Skip to main content

View Diary: What is the chained cpi..and why it's a screwing. (127 comments)

Comment Preferences

    •  And, of course, it's not just social security (30+ / 0-)

      affected by this statistical shafting, it's veterans and others.
      Some measures of CPI don't include food and energy costs because the BLS says they're "too volatile."  Wow, we sure wouldn't want to reflect reality would we?  That might mean an extra $15/month to some pensioner somewhere.

      Meanwhile, no word on getting rid of lucrative Congressional pensions and cadillac health insurance...or reducing their pay to the level of "part time" workers.

      The longer I live, the clearer I perceive how unmatchable a compliment one pays when he says of a man "he has the courage to utter his convictions." Mark Twain

      by Persiflage on Wed Apr 10, 2013 at 06:37:40 PM PDT

      [ Parent ]

      •  This guy will get right to it, cause he's against (8+ / 0-)

        cutting benefits, cause he's met too many struggling seniors........

        I believe that cutting benefits is not the right answer.

        I meet too many seniors across the country who are struggling with the limited social security benefits that they have.

        --

        "Who are these men who really run this land? And why do they run it with such a thoughtless hand?" David Crosby

        by allenjo on Wed Apr 10, 2013 at 08:42:49 PM PDT

        [ Parent ]

      •  Cutting an extra $15 a month from someone's (12+ / 0-)

        pension so more money can be crammed into those offshore tax shelter accounts that are already crammed with trillions of dollars.

        It's insane.

      •  It's also a tax increase. It's used to calculate (6+ / 0-)

        the tax brackets, standard deductions and exemption rates.  If your income rises faster than a depressed dpi, it will throw you into a higher bracket.  It affects those making under $100K more so it's regressive. No wonder Republicans like it.

        It will also affect income thresholds for assistance programs and student aid.  

      •  Also, Income Tax Filers Will Enter Higher Tax (1+ / 0-)
        Recommended by:
        SingleVoter

        brackets sooner since CPI measures inflation differently than the current method. It's a back door tax increase without actually having to raise tax rates so that's why repugs and Dems both want it. Repugs know their brand requires them to never vote for a tax rate increase but they also want more revenue (despite their public claims to the contrary).

        "The problem with posting quotes off the Internet is you never know if they're genuine."--Gen. George Washington at the Battle of Gettysburg, February 30, 1908

        by Aspe4 on Thu Apr 11, 2013 at 08:11:50 AM PDT

        [ Parent ]

      •  CPI is Keynes as opposed to Friedman (0+ / 0-)

        Its activist rather than conservative and apparently widely misunderstood by people who aren't presently trying to live on Social Security.

        Currently, the United States’ federal government uses inflation measurements to calculate various programs outlays, such as Cost of Living Adjustments (COLAs) for programs like Social Security, and provisions related to the tax code. Right now, most programs are indexed to the CPI-U (Consumer Price Index for All Urban Consumers) and the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers).[8]
        Most programs includes most tax thresholds which are increased right along with Social Security and Medicare benefits. In other words Obama is doing something that makes Grover Nordquist apoplectic.
        In 1996, the Advisory Committee to Study the Consumer Price Index (The Boskin Commission) overstated inflation and estimated that in 1996, it was over-estimated by 1.1 percent. BLS responded by making changes to the CPI-U and CPI-W. However, a portion of the bias (upper-level substitution bias) was not addressed. In 2002 BLS created a new index, the Chained CPI that addressed this concern.[9]
        The first adjustments we have already been living with since 1996, but there remains a bias known as the substitution bias
        The bias corrected is known as the substitution bias. The idea behind this is how consumers respond to price increases- for example, if the price of Granny Smith apples goes up, consumers may decide to purchase more Red Delicious Apples; this "lower-level" substitution bias is accounted for in the current CPI measurements. However, if consumers respond to the price increase of Granny Smith apples by purchasing fewer apples and instead purchase more oranges, thereby changing the “basket of goods”, this "upper-level" substitution is not accounted for in the traditional CPI, but is in the Chained CPI. This is because the CPI-W and CPI-U use a fixed basket of goods. Because of this, the Congressional Budget Office notes that current COLA’s “CPI grows faster than the cost of living does.”[3][10]
        The Keynsian economic theory behind substitution bias holds that people consume from each according to their abilities, if you are unable to consume you substitute to each according to their needs. For those of you who recognize what is going on here, it changes the distribution of wealth even more than the increase to the benefits poor people get on SSI by raising the minimum wage or the cap
        According to the Committee for a Responsible Federal Budget, “moving to the Chained CPI would address this by using a superlative [chained] index that updates expenditure weights and formulas in order to address consumer response to substitution between categories.”[3]

