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View Diary: The “Chained CPI” Cut – “If You Can’t Dazzle Them With Brilliance . . .” (262 comments)

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    In 1995 republicans in Congress were concerned that the annual cost of living adjustment for Social Security threatened the Social Security trust fund balance due to the ever escalating cost of benefits.

    President Clinton brought in an economist, Michael Boskin, to analyze the SS cost of living adjustment.  The Boskin Commission was formed to study the problem of reducing the cost of living measurement.  The commission developed the concepts of substitution, weighting and hedonics to juggle the items in the CPI market basket to understate inflation in the US economy.

    The new CPI calculation methods in the Boskin Commission's final report were approved by Congress and adopted by the BLS and SSA in 1996.  For the past 15 years the annual Social Security COLA has been understated by about 3% each year.  This affects both current retirees and workers who will be starting their SS retirement benefits in the future.

    Applying another round of voodoo economics to the COLA calculation would be another step toward the new feudalism for retirees and working Americans.  See blog/ 2010/ 01/ why-michael-boskin-deserves-our-contempt/


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