Hullabaloo

Thursday, March 21, 2013

 
Don't worry it's just a "technical fix"

by digby

This fine piece by Lawrence Mishel at the Economic Policy Institute blog makes an important point that simply cannot be made often enough:

I hate to say it, but some of my liberal friends, including those in the Obama administration, have a contradictory/illogical position. Kathy Ruffing, Paul Van de Water and Robert Greenstein argue in a recent CBPP paper that a chained index is more accurate, even if it does not use weighting specific to the elderly, but that the switch should only be done “if it is accompanied by several necessary adjustments to prevent significant hardship.” However, as elaborated below, if the index is accurate then there is no hardship.

In fact, a recent paper from Moment of Truth quotes a 2004 paper written by Bob Greenstein that makes this same point, saying: “this change [chaining the CPI] should not be regarded as a benefit cut or a tax increase. It should be regarded more as a technical change to achieve Congress’ stated goal of keeping pace with inflation in as accurate a way as possible.”

The CBPP paper also argues that the change in indexing should not be assumed to apply to all programs that rely on the current CPI for indexation or eligibility thresholds. Instead, it should just be applied to a handful of specified programs that will see large spending reductions because of the shift. Again, this just does not look like a “technical adjustment.”

It is not logical to argue that a chained CPI is more accurate and simultaneously argue that we need to protect the vulnerable from its consequences. The administration’s wish to protect poor beneficiaries, veterans and the oldest old suffers from the same contradictions. Jared Bernstein also gets caught up in this contradiction, saying, “It’s a more accurate price index, but it would constitute a benefit cut.”

A more accurate index would be a benefit cut only in the most literal sense that benefits would be less than currently written into law, but such an adjustment would adequately and totally insure benefits against erosion by inflation—the purpose of the COLA. However, a chained CPI would be a benefit cut in both the literal and commonly understood sense of the term if you believe, as I do, that the failure to use the detailed consumption weights of Social Security beneficiaries leads a chained CPI to understate inflation for this population.

The economics could not be clearer: in regards to the Social Security COLA, there is no merit at all to the claim that adopting a chained CPI measured for the average consumer is a technical improvement. In addition, there is no liberal safe harbor where one can argue that a chained CPI is technically accurate but vulnerable populations should be shielded from the consequences.

I guess we're all supposed to just accept that the Chained-CPI isn't really changing anything and it isn't a benefits cuts, but we'll try to make sure that all the people who are hurt by it will be taken care of.

And, by the way, the people they designate as the ones who will be hurt by this are only those below the poverty line. All you wealthy retirees who are living high on the hog on 25k a year will just have to take the hit. Of course, there is no hit. Except for the one's who will be hit. Which we'll make sure to take care of. Sort of. At least a little bit. Maybe.

Oh, and by the way, let's not forget that even with the current CPI --- the benefits are miserly and inadequate. I'd love to see some of these people try to live on $1200.00 a month and see how easy it is.

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digby 3/21/2013 12:00:00 PM