Tuesday, July 26, 2011

Footnote to the preceding

As I discussed about 10 days ago, one of the cost-cutting (i.e., benefit-cutting) measures that PHC* wants to apply to Social Security is shifting the method of calculating cost of living adjustments (COLAs) from the Consumer Price Index, or CPI, to what's called a chained-CPI. Chained-CPI supposedly tracks how consumer behavior changes as prices change, particularly how they switch to cheaper alternatives in the face of rising prices. The classic example is dropping beef in favor of chicken.

As a result of this focus on the purchase of cheaper alternatives, chained-CPI will always, by its very nature, report a lower rate of inflation than the CPI will. So switching to chained-CPI would be a stealth benefit cut for people on Social Security because while they would still get COLAs, the increase would be less than it otherwise would have been. And the effect is cumulative so the longer you're on Social Security (i.e., generally, the older you are), the bigger a gap you'll experience.

That's bad enough, but writing in The Guardian on Monday, Dean Baker, co-director of the Center for Economic and Policy Research, notes that the Bureau of Labor Statistics has created an index to track the inflation rate experienced by the elderly, whose consumption patterns are not the same as those younger. (For example, health care takes up a greater portion of the income of the elderly than it does of those younger.) Although the index is considered experimental, and so, as an agency-produced description of the method says, "any conclusions drawn from these data should be treated with caution," still, as Baker says,
[t]his index actually has shown a somewhat higher rate of inflation than the CPI currently used to adjust benefits. In other words, it implies that the current cost of living adjustment is too low, not too high.
That is, despite the ranting and raving of the reactionary budget hawks and their Dimcrat echoers and enablers that the old geezers have it too soft, it is more likely that we have been short-changing them for years.

And you have about as much chance of seeing that become a topic of discussion as you have of seeing the Congressional Progressive Caucus budget get front page treatment from the New York Times, which has never printed a single word about it.

*PHC = President Hopey-Changey

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