Republicans have ADMITTED that the RIGGING of CPI is a scam to slash your Social Security:

[Faryn Balyncd]

(but that is not stopping them from trying again.)




No one, but no one, truly believes the official "no inflation" statistics (resulting in no COLA for SS for at least 2 years).

In fact, a few years after the Boskin Commission slashed SS benefits by rigging CPI to understate inflation, Greg Mankiw, chairman of George W. Bush’s Council of Economic Advisers from 2001-2003, seeing no reason at the time to continue the charade, publicly admitted the truth everyone already knew: “The debate about the CPI was really a political debate about how, and by how much, to cut real entitlements.”




Since, by the time of Mankiw's admission, the Boskin Commission's (bi-partisan) dirty deed had already been safely accomplished, resulting in a CPI that critics estimate understates real inflation by at least 1% annually to as much as 7% annually, little did Mankiw know that, in 2011, Republicans (and their enablers) would have the audacity to try a repeat of the same scam .......to attempt to RE-RIG the CPI that Americans already recognized as fraudulent.

But, to the extent that Mankiw did not foresee a repeat of the CPI-rigging scam, he clearly underestimated the charms to politicians of dishonest accounting manipulation of CPI....... what Barry Bosworth of the Brookings Institute eloquently labeled "the ‘immaculate conception‘ version of deficit reduction in which spending is cut without Congress taking the blame.”




Do Republicans (and their co-conspirators) have no shame?

The compounding of an artificially low Consumer Price Index have ALREADY reduced payments to social security recipients by about half (according to John Williams, author of the newsletter Shadow Government Statistics).

Yet they are now back for the rest of the benefits Americans have funded (building a $2.2 trillion surplus with which Republicans have funded wars and tax cuts to the rich) with a lifetime of sweaty payroll tax contributions.




Because Republicans are ADDICTED to the raiding of payroll taxes from the SS Trust Fund to fund the deficits created by wars, corporate welfare, and unsustainable tax cuts to the uber-rich, they do not want to EVER honor the $2.2 trillion in Treasury bonds representing the decades of loans from the SSTF to the Treasury. Republicans have even pushed to PAY CHINESE BONDS before those of Social Security.

Because they want to continue to have payroll taxes subsidize income tax cuts for the rich, Republicans reject any approach which would address the fact that billionaires pay a LOWER combined federal marginal tax rate than the middle class. Republicans reject, for just one example, eliminating the exemption of income over $106,800 from FICA taxes, which, by itself, would more than guarantee continued solvency, while (partially) rectifying our regressive tax system which favors billionaires with lower combined marginal tax rates than the middle class.




Instead, Republicans, and their enablers, are so intent to continue raiding payroll taxes that they propose cuts that are much, much greater than the 22% cut in 2037 (rising to 25% by 2084) that the Social Security Trustees say would achieve continued solvency IF NOTHING IS CHANGED BEFORE 2037.

Just the rigging of the CPI by itself, for example, (even if one accepts their ridiculously low estimates of the magnitude of suppression of CPI (0.3% per year) this will achieve, will compound to slash SS payments by 8% by 2037 and 24.4% by 2084. If one uses a more realistic estimate of 1.5% suppression per year (which is a low estimate of the suppressive effects achieved by the Boskin Commission) the compounded effect will result in a cut of 47% in Social Security by 2037. (But, moreover, will begin now, and will continue to compound forever).

The method the enemies of Social Security are now peddling, however, "Chained CPI", because it DE-COUPLES CPI from comparing apples to apples, has a much, much greater suppressive potential, and because it will depend on the somewhat arbitrary criteria which will need to be determined to implement the "substitution effect" "Chained CPI", if adopted, will be an infinitely powerful and flexible tool for artificially suppressing official CPI statistics.




This is how "Chained CPI" re-defines reality:

Suppose, over a given time period, prices rise 100%. And suppose that you, and others, have been purchasing rib eye for $5/lb, and rib-eye rises to $10/lb. Because of this inflation, you switch from rib-eye to hot dogs, which formerly were $2/lb, but rose to $4/lb. Now, you might be tempted to assume that the CPI has risen by100%, since that is what individual items rose. But "chained CPI", by allowing for a "substitution effect", says, in effect, that "Hot dogs are the new rib-eye", and that your meat expense actually went down from $5/lb rib-eye to $4/lb hot dogs, and that therefore there has "not been 100% inflation", but has been "20% deflation".






