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Wed Jan 16, 2013, 07:09 AM

Dean Baker: The 3 Percent Cut to Social Security, Aka the Chained CPI

http://www.nationofchange.org/3-percent-cut-social-security-aka-chained-cpi-1358266584

What’s more the cut in fashion in Washington is especially poorly targeted. The idea is to reduce the annual cost-of-living adjustment by 0.3 percentage points annually by using a different inflation index. That translates into a cut in benefits of 3 percent for those who have been retired 10 years, 6 percent after 20 years, and 9 percent after 30 years. The people who have been retired the longest and therefore the poorest will see the largest cuts.

And remember those pledges not to cut benefits for those currently retired? Oh right, no one meant that to be taken seriously.

<snip>

If we believe the claim that the chained CPI is the more accurate measure of inflation, this is a proposal to increase SSI benefits each year by an amount that is 0.3 percentage points more than annual rate of inflation. That may make sense to inside Washington types, but anywhere else this is loon tune stuff. If SSI benefits are too low (they are), then raise them. What possible logic can there be to have benefits rise each year by a bit more than the actual rate of inflation?

The bottom line is that President Obama and many leading Democrats are prepared to give seniors a larger hit to their income than they gave to the over $250,000 crowd. And the whole reason it is necessary is that the Wall Street types who wrecked the economy say so. Is everybody happy?

31 replies, 1808 views

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Arrow 31 replies Author Time Post
Reply Dean Baker: The 3 Percent Cut to Social Security, Aka the Chained CPI (Original post)
eridani Jan 2013 OP
xchrom Jan 2013 #1
Protalker Jan 2013 #2
Recursion Jan 2013 #3
Glitterati Jan 2013 #4
Recursion Jan 2013 #5
Glitterati Jan 2013 #6
Recursion Jan 2013 #7
Glitterati Jan 2013 #8
Recursion Jan 2013 #9
Glitterati Jan 2013 #10
Recursion Jan 2013 #11
Glitterati Jan 2013 #12
Recursion Jan 2013 #13
Glitterati Jan 2013 #17
Recursion Jan 2013 #18
Glitterati Jan 2013 #21
Recursion Jan 2013 #23
sulphurdunn Jan 2013 #25
Recursion Jan 2013 #26
Glitterati Jan 2013 #15
Recursion Jan 2013 #16
Glitterati Jan 2013 #19
Recursion Jan 2013 #20
Glitterati Jan 2013 #22
Recursion Jan 2013 #24
1StrongBlackMan Jan 2013 #28
Glitterati Jan 2013 #30
sulphurdunn Jan 2013 #29
JayhawkSD Jan 2013 #27
ProSense Jan 2013 #14
indepat Jan 2013 #31

Response to eridani (Original post)

Wed Jan 16, 2013, 07:10 AM

1. du rec. nt

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Response to eridani (Original post)

Wed Jan 16, 2013, 07:45 AM

2. 2014

Look at Repugs who did not vote Hurricane Sandy Relief, target them. Until house is Dem crap will happen to the big 3.

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Response to eridani (Original post)

Wed Jan 16, 2013, 08:18 AM

3. Is the chained CPI actually more accurate or not?

I know that the "if you switch from steak to hot dogs" framing is misleading, there's 12 (or whatever) categories of spending and the chained CPI updates what percentage of your income somebody spends on each of them (the current breakdown is IIRC how a civil servant in the 1950s spent his money).

But people don't spend nearly as much of their income on clothes or food as we used to, and we spend a shit-ton more on electronics and entertainment than we used to. So chaining the CPI is a "backdoor cut" but keeping it is a "backdoor increase". If the benefits are too low, raise them, but sticking with an inaccurate way of accounting for inflation seems sketchy to me.

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Response to Recursion (Reply #3)

Wed Jan 16, 2013, 08:36 AM

4. Perfect example - this year.

Social Security recipients got a 1.3% increase, which amounted to around $15.00/month.

Now take just one moment and consider that gasoline hovered around $4.00/gallon for many months this summer. I don't drive except to the grocery store and/or to pay bills - trying to save pennies everywhere I can. But, my doctor is 70 miles round trip - and I have to stay with this Dr. because I'm uninsured and he charges on a sliding scale according to income.

So, I can't buy less or cheaper gas for the car.

