Saturday, April 25, 2015

201.4 - Update: Chris Christie on Social Security

Update: Chris Christie on Social Security

Last week, I raised the amazing possibility that I might, and I did emphasize might, agree with NJ Gov. Chris Christie on something after he proposed an income cap on receiving Social Security benefits. I did say I was wary both because it would turn Social Security into a partly means-tested program, which it never had been, and because the history of right-wing attempts to undermine Social Security said I should be wary, but okay, I was willing to look at his fleshed-out proposal and to at least consider the idea.

Well, we have his fleshed-out proposal and, guess what, history wins again.

Gov. Krispy Kreme did indeed propose phasing out Social Security benefits for people earning more than $80,000 non-Social Security income with a final cut-off at $200,000.

Beyond that, he also proposed raising the retirement age, which is already going up to 67, two mnore years to 69, raising the age for Medicare eligibility from 65 to 67, and coupling cost-of-living increases to what's called Chained-CPI.

That last part requires an explanation. Cost-of-living adjustments for Social Security have always been based on the Consumer Price Index, or CPI. It's the inflation rate we normally hear about. Chained-CPI calculates inflation in a different way, based on the premise that consumer choices change as prices change. It assumes, in the most commonly used "for instance," that if the price of beef goes up too much, you as a consumer will switch to cheaper cuts of meat.

On it's face, that doesn't seem a wildly unrealistic assumption, but here is the effect: Bear in mind that this is a very oversimplified example; I'm only using two commodities - beef and chicken - rather than an entire market basket of goods and services and the numbers are just for the purposes of illustration. But it does serve to make the point.

Okay. Suppose the price of ground beef goes from $4.00 per pound to $5.00 per pound, and that's getting a little pricey for you. So you switch to chicken, which has gone from $3.20 per pound to $4.00 per pound. The CPI says the inflation rate is 25% because that's how much the price for those commodities has gone up.

Chained-CPI, however says that even though the price of meat has gone up 25%, your cost is still $4.00 a pound, it hasn't gone up at all, so the inflation rate is zero even as the prices rise.

What this means at the end of that day is that by its nature, Chained-CPI, by assuming you always will and always can secure a lower-priced alternative to a product or service, always produces a lower inflation rate than regular CPI.

Chris Christie
So switching to Chained-CPI would be a stealth benefit cut for people on Social Security because while they would still get cost-of-living adjustments, the increase always 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. It's a benefit cut - but it's one the politicos and their rich funders hope you wouldn't notice.

So Krispy Kreme's proposal, in sum, would mean having to work longer to get Social Security and getting less when you finally do. Work longer, cut benefits, and make it a means-tested program to justify cutting it further.

Balance is restored: Chris Christie is an ass.

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