Wednesday, December 19, 2012

Chained CPI of fools

One of the fiscal cliff solutions being proposed is a change to the way inflation is calculated called the "chained CPI."  Since cost-of-living-adjustments (COLAs) for entitlements are based on inflation adjustments, the chained CPI changes the way inflation is calculated.  Very briefly, instead of taking a calculation based on the price of a list of goods, the chained CPI - realistically - assumes that you would pay a lower price for a substitution.  In other words: if beef prices rise, you wouldn't (necessarily) buy beef, you'd buy chicken.  That's it.  So moving to a chained CPI would very slightly arrest the rise in Social Security spending.

Naturally, that means we're pushing Grandma over a cliff and making our war-hero Grandpa to eat cat food:
“If we don’t do this right, we could be asking old, poor elderly people to make some pretty terrible choices,” said Jared Bernstein, former economic adviser to Vice President Joe Biden and now a senior fellow at the Center on Budget and Policy Priorities.
Oh, yes, awful Sophie-like choices.  Behold the horrible reckoning:
For Social Security beneficiaries, the effect would barely be felt in a one-year period. In most years, chained CPI differs from the other inflation measure very little -- only by about 0.3 percentage points, according to the Social Security Administration's chief actuary. This year, for example, that would shave about $4 a month off the cost of living increase for the average Social Security recipient. Currently slated for a $21-dollar-a-month increase, the average Social Security recipient would instead receive a boost of only $17 a month.
What kind of country are we living in if we deny our seniors their monthly TV Guides, cappuccinos, and matinee movies?  I don't know...I just don't know.

Extra - Hit & Run: "What the chained CPI debate tells us about the politics of entitlement reform."

No comments: