New formula would reduce Social Security increases

[Javaman]

http://finance.yahoo.com/news/New-formula-would-reduce-apf-365864943.html?x=0&sec=topStories&pos=7&asset=&ccode=

WASHINGTON (AP) -- Just as 55 million Social Security recipients are about to get their first benefit increase in three years, Congress is looking at reducing future raises by adopting a new measure of inflation that also would increase taxes for most families -- the biggest impact falling on those with low incomes.

If adopted across the government, the inflation measure would have widespread ramifications. Future increases in veterans' benefits and pensions for federal workers and military personnel would be smaller. And over time, fewer people would qualify for Medicaid, Head Start, food stamps, school lunch programs and home heating assistance than under the current measure.

Taxes would go up by $60 billion over the next decade because annual adjustments to the tax brackets would be smaller, resulting in more people jumping into higher tax brackets because their wages rose faster than the new inflation measure. Annual increases in the standard deduction and personal exemptions would become smaller.

Despite fierce opposition from seniors groups, the proposal is gaining momentum in part because it would let policymakers gradually cut benefits and increase taxes in a way that might not be readily apparent to most Americans. Changes at first would be small -- the Social Security increase would be cut by just a few dollars in the first year.

more at link...

[Autumn]

1. Not with my vote.

This is all bullshit.

[MADem]

2. That's right. It's important to let our representatives know that we'll remember how they vote on

this issue.

[Autumn]

4. Obama is the one who floated this idea and it caught on.

He has already heard from me.

[Name removed]

7. Deleted message

Sub-thread removed by moderator. Click here to review the message board rules.

[MADem]

12. Well, he's not voting on it, so you want to talk to the people who will

craft the law as well.

If it isn't passed, no one will be signing it.

[Autumn]

13. Did you miss the part that this is his idea?

I don't believe in the refrain that Obama has no power or it's all Congress fault. It was his fucking shitty idea, he put it out there. I took it up with him.

[MADem]

14. Did you miss the part that said "He's not VOTING on this?"

Good grief.

It doesn't hit his desk AT ALL if it gets voted down.

You know how, sometimes, people throw out shit to make everyone feel "included?"

Don't whine to Obama about not signing a bill that has been passed, already.

Take the time to protest before the thing is voted on. Stop it from being passed in the first place.

Or don't. I really don't care what you do.

If you think you can make a difference AFTER a bill has been written and PASSED by Congress, you're whistling in the dark. The time to gripe is before Congress is done with it.

[Autumn]

15. No I ignored that part because I thought it was a stupid

remark. An idiot knows he isn't voting for it. And if he wants to throw out shit to make everyone feel "included" He might just try doing that for the poor and elderly who voted for him, instead of tossing us out there as sacrifices on his fucking alter of bipartisanship. Cause right now, at this fucking point I, and a lot of others have not been given a good enough reason to vote for him again.

[MADem]

16. OK, we're done here. You might want to look in the mirror if you

really want the source for "stupid remarks."

You can dismiss realpolitik all you want, but everyone (save you) understands these realities. You might also want to reread your old junior high civics notes, to refresh your mind about how bills become law.

Go vote for Cain or Romney, if that makes you happy, or that racist fucker Ron Paul--go on--or take your self-important "my way or the highway" ball and go home, sit on your ass and vote for NO ONE at all!!

That'll show us! BIG "harrumph" now!

:eyes:

[Autumn]

17. The stupid remarks came from Obama when he

floated this stupid idea, and from you when you presume to think someone you don't even fucking know doesn't know how politics work. THAT was my complaint. That is what I commented on. I don't need you to refresh my mind, I don't need to reread notes about how a bill becomes law. I know how it works. Run right along and defend the indefensible. I have no desire to converse with someone who thinks they can bully a person into thinking like they do.

[MADem]

18. A big fail on that backtrack attempt. Reread your own words.

They weren't directed at Obama, they were directed at me.

When you wave the "stupid remark" flag solely because you disagree with someone, that reflects on your gross inability to make your case cogently.

We're done.

[Autumn]

19. Well you certainly made a case on ONE point

:rofl: The rest not so much. Bye bye

[Bluenorthwest]

3. Anyone who votes for that will not get my vote. Never.

It is that simple.

[TheKentuckian]

5. Fuckin A!

[bluedave]

6. DITTO

[nc4bo]

8. Changes at first would be small -- the Social Security increase would be cut by just a few dollars

in the first year."

In the meantime, Medicare expenses go up. Prescription drugs go up. Health insurance goes up. Food, utilities, fuel, public transportation, everything continues to go up.

Net loss for the American people, again.

[Brickbat]

9. Don't worry -- it's not "slashing," so it's OK.

[starroute]

10. It isn't a "formula" -- it's a lie, and a toxic one

It's based on the assumption that when inflation reduces the purchasing power of money, people who have no alternative respond by reducing their quality of life. That much is true enough -- but the lie is that that the government should accept this as a fact of life and do nothing to counterbalance it.

And the really big lie is that we can afford to have this happen year after year, with everyone progressively getting a little poorer and a little needier. In other words, this represents an official policy of national impoverishment.

And there may be a further hook hidden in the policy. As a general rule, inflation is a good thing for debtors because it reduces the effective amount of their debts. A sustained period of moderate inflation is one thing that might get help get Americans out of the crippling burden of their student loans and underwater mortgages.

But the creditor class -- the 1% and the banks -- has always done its best to convince voters that it's in their own interest to keep inflation low, even if it takes continued high unemployment and a further destruction of union bargaining rights to do it. So this could be a preemptive move to cast inflation as public enemy #1, even at a time when it's actually the average person's friend.