There's absolutely no public transportation where I live.

So, please tell me how the chained CPI is a better measure of inflation.

Did gas not go up for you? Did you find an alternative to purchasing it? In addition, please remember that heating fuel rose right along with it. Folks with no fireplace (raises hand) can't even burn wood!

The bottom line is simple - these people have no intention of giving seniors on SS any more money. They are desperately searching for ways to kill us off.

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Response to Glitterati (Reply #4)

Wed Jan 16, 2013, 08:38 AM

5. If you can't buy less or cheaper gas, chaining the CPI would be in your favor

If demand for gas is inelastic, a chained CPI would be good for you, because the model will have to spend more of its income on gas.

The chained CPI is a "cut" over the long term because over the long term the price of everything tends to fall.

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Response to Recursion (Reply #5)

Wed Jan 16, 2013, 08:40 AM

6. You don't seem to get it

Automobile gas is NOT one of the measures of inflation.

It simply doesn't COUNT according to these fools.

Neither is heating fuel.

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Response to Glitterati (Reply #6)

Wed Jan 16, 2013, 08:44 AM

7. Yes, gas is included in the CPI

http://www.bls.gov/cpi/cpifaq.htm

It's one of the subcategories of "transportation".

There's a lot of disinformation going on here about this.

You may be thinking of the "Core Inflation Rate" that's calculated by the Fed, which does not include food or energy costs.

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Response to Recursion (Reply #7)

Wed Jan 16, 2013, 08:49 AM

8. Bwahahahahahahahahahaha!

The CPI market basket is developed from detailed expenditure information provided by families and individuals on what they actually bought. For the current CPI, this information was collected from the Consumer Expenditure Surveys for 2007 and 2008.

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Response to Glitterati (Reply #8)

Wed Jan 16, 2013, 08:51 AM

9. And?

So you agree the CPI does include gasoline?

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Response to Recursion (Reply #9)

Wed Jan 16, 2013, 08:53 AM

10. Sure, Bush's 2007-8 gas prices

which were $1.28.gallon. I'm paying $3.26 today, which is at least less than the $4.00/gallon I paid the last 3 months.

No where near the ACTUAL price I'm paying now, nor paid last year when they so kindly </sarcasm> gave me an extra $15.00.

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Response to Glitterati (Reply #10)

Wed Jan 16, 2013, 08:55 AM

11. That FAQ is two years old

Yes, the basket trails by a couple of years. If you know a way to assemble it more quickly I'm sure they'll be all ears.

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Response to Recursion (Reply #11)

Wed Jan 16, 2013, 08:59 AM

12. Take your right wing talking points somewhere else

You defend yourself with a link to it, then fault me for pointing out the issues with your own link.

Wow, nothing quite like a Republican who refuses to honestly debate his own facts.

Keep it up. Glad you're out here spewing talking points which are intended to kill off seniors. </sarcasm>

Pardon me if I can't wish you any luck with it.

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Response to Glitterati (Reply #12)

Wed Jan 16, 2013, 09:02 AM

13. You're the one who thinks gas isn't included in the CPI

The fact that you have to imagine I'm making right wing talking points (please, name one) is amusing.

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Response to Recursion (Reply #13)

Wed Jan 16, 2013, 09:04 AM

17. Imagine?

Puuuuuuuulease! You sound just like every Republican on television.

Standing on your soapbox grousing about the lousy FIFTEEN DOLLARS seniors got in their COLA increase this year.

Yeah.....that's the Republican line.

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Response to Glitterati (Reply #17)

Wed Jan 16, 2013, 09:06 AM

18. When did I grouse about the COLA? Stop making stuff up.

This is why we can't have nice things on DU...

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Response to Recursion (Reply #18)

Wed Jan 16, 2013, 09:07 AM

21. By supporting Chained CPI

that's the entire intent of chained CPI - to reduce COLA.

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Response to Glitterati (Reply #21)

Wed Jan 16, 2013, 09:09 AM

23. Have you compared the actual COLA with what a hypothetical chained COLA would have been this year?

The results might dismay you. And actually the gas prices you mentioned have a lot to do with it.

Chained CPI's will probably be lower than normal CPI's over the long run because most categories see falling prices over the long run. In a given year (say, this one) a chained CPI can be significantly more, because it's more sensitive to volatility.

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Response to Recursion (Reply #13)

Wed Jan 16, 2013, 09:37 AM

25. I disagree

with the idea that you should take your arguments elsewhere. However, I do feel they entirely miss the point. I am all ears for any humane argument that supports the necessity of reducing SS benefits, although I have yet to hear one. Since SS benefits do not contribute to deficits, determining the CPI for SS beneficiaries is really more a matter of taxation than of inflation. Considering the long term trend of productivity gains going primarily to the upper incomes tiers, the solution to the problem is simply to raise FICA taxes on upper incomes (probably including capital gains), since they are obviously the ones benefiting most from the economic status quo and contributing least to the support of aged.

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Response to sulphurdunn (Reply #25)

Wed Jan 16, 2013, 09:40 AM

26. I agree the cap should disappear

One way or another, even if everybody entirely does 401k's, the issue here is that we need to find a way to figure out how much money goes from people who are currently working to people who are retired. It should probably be more than it currently is. But I don't like using an inaccurate measure of inflation as a way to do that. Though for that matter I like the provisional ECPI that's been floating around for a few decades.

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Response to Recursion (Reply #11)

Wed Jan 16, 2013, 09:03 AM

15. I really wish someone could explain

why the hell Republicans so desperately resent the lousy $15.00/month COLA increase Seniors got this year.

FIFTEEN DOLLARS.

Why the hell does that lousy FIFTEEN DOLLARS eat up these people so bad? Seriously, you're grousing over FIFTEEN DOLLARS?

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Response to Glitterati (Reply #15)

Wed Jan 16, 2013, 09:04 AM

16. Republicans dislike Social Security because it's an effective government antipoverty program

That sort of disproves their entire philosophy.

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Response to Recursion (Reply #16)

Wed Jan 16, 2013, 09:06 AM

19. You still didn't answer the question.

why the hell Republicans so desperately resent the lousy $15.00/month COLA increase Seniors got this year.

FIFTEEN DOLLARS.

Why the hell does that lousy FIFTEEN DOLLARS eat you up so badly? Seriously, you're grousing over FIFTEEN DOLLARS?

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Response to Glitterati (Reply #19)

Wed Jan 16, 2013, 09:07 AM

20. No, I'm not. You're imagining things

I'm not grousing over your COLA. Stop pretending I am.

Republicans don't like anything having to do with Social Security, which means they oppose any COLA too.

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Response to Recursion (Reply #20)

Wed Jan 16, 2013, 09:09 AM

22. Yet here you are, spouting Republican talking points

Hoping like hell to starve all these seniors on Social Security to death.

Hmmmmmm!

Oh my!

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Response to Glitterati (Reply #22)

Wed Jan 16, 2013, 09:10 AM

24. *snort*

OK, whatever

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Response to Recursion (Reply #24)

Wed Jan 16, 2013, 10:12 AM

28. Do you see a pattern here? ...

You present information (read: FACTS) ... Your information is met with disinformation (read: inch deep talking points) ... You address the disinformation with more information ... Your information is met with "Go away."

I thought us liberals valued being informed.

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Response to 1StrongBlackMan (Reply #28)

Wed Jan 16, 2013, 01:36 PM

30. ROFL, I do see it

Clear as a bell!

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Response to Glitterati (Reply #19)

Wed Jan 16, 2013, 12:43 PM

29. Becasue it's not $15

It's 15 X 60,000,000 dollars that could be transferred to and administered for profit by the plutocrats who pull their strings.

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Response to Recursion (Reply #11)

Wed Jan 16, 2013, 10:06 AM

27. Something called computers. n/t

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Response to eridani (Original post)

Wed Jan 16, 2013, 09:03 AM

14. "According to inside Washington gossip"

I doubt this is going to happen. It simply can't pass the current Senate.

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Response to eridani (Original post)

Wed Jan 16, 2013, 05:31 PM

31. The $250,000-$450,000 crowd have just received newly enacted tax cuts as the politicians

dicker about how much to cut social security and Medicare, arguably to fund those tax cuts. Senators Corker (R-TN) and Alexander (R-TN) reportedly insist on a $1 trillion cut in social security and Medicare benefits in turn for raising the Federal debt limit by $1 trillion, surely knowing their electorate will return them to office no matter how much they instigate pissing on the old, frail, and poor.

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