Will Republicans succeed in repeating a scam on working Americans? Is it possible without the active collaboration of Democrats?

In 1997, as the Boskin Commission's fraudulent rigging of CPI was on the verge of implementation, The Atlantic published an eerily prescient "How to Re-Write Economic History" which illustrates the profound attraction that cooking the books has for politicians:

“Given the questionable intellectual foundations of the Boskin Commission's findings, the commission's high standing in Washington requires explanation. Both Democrats and Republicans have been keen to see its recommendations adopted, because they provide a potentially uncontroversial way to achieve deficit reduction. Raising taxes is unpopular, and little discretionary government spending is left to be cut. Restating the CPI as a measure of cost-of-living inflation offers an easy way to lower Social Security payments through reduced COLAs and raise tax revenues through reduced exemptions. The hope is that the CPI can be presented as an apolitical and boring technical issue that voters won't notice.

“Revising the CPI would get the Republicans off the hook of deficit reduction, while simultaneously advancing the interests of business. This, however, would occur at the expense of working Americans and the elderly. Revising the CPI would get the Democrats off the same hook, but at the cost of another shameful desertion of the constituencies they claim to represent.”


- - - - - - - - - - - - http://www.theatlantic.com/past/docs/issues/97apr/econhist.htm

Will Democrats learn from the past?







:kick:

[Poboy]

1. Always glad to k&R your OPs .-nt

[rhett o rick]

2. Thank you. k&r

[Kaleva]

3. kicked and rec'd

I'm all for at least removing the cap on FICA tax. There is no cap on the medicare payroll tax and there ought not be one for the SS payroll tax.

[lonestarnot]

4. Used to being deserted. Now when are we going to stop them?

[dkf]

5. In addition Seniors basket of goods differs from the general public.

http://www.marketwatch.com/story/inflation-measure-misses-senior-citizens-2010-10-12p

However, seniors’ market basket is different. It consists mainly of such items as food, energy, taxes, transit fares, tolls and, of course, health care, such as insurance, doctors, prescription drugs, hospitals, assisted living and nursing homes.

These costs are not falling — they are rising quite rapidly. As a matter of fact, health-care costs are just about the only item that did not dip for even one month during the recession.

Those items that are pulling the CPI down — cars, computers and cell phones, to name three, don’t affect seniors all that much.

In the face of all this, retirees will have to make do with less for the second year in a row.

[JDPriestly]

6. K&R

[The Wizard]

7. Paying for war and tax cuts for the wealthy

on the backs of seniors and the disabled is not only contrary to American ideals, it's immoral.
The wealthy need tax cuts like a fish needs a bicycle. The American people are getting rolled by unscrupulous shysters posing as our representatives.

[Overseas]

51. +1.

[liberal N proud]

8. They have tried every tick in the book and some not to kill Social Security

It just pisses them off to see old people survive.


How do we stop them this time?

[DirkGently]

9. Yep. Needs saying. Bears repeating.

[SpiralHawk]

10. k

and

r

[scarletwoman]

11. Happy to K&R and bookmarked. Thank you for all your good work on this subject! (nt)

[rucky]

12. Here's to all the assholes who insisted prices weren't going up.

When we all saw them go up and felt them in our pocketbooks.

[ThomCat]

13. And yet, people HERE have argued that the formula for COLA

was accurate, and there really has not been any increase in cost of living because interest rates have not gone up. There have been arguments HERE at DU where people have refused to accept that the governments numbers are cooked to cheat elderly people and people with disabilities who depend on Social Security income to survive.

If we can't even agree on something this incredibly obvious, that has been reported as frequently and as thoroughly as this, then what common ground can we ever possibly agree on?

[PA Democrat]

14. Thanks for posting this. I am bookmarking for future use.

[myrna minx]

15. K&R n/t

[malaise]

16. K & R

for another excellent post

[old mark]

17. K&R- Will the Democrats learn from anything?....looks dim....nt

[katnapped]

18. So by this argument....

The people who have traded down from ground beef (at say $3 a pound) to cat food (at 50 cents a can) really should be getting their SS cut.

That correct?

[woo me with science]

19. Kicked and strongly recommended.

We need this in the media, every day. People have no idea that what is happening to them is so systematic and deliberate.

Thank you for posting this.

[Imperialism Inc.]

20. CPI is not a cost of living index.

There is one thing that is a fundamental source of the split in opinions about how CPI is measured. That is the fact that CPI is not, and was never designed to be, a cost of living index. It is used that way in determining the COLA increases for social programs but that is simply a mistake. CPI is intended to help measure and understand things like the growth in GDP, and growth in wages and productivity.

Understanding this it is easy to see why there is split over things such as accounting for hedonics (where adjustments are made for such considerations as products getting better over time). Imagine one year every company offers basic telephone service with no features. The next year everyone offers voice mail, call forwarding etc. The rpice goes up accordingly. Is this inflation? I don't think many people would say yes. With respect to analyzing GDP, and wage and productivity growth the price increase isn't telling us anything in particular. On the other hand, from a cost of living perspective, it is a different story. You need phone service of some type to thrive in modern society. That isn't to say that the adjustments were made in the past were perfect just that some of them were surely justified.

[Bluenorthwest]

24. Here is what SSA really says about the nature of the CPI and

Cost of Living Indexes: "Price indexes are not true cost-of-living indexes, but approximations of cost-of-living indexes (COLI). The Bureau of Labor Statistics (2006a) explains the difference between the two:

As it pertains to the CPI, the COLI for the current month is based on the answer to the following question: "What is the cost, at this month's market prices, of achieving the standard of living actually attained in the base period?" This cost is a hypothetical expenditure—the lowest expenditure level necessary at this month's prices to achieve the base-period's living standard. . . . Unfortunately, because the cost of achieving a living standard cannot be observed directly, in operational terms, a COLI can only be approximated. Although the CPI cannot be said to equal a cost-of-living index, the concept of the COLI provides the CPI's measurement objective and the standard by which we define any bias in the CPI."

Now let's talk about a better example than your 'additional phone services' example, because that one sucks due to the fact that even if one wanted to, you could not have kept your old style dial phone, and the fact is voice mail is expected on any number where the person makes appointments. Medically, message capability is vital. I could go on. But you are skipping right over such a great example, even as you use it. The internet. Just a decade ago, the internet was an item of choice, and it no longer is that. Now people need that service, which previously did not even exist. Quickly, the need increased as dial up became archaic and broadband became the need. Well, one year's 'basket of goods' did not even have 'internet' in it. Then the following year did. New stuff. Not a luxury. Not comparable to last year, when the service did not exist, or was not pervasive in society. So how would 'hedonics' apply there? New, necessary and now. It goes on like this. In the past, one year's 'basket' could include livery and horse feed, the next gasoline and oil. At what point in that change would you stop seeing the horse as the standard, and the car as a 'hedonic'? Would you suggest the continued use of horse based prices, even after it had become illegal to ride a horse in town? Or would you agree that there are brand new transportation expenses to look at, not a 'hedonic increase' but a simple change in how we all do things.
So would you say the CPI should leave people on horseback, or with no internet, or just in a model T with dial up for all time?
And in closing, people in the profession use the term CPI and cost of living in the exact same way, and the SSA explaination above will tell you why that is. CPI. Consumer Price Index. It is made up from information from COLI which are 'cost of living indexes'. They are not exactly the same, but the one is created from the other.

[Imperialism Inc.]

25. The internet was a certainly a much better example.

I'm not seeing where we actually differ much though. Were you trying to correct something I said or just expanding and clarifying?

[Bluenorthwest]

26. We differ greatly. And partly, I am amused to be talking to

someone who has to 'imagine' the invention of voice mail. Many of us merely recall it. You did not respond to questions about new services that become vital needs. That is a basic question for those of us whose parents got the first flush toilet on the block. Big luxury it was. Hedonistic. Previously unheard of. At what point would you declare indoor plumbing to be a need as opposed to just being a hedonistic improvement to an outhouse? In your method, that has to happen at some point. Unless you want to keep tying the CPI to the cost of a telegram, or the price of a block of ice delivered, as that fridge is a hedonistic improvement on the ice box, and many around the world would kill for an ice box and ice, much less a side by side. So imagine one day you have an ice box, then they come up with freezers and such. Do you keep the 'basket' used for the CPI filled with icemen and blocks of ice, or do you ramp up to include the fridge, the electricity needed to run it and so forth?
Cell phones. For some time in my life, a portable phone was a sign of great wealth or of an important job, the calls were a fortune, the device costly, and only a handful used them. Now people tell Great Grandma she HAS to have one for emergencies, and they are very correct. Grandam already has a phone, so what's with the hedonistic upgrade? Or is it just keeping up with how it is? If it saves lives in emergencies, often of the elderly, is it a luxury just because it did not exist as a need in a previous year?
Just looking for specifics from you, as to how you think this works. You had your analogy, which I responded to. You did not offer the same in return. I also gave the SSA's actual statement as to the differences between a COLA and a CPI. Which is not the same as they way you stated it. I did not state it myself, I quoted the actual authority.

[Imperialism Inc.]

29. OK. I'll look at it later. I didn't get what you were saying I guess.

I'm going to be at a rally at our statehouse for the first part of the day. I'm 40 so I just pulled an example from my living memory. For now I would just say that SSA did not create the CPI to my knowledge. I'm not really sure we do differ much, I may have not just been clear enough due to time. My main point is that there is a distinction between what economists want out of CPI and what the SSA actually uses it for. I'm well aware that they use it as a proxy but wrt to hedonic adjustments (of various kinds) there are different needs for each group and each use. Like I said I'll look at this again later to see where we differ.

[Bluenorthwest]

30. CPI, fyi, was started during WW1 by the Dept of Labor Statistics

That index has in fact worked through every change you mentioned, all that I mentioned, and in addition to WW2 which involved rationing and shortages and price controls. Thus, it is possible to look at how the CPI was handled by the Government both before and after it was tied to the SSA COLA. And therein lies the tale.
Sorry to hand you specific questions so far above your pay grade. But you did some very large declarations without any citing of actual rules an language. You spoke of the intention behind the creation of the CPI when in fact you did not know who created it, when, nor why. So I filled in with some facts instead of opinion.
I know it can be hard to focus the blather to specifics. But that is what has to happen, as this functions in the real world. And the world changes, and those changes are not all pursuits of pleasure and luxury. They are often pursuits of health and safety.

[Bluenorthwest]

31. No, read what SSA writes. They do not use CPI as a 'proxy'

The CPI is created by compiling data from various COLI, cost of living indexes. It is not a proxy for one, it is made out of many COLI. COLI are the parts of which the CPI is made. It is not a proxy for COLI. So you are well aware of something you misunderstand.
You have this word 'hedonic' and you keep using it to sound clever, but when asked to define it, you do not know how to use it.
The CPI is not a proxy for a COLI.

[Imperialism Inc.]

34. Approximated, proxy, whatever. You are picking nits and still don't understand

what I said. Like I said, that is probably my fault. But nothing you have said has challenged my main point that economists want different things from CPI than SSA does.

[Imperialism Inc.]

21. Economists did not just go along with the CPI changes as one linked article claims.

In one of the articles linked it is claimed that economists just went along with the changes blindly. This is not true. Economists, left right and middle, already thought there needed to be some adjustment to the calculation based on data not blind loyalty to politicians. The problem was that data collected about wages, in a way that avoided inflation calculation problems, showed a different story than the trend showed by the old CPI calculation. When 2 ways of calculating the same thing come to different conclusions there is a problem somewhere.

Measuring total wages (including those of the high end of the wage scale) showed that wages had remained a consistent percentage of the economy since 1973. Working back from the old CPI calculation however suggested that total wages had shrunk even though productivity had grown. That is why economists "went along" with it.

Note this *does NOT* say anything about inequality. It was the top tiers that were capturing the productivity gains and the lower levels were getting a shrinking share. The data still show that but now the 2 measures are more closely aligned.

[Imperialism Inc.]

22. One last comment.

From everything I've read I think it is still correct to say that the Boskin commission went too far with their changes in the calculation. Probably precisely for the reason the stated. As a backdoor way to lower COLA increases.
Still it is important to remember the distinction I made above. Economists care about trends in productivity, GDP growth, wage growth and the output gap for determining what the best policies are for the overall trends in the economy.
In that respect it is entirely correct to note that the trend is one of disinflation (at least until very recently, like the last couple months) and historically low levels of inflation. This tells us there is a downward pressure in the economy that needs to be dealt with.

[Bluenorthwest]

28. I think people should go to SSA.gov and look up definitions

The distinctions you 'made above' are not accurate, they are written with intent to make a point. There is no need to argue about it, as any and everyone can look up COLA on SSA.gov and learn more than they thought there was to learn, without any editorial flourish from me or anyone else.
Why not go to the source and ask the horse?

