?

That's one of the most deceptive charts I've ever seen.

Seriously. Non issue.

[t0dd]

11. What are you talking about?

The average earner retiring at age 65 would get a $560 cut each year at age 75, and an almost
$1,000 cut by age 85. By age 95, when Social Security benefits are probably needed the most,
that person faces a staggering 9.2 percent cut. The chained-CPI will cut $1.6 trillion over Social
Security’s 75-year valuation period – mainly from the oldest of the old, primarily women and
disproportionately poor.

http://strengthensocialsecurity.org/sites/default/files/CPI%20fact%20sheet%20with%20graphs%207-1-11%20FINAL.pdf

[oNobodyo]

18. The only way that math works out is if it's accumulated colas

In the last 4 years there has only been one cola (cost of living allowance increase) and that math requires that a cola is granted every year.

The base check for social security is about $620, now colas are a fraction of that at approximately $20...

That means that your monthly check would go up from $620 to $640 or an extra $240 per year...

Now you could calculate that as if those colas came every year for the lifespan of the recipient and make it look like those cuts are coming directly out of their checks as the chart that you posted does...it is however grossly misleading.

The idea of chaining both what is taken out or your paycheck and put into your social security account and how colas are calculated to the consumer price index has the effect of making those taxes and colas more closely match the actual cost of living rather than the way it's presently factored as a relation to interest rates.

Example: right now...prices on food are high but interest rates are really low so this year there is no cola even though it's more expensive to live.

Now to go back to the math...take that $20 cola x the rate change .09 and that's $1.80 less of an increase but it would've been triggered by the sharp price spikes and there would've been a cola this year and you would've had an extra %.20 taken out of your paycheck and put into your social security account...

Comparing to present law rates as if those colas actually occured yearly is more than just a little disingenuous.

[Fuddnik]

14. There used to be a COLA increase every year.

And if it weren't for CPI manipulations, SS benefits would be nearly double what they are today.

Seriously. Major issue.

[oNobodyo]

20. Maybe this will clarify it...

....

Some critics believe however, that because of changes to the way that the CPI is calculated, and because energy and food price changes are currently excluded from the Federal Reserve's calculation of "core inflation," that inflation is being dramatically underestimated.<7><8> The second argument is unrelated to the CPI, except insofar as the calculation of CPI is modified in response to a perceived overstatement of inflation.

The Federal Reserve's policy of ignoring food and energy prices when making interest rate decisions is often confused with the Bureau of Labor Statistics' measurement of the CPI. The BLS publishes both a headline CPI which counts food and energy prices, and also a CPI for All Items Less Food and Energy, or "Core" CPI. None of the prominent legislated uses of the CPI excludes food and energy.<9> However, with regards to calculating inflation, the Federal Reserve no longer uses the CPI, preferring to use core PCE instead.

Some critics believe that changes in CPI calculation due to the Boskin Commission have led to dramatic cuts in inflation estimates. They believe that using pre-Boskin methods, which they also think are still used by most other countries, the current U.S. inflation is estimated to be around 7% per year. The BLS maintains that these beliefs are based on misunderstandings of the CPI. For example, the BLS has stated that changes made due to the introduction of the geometric mean formula to account for product substitution (one of the Boskin recommended changes) have lowered the measured rate of inflation by less than 0.3% per year, and the methods now used are commonly employed in the CPIs of developed nations.<10>

...

Chained CPI for All Urban Consumers (C-CPI-U)This index applies to the same target population as the CPI-U. The same raw data are used, but a different formula is employed to calculate average prices. The chained CPI was developed to overcome a shortcoming of the CPI-U series, which does not account for the changes that people make in the composition of goods that they purchase over time, often in response to price changes. The alternative method of the C-CPI-U is intended to capture consumers' behavior as they respond to relative price changes.


http://en.wikipedia.org/wiki/United_States_Consumer_Price_Index

[virgogal]

12. Why don't they just shoot us? (I'm on SS)

[chill_wind]

13. K & Recommend. Whole thing needs to read. n/t

[KittyWampus]

15. Reposting this after it's been debunked. It's not happening. And it's hilarious that now so many

internet DU'ers will now become experts on COLA.

[EFerrari]

17. Um, it hasn't been debunked in the least.

Pelosi said it won't happen but that only means that she's dug in. Last time I looked, she's not the Speaker any more.

[Faryn Balyncd]

19. Why "cut" anything? It's (sl)easier to just cook the books by (once again) rigging CPI....

After the Boskin Commission in the 90's, the CPI/COLA calculations were rigged, resulting in our current "no inflation" figures (which have already reduced COLA'S to zero for at least 2 years.

The "chained CPI" concept is, by definition, extremely flexible, depending on at what point manipulators decide that a "substitution effect" should be inserted. Since they are no ;onger required to compare apples to apples, the "chained CPI" substitution effect allows manipulators virtually infinite ability to FURTHER rig the CPI/COLA figures downward in the future without new legilation.





:kick:

[xchrom]

21. Recommend

[democracy1st]

22. K & R

[defendandprotect]

24. Cuts came two years ago -- a lot of money involved for Seniors making it poverty wage --