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December 18, 2012

Though Liberals Carp at Chained CPI, Pelosi Says She Could Live With It

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Others will have to live with it, too.

Many of what would be described as the liberal left of Congress have weighed in against using the chained CPI to calculate cost of living increases in Social Security benefits. Here’s a representative sample from Sen. Jeff Merkley:

We had an election, and the voters sent a message to Congress to focus on jobs and fairness — not cutting benefits for people who have worked all their lives and are now making ends meet on fixed incomes. The formula we use to adjust cost-of-living changes for seniors needs to reflects the real costs they face, not the budgetary fantasies of Washington.

I mean that’s precisely it. You will hear virtually nobody claim that chained CPI represents a more accurate way of determining the cost of living for senior citizens on Social Security, because if they were honest about it, they would tailor an inflation index to the real costs of seniors. The only benefit to chained CPI is that it saves the government money at the expense of senior citizens. That’s it. It’s a back-door way of lowering the benefit. Even if you agree with the methodology of the substitution effect, that people will manage the cost of living by purchasing less expensive products, you have to ask yourself if seniors have been getting away with murder all these years under the old rules. And considering they get an average annual benefit of just $13,000, and that almost half of them use that as their only form of income, without savings or anything else to fall back on, the very idea is preposterous. And the public, who has a working knowledge of Social Security benefits and how far they stretch, agrees.

Regardless of the carping of a few of those liberals and the majority of the country, however, Nancy Pelosi basically gave the game away: she will force her charges to stick with the President.

Despite these changes, Pelosi said she could convince her caucus to get behind such a plan, if need be.

“Do you think you could sell it to your caucus?” MSNBC host Andrea Mitchell asked Pelosi in an interview on Tuesday.

“I do,” replied Pelosi, adding, “Yes, the Democrats will stick with the president — and maybe not every single one of them.”

Pelosi tried to emphasize the unformed idea that there would be “protections” for the most vulnerable. For example, the disabled on Supplemental Security Income might not be subject to chained CPI, and there could be a “bump-up” for people aged 80, to compensate for the cumulative effect of the benefit cut. Again, the vulnerable are a massive part of this population. This is almost the entire income source for almost half of seniors, and for 3/4 of widows or unmarried women. And 15.1% of seniors live in poverty. And if you hold all of them harmless, you erode the actual savings you can derive from this. The three-legged stool of retirement has withered away, especially since the dot-com bust and the Great Recession. This argues strongly for increasing Social Security benefits, not cutting them and not even mitigating cuts.

White House Press Secretary Jay Carney called this a “technical fix” to better calculate inflation. Bullshit. If this were just a technical fix, you would adjust so that the fix wouldn’t hit beneficiaries in a regressive fashion, with the most pain at the bottom. This plan doesn’t, to any real degree. The goal isn’t to properly measure inflation, it’s to save money for the federal government. It always has been.

The question worth asking, then, is if we want to cut Social Security benefits, why are we talking about chained-CPI, rather than some other approach to cutting benefits that’s perhaps more equitable? The answer is that chained-CPI’s role in correcting inflation measurement error is helpful in distracting people from its role in cutting Social Security benefits. Politicians who are unwilling or unable to offer a persuasive political or policy rationale for cutting Social Security benefits are instead hiding behind a technocratic rationale. We’re not “cutting benefits,” we’re “correcting our inflation measure.”

A similar dynamic is behind the popularity of raising the retirement age, or the Medicare eligibility age: Its advocates can pretend that it’s not a cut, but a technical adjustment made to account for the fact that Americans are living longer. Compared to other approaches to cutting benefits, raising the retirement age is, again, a substantively unwise, regressive approach. But it can be justified as a mere technocratic tweak.

The phrase “banality of evil” comes to mind.

The Administration won’t even stand up and own the fact that chained CPI also is a regressive tax increase that would break their promise to hold harmless anyone making $250,000 or less from additional taxation.

The difference between the two sets of numbers arises because of arbitrary ways the White House and the speaker’s office count spending cuts and revenues. Specifically, the White House isn’t counting the $60 billion in new revenue that the Treasury would collect if Congress indexed tax brackets to chained CPI. Round up a little, and it accounts for the $100 billion difference between the White House’s revenue number and the speaker’s.

On the spending side, the White House accounts for the fact that lowering projected deficits will reduce the amount the government is projected to spend on interest on the debt over the next 10 years. Some $290 billion, by the administration’s calculations. Boehner doesn’t want to count interest savings toward the spending cuts in any final agreement.

The White House refuses to own the tax increase, or they will work with Republicans to leave tax brackets unchanged. Then you would get all the savings from chained CPI out of benefits.

It’s hard to be surprised by any of this; we knew this was the trajectory for several years. But the combination of technocracy and cruelty is depressing to behold.

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