[Imperialism Inc.]

32. One more comment before I go.

My entire point was that economists want something different out of CPI than those wanting to use it as a COLA proxy. So why would looking it up on SSA.gov show you anything about that? Don't you need to look up what the other constituency for CPI is saying to see if I am right?

Go to Paul Krugman's blog and search for CPI, core, or better yet "sticky prices". What you will find is that what economists want is a measure of inflation that is consistent with how it is used in their models. Their models where things like output gaps and wage levels matter. Given that that is what they want you cannot ignore the hedonic adjustments. It would give you very wrong answers in their models. The reason is , every time a new feature was added to a product it would appear that either wage or commodity pressures were rising, or productivity was changing even though they really aren't!

[bullwinkle428]

23. K&R!

[annabanana]

27. They will suck the poor remaining economy dry.. and then go after

what's left of the rest of the world's money.

[Maineman]

33. I think Cheney did something with the CPI also.

It had to do with salaries. I do not recall exactly what it was, but I recall at the time it sounded like a rip off.

[Ghost in the Machine]

35. Kicked and highly recommended...

Keep up the great work on this, Faryn Balyncd.. thanks for posting

[Uncle Joe]

36. The word "chained" is a most appropriate adjective in describing this type of CPI.

"Chained cpi" would serve as a 21st century form of stealthy financial shackles attached to the middle and lower income earning Americans, eventually enslaving them and in turn their representative government to the trickle-down desires of the mega-corporations and the uber-wealthy.

The answer to the question of "Do Republicans (and their co-conspirators) have no shame?" is they don't even know what shame is, because they're obscene addiction to greed and power blinds them to any consideration other than their own.

Thanks for the thread, Faryn Balyncd.

[Poboy]

37. .

[Bozita]

38. K&R ... That's MUST READ stuff!

[nashville_brook]

39. fnaknr

[glinda]

40. K & R n/t

[unblock]

41. "chained cpi" in effect measures spending, not prices.

if you're willing to completely adjust the "basket of goods" when calculating inflation, then, well, if you spent $1000 last month and $100 this months, then there has been zero inflation. what does it matter if $1000 last month bought you everything you needed to get by in modest comfort but $1000 this month leaves you hungry and sick and cold and in tatters?

by the logic of "chained cpi", prices didn't go up, you merely chose to substitute different things. a one-room studio instead of a mansion, a slice of toast instead of a slice of filet mignon, a bus pass instead of a mercedes.

my favorite example is the massive "deflation" in computers. yes, computers are a gazillion times faster and store a gazillion times more data, so you get "so much more for the money", which by chained cpi logic means MASSIVE deflation. however, the no one fully utilizes or fully values that additional speed and memory. for most people, it's always just been a machine for word processing and email and maybe some games, and now also web surfing. yeah, today's computers are nicer and have more bells and whistles, but in most practical respects they do NOT represent anything that you could reasonably characterize as a drop in price relative to how they're actually used. and that's the key. who cares if the cpu is a million times faster if i'm using a word processor? all that speed goes to waste waiting for the slow human to tap a key. but that's not the way "chained cpi" sees things.


allowing substitution in the basket of goods has a tiny portion of academic justification in certain circumstances, but is obviously subject to such massive abuse and subjective distortion that it should never have been used. but then, of course, that's exactly WHY it IS used.

[Enthusiast]

42. K&R

Incredible.

[Name removed]

43. Deleted message

Message removed by moderator. Click here to review the message board rules.

[butterfly77]

44. Kicked&Recommended!

:kick:

[undergroundpanther]

45. Republican=parasites

Rich trust fund criminal parasites been feeding for years off the poor and working poor's lifeblood.I'd say it's time we pulled these swollen leaches off of the body politic. All we need to do is,put the heat on their ass,and toss them away into a bucket of fire.

[GreenTea]

46. Everyone knows republicans have no shame - they believe only in selfish, greed & money, opression

power...hate and will lie and point fingers at others all while smearing, distorting, lying about the truth and facts - whith their smokescreens and character assassinations.

[LaPera]

47. Slimy lying republicans!

[WillyT]

48. Most Excellent !!! - K & R !!!

:kick:

[fascisthunter]

49. ooops

[hay rick]

50. K&R