NY Times Argues Against Chained CPI
From today's
NY Times editorial page:
At the end of last year, just shy of the 11th hour in the fiscal cliff
negotiations, President Obama made an offer that included a
Republican-backed idea to cut spending by lowering the cost-of-living
adjustment for Social Security benefits. The move shocked Congressional
Democrats and dismayed Mr. Obama’s liberal base.
The offer, however, was rejected by House Republicans who could not
stomach the tax increases and other concessions that Mr. Obama demanded
as part of the deal. The talks moved on, and when all was said and done,
Republicans did not get the lower cost-of-living adjustments (known as
COLAs) and Mr. Obama did not get the concessions he had sought.
But that is not the end of the story. As the next round of deficit
reduction talks gets under way, the administration seems determined to
include the COLA cut in any new package of spending reductions. Rather
than using the issue as a bargaining ploy, the administration appears to
have embraced it as a worthy end in itself.
Is it? In a word, no.
That is not to say that Social Security should be off the table. There
are reforms that are eminently sensible, if only the political will
could be found to enact them. But reducing the COLA is not a sound idea
now and may never be....
The administration and other proponents of switching to a chained C.P.I.
contend that it is a technical fix in the interest of greater accuracy,
not a benefit cut per se.
But that claim does not stand up to scrutiny. The chained index is in
many ways a better method of tracking price changes for the broad
working population, but there is no compelling evidence that it is
better for computing the Social Security COLA.
What is known is that elderly households tend to have lower incomes and
lower expenditures than younger households, and that more of their
purchases are for needs that cannot be met by switching to products and
services in unrelated categories. That indicates that they do not have
the same flexibility as younger households to respond to price changes
while still maintaining their standards of living. ...
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