Thursday, December 27, 2012

Left Side of the Aisle #88 - Part 1

Chained-CPI takes away benefits

Over the past few weeks I've been telling you bits and pieces about this so-called "Grand Bargain" nonsense, the one where the pundits are saying that because Barack Obama won re-election and the Democrats gained seats in both the House and the Senate, obviously they are the ones who must make concessions to the losers. That would be merely funny if it were not for fact that so many Dummycrats, including President Hopey-Changey himself, appear to agree.

One example is that after months of proclaiming to anyone within public earshot that he absolutely, positively, no doubt about it would not accept extension of tax cuts for those making over $250,000/yr, Obama now says well, okay, make it $400,000 a year. And now, since he's bent that far, there is no indication he won't bend further. There are other concessions in the tax plan he presented, but I'm going to leave those aside to focus on something you've heard about and I want to make sure you understand.

Obama has proposed a change in the way Cost Of Living Allowances, or COLAs, are calculated for federal benefits, particularly Social Security. Now the first thing to remember here is that this whole business is supposedly about the deficit - the most important issue EVAH. To be accurate, that is, the most important issue ever to those inside the Beltway: the well-paid pundits, the well-paid lobbyists, and their corporate paymasters, none of who actually depend on government benefits to keep food on the table or a roof over their heads. Out in the real world, where the rest of us live, Americans are much more concerned about issues like jobs and the economy than the deficit.

But no matter, not to these people. For them, it is all about the deficit - and all about Social Security, even though the second thing to remember is that Social Security has nothing to do with the deficit. It has its own, independent, revenue stream - the payroll tax - and does not contribute one single penny to the deficit.

But still, Obama has proposed cutting Social Security by about $112 billion over the next ten years and Nancy Pelosi, the top Dum in the House, has embraced it. The method, again, changes the way Cost Of Living Allowances, or COLAs, are calculated. COLAs have always been based on the Consumer Price Index, or CPI. It's the standard measure of inflation. The proposal is to change this to using what's called Chained-CPI.

It's based on the idea that consumer choices change as prices change. It assumes, in the most commonly used example, 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 simplified example; I'm only using two commodoties - beef and chicken - rather than an entire market basket and the numbers are just for the purposes of illustration. Suppose the price of ground beef goes from $4 per pound to $5 per pound, and that's getting a little pricey for you. So you switch to chicken, which has gone from $3 per pound to $4.50 per pound. Chained-CPI says that even though the price of beef has gone up 25% and the price of chicken has gone up 50%, your cost has only gone up from $4 per pound to $4.50 per pound, or 12.5%.

Chained-CPI assumes that there is always a cheaper alternative and that you always will - and always can - choose that cheaper alternative. By its nature Chained-CPI will always produce a lower inflation level than the traditional CPI and so smaller COLA increases than CPI. Using Chained-CPI means a cut in your future benefits, a cut that will grow over time, year by year, as a lower inflation figure continues to be presented. The reason politicos and pundits like it is because it's a hidden cut: You would still get a cost of living increase, it just wouldn't be as big as it otherwise would have been, so they're hoping you won't notice.

In fact, Pelosi claimed it's not a cut. Well, military spending is projected to go up by scores of billions of dollars a year over the next decade. But because of an earlier agreement, that increases will be less than originally predicted. That smaller increase is being called by literally everyone in Washington a "cut" in military spending. If a smaller increase in military spending is a cut, then why isn't a smaller increase in your benefit also a cut?

But instead, Pelosi echoed right wing blather that this change is "a strengthening of Social Security." This makes it stronger, she said. By which logic, actual cuts in benefits - not just smaller increases, actual cuts - would make it even stronger and the strongest program, the one impervious to fiscal catastrophes or budget strains would be one that was eliminated entirely. The strongest program is one that provides no benefits at all. This is what passes for thinking among leading Dummycrats.

Know this: Social security is not in trouble. It is not going under, it is not going broke. It may need a little tweaking; it's been tweaked any number of times across its history. In fact, there is one easy fix that would secure Social Security for as many years into the future as you care to look: eliminate the cap on income subect to the payroll tax.


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