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Thu Dec 20, 2012, 02:41 PM

The “Chained CPI” Cut – “If You Can’t Dazzle Them With Brilliance . . .”

Let me get right to the point. I'm against the proposed "chained CPI" cut in Social Security because it substantially undermines the protection against inflation that Social Security recipients enjoy under current law. The existing cost of living adjustment ("COLA") already understates actual increases in the "cost of living"; the chained CPI would exacerbate the problem.

I understand that the vast majority of Americans -- including, quite possibly, most people reading this - have no burning desire to learn anything about the chained CPI. It has, however, become a major part of the "fiscal cliff" negotiations, and so it has become one of those things that people have to learn about, for their own protection.

Where we are now in the fiscal cliff negotiations is that Speaker Boehner is talking about reducing the federal deficit in the exact same way that Governor Romney did - Boehner says that he wants to, but he won't tell us how. President Obama, boxed in by the poll-driven sense that he must-must-must propose something "balanced," is "balancing" the reduction of tax breaks for the rich against the reduction of the protection that seniors have against inflation. On the merits, however, reducing that protection is undeserved, unwise and unfair.

Social Security benefits are automatically adjusted each year to reflect increases in the cost of living, as determined by the consumer price index (CPI). The U.S. Bureau of Labor Statistics calculates the CPI each month.

Here is how the "chained CPI" would change things: Let's say that the cost of gasoline tripled, from $3.33 per gallon to $10 per gallon. Most people would call that a 200% increase in the price of gas. That's how it would be calculated under the CPI today. Under the chained CPI, however, it would be calculated at less than 200%, because some people couldn't afford to pay $10 a gallon. They would drive less. They might have to take the bus to work. They might take a "staycation" instead of a vacation.

Because a tripling in the price of gas basically makes everyone poorer, and thus less able to buy gas, the chained CPI doesn't count that as a 200% increase. It reduces the percentage increase in proportion to the amount of gas that people can no longer afford to buy.

In fact, the bigger the price increase (and the poorer people get), the bigger the gap between the actual price increase and the chained CPI adjustment. This effect starts off small, and barely noticeable, but then as time goes by, it swells like a blister. In fact, it swells from $1.4 billion in the first year to $22 billion in the tenth year, according to the Congressional Budget Office. So the chained CPI is inflation protection that, by design, inflation itself erodes. Ain't that just grand?

To make things worse about the chained CPI, there is no evidence that the existing CPI is somehow overpaying seniors. On the contrary, as John Williams has pointed out at Shadowstats.com, if the Government simply calculated the CPI today in the same manner as it did through 1990, then every year, the CPI increase would be approximately 3% higher. If the Government calculated the CPI today in the same manner that it did before 1980, then every year, the CPI increase would be approximately 7% higher. That's the sort of thing that happens when you pretend (as the CPI now does) that a computer with a CPU that is twice as fast is the same as a computer that costs half as much.

And let's be honest: you know plenty of Social Security recipients. Have you seen any of them driving a brand-new Lexus, thanks to a COLA increase?

The political proponents of the chained CPI are hoping that you don't understand it. Because when you do understand it, you won't support it. We should be doing more to protect seniors against inflation, not less.

The chained CPI calls to mind something that W.C. Fields once said: "If you can't dazzle them with brilliance, baffle them with . . . " With the chained CPI.

Courage,

Alan Grayson

"And time goes by, so slowly,
And time can do so much.
Are you still mine?"


- The Righteous Brothers, "Unchained Melody" (1965).

21 replies, 2142 views

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Arrow 21 replies Author Time Post
Reply The “Chained CPI” Cut – “If You Can’t Dazzle Them With Brilliance . . .” (Original post)
Alan Grayson Dec 2012 OP
freshwest Dec 2012 #1
Filibuster Harry Dec 2012 #2
forestpath Dec 2012 #3
xtraxritical Dec 2012 #14
forestpath Dec 2012 #16
Aerows Dec 2012 #4
Harmony Blue Dec 2012 #5
sheshe2 Dec 2012 #6
ProudProgressiveNow Dec 2012 #7
byeya Dec 2012 #8
ut oh Dec 2012 #9
Milliesmom Dec 2012 #10
Cleita Dec 2012 #11
AzDar Dec 2012 #12
Bozita Dec 2012 #13
Flatpicker Dec 2012 #15
Milliesmom Dec 2012 #17
budkin Dec 2012 #18
KeepItReal Dec 2012 #20
JoePhilly Dec 2012 #21
Faryn Balyncd Dec 2012 #19

Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 03:38 PM

1. Best word yet, thanks Senator Grayson.

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Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 03:49 PM

2. And don't forget these seniors are getting pennies of interest on their savings.

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Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 04:06 PM

3. Thank you. Why are President Obama and so many of your colleagues so cruel?

 

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Response to forestpath (Reply #3)

Thu Dec 20, 2012, 05:40 PM

14. I may be wrong but I think the President knew that Boehner's Congress would not accept the offer

 

so he put the tweak to SS in there so that the RepubliCONs have even less reasons for not accepting the offer and justifying going over the (so called) fiscal cliff. Another big black mark for RepubliCONs!