[pinqy]

20. Absolutely untrue.

It's based on the assumption that when inflation reduces the purchasing power of money, people who have no alternative respond by reducing their quality of life.

Utter nonsense. That is NOT the assumption at all and you have absolutely nothing to back that up. The actual assumption is that when faced by rising prices of one commodity, people will switch to another, similar, commodity IN ORDER TO MAINTAIN THE SAME STANDARD OF LIVING. Who doesn't recognize that as being true?

If you are buying 5 pounds of beef and 5 pounds of chicken a week, and beef prices go up and you switch to buying 4lbs of beef and 7lbs of chicken, is your standard of living worse? Of course not. You're actually buying more meat and probably paying more, just not to the level you would have if you continued to buy the same amount of beef.

[starroute]

21. There's a great deal to back it up

I've just been reading an official description of the methodology at http://bls.gov/opub/mlr/2008/08/art1full.pdf and I see that it's more subtle than has been generally reported -- but it's still dodgy.

The main argument is that consumers routinely switch off among roughly comparable products and never notice the difference. If chocolate prices soar, they buy peanut bars. If eye round roasts gets too expensive, they eat chuck instead.

But I also found a 2008 response to that government paper at http://www.shadowstats.com/article/special-comment which quite plausibly argues that consumers are not rational little buying machines and that trading off to whatever happens to be cheapest at the moment does not leave them feeling they are maintaining their accustomed standard of living.

It also cites a article from 1995 which makes it clear that people like Newt Gingrich and Alan Greenspan were originally behind the change and knew from the start what it was really about:

Consider from the New York Times, "Panel Sees a Corrected Price Index as Deficit-Cutter," September 15, 1995, by Robert D. Hershey, Jr.:

"Speaker Newt Gingrich, Republican of Georgia, suggested this week that fixing the index, with its implications for lower spending <Social Security, etc.> and higher revenue <tax bracket adjustments>, would provide maneuvering room for budget negotiators …"

"Alan Greenspan, chairman of the Federal Reserve, is among the other Government officials who have spoken optimistically about financial benefits of a more accurate <CPI> index …"

"<E>conomists believe one of the most important <CPI upside biases> is when consumers shift their buying patterns in response to changing prices, substituting one product for another. The <CPI> index is based on a fixed market basket of goods and services. But for, for example, if the price on an item like steak gets too expensive, consumers may switch to hamburger."

So that steak/hamburger example, which these days is derided as urban legend, actually goes back to that 1995 cost-cutting panel -- although the actual changes that were made to CPI calculation at the time didn't go quite as far. And the idea that adjusting the CPI index would be a great revenue enhancer was apparently Newt Gingrich's baby.

So tell me again what utter nonsense it is to see it as a con?

[pinqy]

24. You're not answering what I asked.

I asked what supports the idea that the assumption is that people change to a lower standard of living. Substituting towards a good that has not gone up as much in price is not necessarily going to a lower standard of living.

And you'll note that Mr. Williams (who is neither an economist nor a statistician), does not deny that a LaSpeyres index gives the maximum level of change (he can't deny it because it's a mathematical fact). But the interesting part is he never tries to exlain why overstating inflation (which everyone recognizes a LaSpeyres index does) is better.

Oh, and as for his complaints about hedonics (which is different from assumed substitution), the point of the index is to measure the same item. ANY change is still a change and you have to try to set a value on the change unless you can show the change is insignificant. That my mother, who is computer illiterate and only uses it for email, would be no better off with 6GB than 3GB is irrelevant when we're talking about the country as a whole.

[TheKentuckian]

22. I'm not sure we are operating on the same definition of standard of living.

If I have to go from say sirloin steak to hamburger, I just took a hit.

Hell, eventually the sirloin is whittled down to beans, then rice, and eventually you're on pencil shavings. All that needs to happen is inflation and a willingness to devalue benefits.

This is a scammy back door way to cut and eventually effectively kill Social Security along with snake charming poverty and all assistance programs.

[pinqy]

23. The IF is the big part.

IF you're eating 5lbs of sirloin and and switch to 5lbs of hamburger, yes you took a hit. But the model doesn't assume that at all not could that happen.

Under the current geo-means forumla, steak and hamburger are seperate item categories and cannot be substituted anyway.

Under the chained, they can be, though it isn't a direct sub.

Here's how it really goes..Let's say you're eating 3lbs of sirloin at $8.99/lb and 6lbs of flank at $5.99/lb for a total beef bill of $62.91
The price of beef goes up 5%, so sirloin now costs $9.44/lb and flank $6.24/lb. BOTH the LaSpeyres and geo-means indexes would show a total increase of 5% and a new beef bill of $66.06.

But what if sirloin went up 15% more...to $10.86/lb? Assuming no substitution, the LaSpeyres would show a new beef bill of $70.30...a 11.75% increase from the original. The geo-means index would show an increase of 10.01% giving a new beef bill of $69.21
This could be represented by going down in sirloin to 2.5lbs and going up in flank to 6lbs 11oz trading off 8oz of sirloin for 11oz of flank. Is that an unreasonable substitution leading to lower standard of living?

What you seem to be thinking is that the index would show a total substitution to flank, which is simply not the case.

Yes, the geo-means and chained indexes are lower, but that's because LaSpeyres OVERESTIMATES the change.

[jtown1123]

11. Chained CPI is a major threat. Democrats are considering it which is awful n/t