Mar 9, 2013

Resistance To Chained CPI

     There is discomfort on the left with the President's apparent willingness to cut Social Security by adopting the chained CPI method of computing the Cost of Living Adjustment (COLA). R.J. Eskow says that the President may lose support on the left if he goes ahead with this, Alan Grayson is threatening civil disobedience and Megan McArdle is saying that benefits should be raised, not cut. The opinions of Eskow, Grayson or McArdle are themselves of little consequence but I don't think that adoption of the chained CPI would be a done deal if the President and Republican leaders agreed upon it. Cutting Social Security would be a tough vote for many Senators and Representatives, both Democrats and Republicans. Make no mistake, the chained CPI is a cut in benefits. Anyone who votes for the chained CPI will face campaign ads on the subject.

14 comments:

Anonymous said...

Millionares(including mr obama) reducing poor people social security would not surprise me. It's the wrong thing to do. If the usa had not entered into war especiallly under george bush,this country would be alot better now.

Mr obama game of golf with tiger woods says alot and was a disgusting event. I'm a
black democrat.

Anonymous said...

There are ways to make chained CPI more palatable.

Adjust the benefit formula by changing the bend points. Increase the figure for 90% of AIME upward and even expand the 35% bend point and then lower the 15% at the top end to 10% to make up for the cost of increasing the bend points below. Or keep the 15% up to a much higher bend point and make it 10% or less after that. It can be done so as not to harm the poorest and reduce the benefits for the highest earners by only a modest amount

Mike B. said...

I think the chained CPI is a bad idea that should be abandoned, not made more palatable. Increasing the first bend point does not help the poorest, who are those below the current first bend point. It helps everyone except those (which includes a lot of low-income people, just not the lowest).

Reducing benefits for high-income people has been suggested as a fix, and could be done directly without changing the CPI measure. But there's not that much money at the top, so you'd have to also cut benefits for middle income people to get significant savings.

If and when a fix is needed, I think it is better to increase revenue rather than decrease benefits, either through gradual, modest increases in the payroll tax or raising of the cap, or some combination.

Anonymous said...

What is the problem with the chained CPI? Besides the fact that it will reduce future benefits, are there any other reasons why it is so unattractive?

Mike B. said...

The reduction of benefits is why I am against use of the chained CPI. The BLS has an experimental CPI index for the elderly (CPI-E), and it gives values higher than the CPI currently used. So if you want inflation adjustments to be more accurate (the usual claim of advocates of the chained CPI), use the CPI-E or similar index, which would give higher, not lower, COLAs.

If the chained CPI is applied uniformly (not just for SS), it would also result in higher income taxes, because the boundaries of the tax brackets would increase more slowly. Tax increases due to the CPI change under Obama's proposal ($100 billion) would be almost as high as benefit cuts ($130 billion).

Anonymous said...

A reduction in future increases is not a cut. People are getting sick of listening to this constant misinformation from the left.

Anonymous said...


"A reduction in future increases is not a cut".

No matter how a person chose to interpret cpi. One thing is clear to me. Poor eldely and the poor disabled individuals will have less income to spend on their critical needs getting further in debt as the rich profit.

The new american dream.

Anonymous said...

The "new American dream" is living off the govt dole.

Anonymous said...

a reduction in future benefit increases is a cut, you nitwit.

i'm guessing you're a austrian economics type thinker, so you should be well aware of (likely scared to death of--afraid to sleep due to that hyperinflation just around the corner those of your ilk have been saying is just around the corner for years now--BUY GOLD!) inflation. i'm leaving it there, just mentioning inflation--that should be sufficient to see what my argument is.

Anonymous said...

Calling someone a nitwit because they state a mathematical fact is typical pseudo-intellectual left-wing reaction. The people are wising up.

Anonymous said...

Current law requires that Social Security payments keep up with inflation so that the real dollars available remain constant through a person's retirement (or disability or survivors) years. Changing the law so that the benefits are reduced is called a cut. People who rely on the checks call it a cut because they fall further behind in the real cost of living every year. Congress calls it a cut because they use such proposals to reduce the deficit. Economists call it a cut because it puts less money into the economy restricting growth. Taxpayers call it a cut because it reduces spending and pressure for revenue increases.

I can't think of any reputable group that doesn't call it a cut. When someone is promised a certain amount in benefits, and then a change is made in the law so that they receive less, it is a cut, contraction, reduction, or removal of a part, especially when inflation causes the value of the resulting benefit to be further reduced.

Anonymous said...

Refusing to call the chained CPI proposal a cut is more representative of climate change deniers that mathematicians. People are sick of hearing common words misused to fit in with a stilted tea party perspective.

Anonymous said...

So why is the federal pay freeze called a freeze and not a cut?

Anonymous said...

Why don't we stick to whether going to the chained CPI is good or bad, or whether it can pass the Congress or not, instead of debating what "cut" means? Why don't we also refrain from name calling, which doesn't accomplish anything?