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Response to xtraxritical (Reply #14)

Thu Dec 20, 2012, 05:48 PM

16. Using the welfare of SS recipients as a bargaining chip would be a very unethical thing to do.

 

I don't believe Sen. Grayson would deceive us on this, either.

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Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 04:10 PM

4. Well said, sir

And absolutely true.

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Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 04:16 PM

5. I agree Mr. Grayson

a chained CPI would be difficult to undo once it is in place. I do not know if there would be the political will given how democratic republics by nature work slowly. This is why it should not be in place in the first place, because the belief that the chained CPI can be significantly altered once in place is a bit too optimistic. Look no further than current COLA calculation as proof.

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Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 04:35 PM

6. Senator Grayson!

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Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 04:43 PM

7. K&R nt

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Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 04:47 PM

8. The House, and the USA, would be better off with, say, 400 more like Mr Grayson.

 

Keep me on your mailing list and can't wait til you're sworn in.

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Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 05:05 PM

9. Completely agree!

Thanks for putting in a very easy to read context.

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Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 05:11 PM

10. Hurting Already

Senator Grayson
I am hurting before this happens. I am a 71 year old divorced female and try to survive on $1028. per month Social Security. The cost of living, car insurance, supplemental health to cover what Medicare does not, property taxes etc etc., heat and utilities take most of it. I receive $16. in food stamps per month and for the first time in my life I stood in a line at the food bank for 2 1/2 hours in the bitter cold right after Thanksgiving, because I ate milk and cereal on Thanksgiving.
I wonder what my future is if this cut happens. I worry about what will happens to people retiring in the future, I understood that President Obama said Social Security was off the table, what is he doing? Caving once again? if so he can expect people to turn their backs on him, we will no longer have his back. I am tired of hearing he is for the poor and middle class,he has broken his word once again. I have enough to worry about and this makes me sick with worry.

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Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 05:11 PM

11. I don't give a fig about the fiscal cliff. Go over it. I don't care.

I do care about Social Security being it's the major part of my income and I'm barely able to make ends meet as it is. I think this is another distraction so Congress doesn't have to work on the real problems that will lead to tragedy in the future. If we had addressed the gun problem, many children would be alive today. If we had addressed the climate change problem, people killed in Katrina and Sandy would be alive today. In my case we are sitting on a couple of nuke plants that should have been decommissioned yesterday. All it will take is a seismic event of 8.0+ here in CA and we will have our own Fukushima. Congress is not doing its job.

If you do anything when the new session starts, put out a bill that if Congress doesn't solve a REAL problem every month they are in session, that they don't get paid. Oh, and make sure they are in session a minimum number of days in the year. I'm tired of my taxes paying for slackers. Oh yes, I had to pay $2,000 in taxes for 2011 because I had a part time job to make ends meet and apparently I earned too much.

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Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 05:22 PM

12. K & R &

Soooo freaking glad you're back where you belong (soon )... A.G.

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Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 05:35 PM

13. K&R ... Bigtime!

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Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 05:45 PM

15. Is it possible

that Obama put the chained CPI on the table knowing that the right would not take it?

Is it possible that the hope is to let us go over the cliff and then claim they were willing to work with them?

I'm trying to figure out how much of this is just theater at this point?

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Response to Flatpicker (Reply #15)

Thu Dec 20, 2012, 06:17 PM

17. I also thought that

He did it once before, Nancy could be in on it and it could all blow over. He is proving the Republicans are not serious about making a deal when they turn down cuts in Social Security, sure hope you are correct, sure hope we go over the cliff.

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Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 07:40 PM

18. Where are all the Obama caving deniers now?

Oh that's right... Alan Grayson just knocked you the eff out.

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Response to budkin (Reply #18)

Fri Dec 21, 2012, 02:27 PM

20. Well said

Rep Grayson does it again.

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Response to budkin (Reply #18)

Fri Dec 21, 2012, 05:01 PM

21. Meanwhile, John Boehner lays weeping in a pool of his own sick.

With Obama's foot print on his ass.

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Response to Alan Grayson (Original post)

Thu Dec 20, 2012, 09:26 PM

19. Thank you, Rep. Grayson!

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