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Wed Dec 19, 2012, 01:13 PM

Social Security - CPI-W vs. Chained CPI effect on benefits' Cost of Living Adjustments

This graph from the Economic Populist outlines basic changes to annual COLA under the two indexes. COLA are intended to help offset the effects of inflation on the standard of living for Social Security recipients. They are calculated annually and are reflected in benefit increases the following year (some years' calculations result in no COLA increase, as in 2008, '09 and '10). COLA are stated as a % adjustment to a Social Security benefit. They are based on an annual cost of living assessment.

This graph uses $1,000 / month as an example. Proponents of the Chained CPI have stated that there would be safeguards included to minimize the effects a decrease in COLA (or more accurately a base cost of living determination) would mean for the most vulnerable, yet I've seen no specifics on the safeguards or a definition of most vulnerable. AARP has proposed a CPI-E component that would apply to the elderly. I've not read specifics of their proposal. ~ pinto



<more at>

http://www.economicpopulist.org/content/chained-cpi-will-reduce-your-social-security-benefits

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Response to pinto (Original post)

Wed Dec 19, 2012, 01:56 PM

1. Fifty dollars a month is a lot of money for someone at that income level n/t

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Response to pinto (Original post)

Thu Dec 20, 2012, 02:39 AM

2. Great information! Thanks!

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Response to pinto (Original post)

Thu Dec 20, 2012, 06:52 AM

3. That's a $600 per year cut. And it grows worse over time, to a $2,500 cut in 30 years!


If they change over to "Chained CPI," it will be the biggest cut to SS benefits in the history of the program. No Dem should even be entertaining the idea.

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Response to pinto (Original post)

Thu Dec 20, 2012, 07:32 AM

4. I found this link explaining chained cpi (while hunting for the missing GD forum)

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Response to Casandia (Reply #4)

Thu Dec 20, 2012, 07:40 AM

5. That site is hated here but if it comes with a poverty exemption...

...I would be for it it. Flame me away, but there are nearly 4 million seniors in this country living below the poverty line and my mom is one of them. She gets $600 a month of which $500 goes to rent. It is insane. (We help her out with money.)

However, here's the deal, I do not think in a million years they would be able to get the poverty exception in there. It'd be just like the public option, discussed, but ignored.

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Response to joshcryer (Reply #5)

Thu Dec 20, 2012, 07:51 AM

7. I never heard of this site,

Just trying to find the General Discussion forum....

Trying to find any GOOD with this SS CPI....

I was listening to Stephanie Miller yesterday while driving to an appointment, and Hal Sparks was on, saying that this chained stuff was GOOD. I had to go to my destination, and didn't hear WHY Hal thought it was so good... GRRR

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Response to Casandia (Reply #7)

Thu Dec 20, 2012, 07:55 AM

8. It's a super pro-Obama site, so a lot of people don't like it here.

It has legitimate points every now and again but they're deluding themselves if Chained CPI would come with a poverty exemption. Chained CPI is logical, but it is still an objective reduction in benefits (and potentially a corporate subsidy since people would stop buying brand name stuff). It also ties into the concept of Giffen Goods which are not really a progressive policy. Basically people would change their spending behavior to buy cheaper stuff.

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Response to joshcryer (Reply #8)

Thu Dec 20, 2012, 08:01 AM

10. Thanks for your help!

I am very upset about SS being cut in any way - and this Chained CPI sounds absolutely terrible. I shake my head in disbelief at what Obama is doing.

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Response to Casandia (Reply #10)

Thu Dec 20, 2012, 08:11 AM

11. Oh, yeah, one more thing, they're totally misrepresenting the Center for American Progress.

The Center for American Progress isn't just supporting "approaches exactly along these lines." Their proposal includes Chained CPI but also a lot of other stuff that isn't in this proposal like raising caps on employers. They also want to increase benefits. So it's really being quoted completely out of context. He also cites Krugman as if Krugman is in agreement with him which is preposterous. If you read the cited link Krugman eviscerates Chained CPI.

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Response to joshcryer (Reply #11)

Thu Dec 20, 2012, 08:22 AM

12. Yikes!

I will be calling my reps and senators today - and Obama.

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Response to joshcryer (Reply #11)

Thu Dec 20, 2012, 10:31 AM

13. The article does not imply that Krugman is in agreement with adopting chained CPI.

It only quotes him on the percentage effect it would have on benefits, and does so correctly.

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Response to bornskeptic (Reply #13)

Thu Dec 20, 2012, 12:24 PM

14. They say Chained CPI is not a cut then cite Krugman.

Implying that Krugman agrees with them. Yet Krugman calls it a cut 4 times in his article. It's weasel language, full stop.

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Response to Casandia (Reply #4)

Thu Dec 20, 2012, 07:41 AM

6. "It's not a cut, it's just a fix that will lower your benefits by 10% thirty years from now."


For clarity, that's me mocking them, not a direct quote of them.

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Response to reformist2 (Reply #6)

Thu Dec 20, 2012, 07:59 AM

9. If it's true that Obama wouldn't approve it without a poverty exemption...

...and if he does hold to it and all that foldera then I could only conclude that it's a bluff. But I think Obama would accept it without a poverty exemption, therefore I cannot say it is a bluff. As this plays out we'll see though. We're talking about a massive increase in benefits to nearly 4 million seniors currently living below the poverty line.

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