        Since 2000, on average, the Chained CPI has measured inflation between 0.25 percent to 0.3 percent lower than CPI-U and CPI-W. Opponents of the change note that while the difference is small, it compounds over time, making the reduction in outlays for COLAs for Social Security larger when looked at over a long time horizon.[3]

        Live Free or Die --- Investigate, Incarcerate

        by rktect on Fri Apr 12, 2013 at 05:29:30 AM PDT

        [ Parent ]

        •  Thanks for adding to the understanding, but... (1+ / 0-)
          Recommended by:
          rktect

          many of the actual "basket" items comprising the CPI don't have rational substitutes:

          --Can't afford heating oil?  Don't burn it.  Walk around wrapped in torn blankets.  I did.
          --Can't afford medical care?  Don't use it.  I don't.
          --Can't afford gasoline?  Walk 45 miles (much of it using the far-right lane of the Capital Beltway) to bankruptcy court.  Don't think that's legal.
          --Can't afford groceries?  Stop buying fruit and vegetables and meat.  Done that.
          --Can't afford to buy books?  Use the library, but since you can't afford transportation, stop reading.  Or re-read the books you already have.

          The easy items -- entertainment, eating out, cable, cell phone, newspaper, clothing, gifts to grandchildren, charities  -- were shrugged off years ago.

          At some point this death-spiral of "substitution" grinds to a halt, as far too many of our fellow citizens already know.

          One of our members argued that chained CPI wasn't really a cut; that was laughable and economically wrong.  Many of us claim that it's too small a cut to worry with; for many, that may be true.  For some, tragically, it's death from the thousandth cut.

          A few assert that proposing chained CPI has extraordinarily powerful negative symbolic effect; if none of the other arguments succeed, that one resonates -- with me, at least.

          Why is it admirable for zealots to cling to their beliefs but pragmatic and realistic for the rest of us to cede ours?

          (-7.62,-7.33) Carbon footprint 12.6 metric tons. l'Enfer, c'est les autres.

          by argomd on Fri Apr 12, 2013 at 07:59:25 AM PDT

          [ Parent ]

          •  I'm on Social Security (1+ / 0-)
            Recommended by:
            argomd

            Medicare, Medicaid (Maine Care), SNAP, HEAP, LI Heap; get VA healthcare, gas cards to get the wife to her radiation treatments.

            I don't buy much, I cut split and burn wood for heat, get some help as noted above, hibernate for the winter wrapped in quilts made from the scraps left over from making garments and bags and bowls and such.

            I get my medical care from the VA with some help as noted above.

            I take a load of wood over to a neighbor who puts some gas in the tank and I get some help as noted above but basically don't drive much.

            I forage food, get some from places that give it away for free, get some manure from the neighbor I gave the wood so I can grow some, maintain an orchard of wild apple trees and berry bushes, and get some help as noted above.

            To deal with legal stuff I filed for indigence at the court and file my motions pro se.

            My library spreads out over every room in the house, the barn and every outbuilding but now I mostly  use google books and manage to find what I need to know either on the web or in the waiting room.

            We don't eat out go to movies (they are free on hulu for the cost of looking at the ads) got rid of the cell phones, cut cable to the minimum, don't have a newspaper, don't buy clothes, don't give gifts except what we make ourselves, (I make cigar box guitars).

            Basically we are poor, elderly and ill but with no worries except for how to get rid of the Republican obstructionists so we can deal with climate change.

            Live Free or Die --- Investigate, Incarcerate

            by rktect on Fri Apr 12, 2013 at 09:44:05 AM PDT

            [ Parent ]

            •  Sounds familiar, friend. (0+ / 0-)

              There are a few workarounds, and you sound remarkably able to find and make good use of them.  I applaud you both for that!  

              One of the best parts of being alone is that no one I care about is suffering because of me.  

              And like you, at least I can still vote!

              (-7.62,-7.33) Carbon footprint 12.6 metric tons. l'Enfer, c'est les autres.

              by argomd on Fri Apr 12, 2013 at 12:38:48 PM PDT

              [ Parent ]

    •  Really good explaining substitution (16+ / 0-)

      ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

      by Roger Fox on Wed Apr 10, 2013 at 06:38:05 PM PDT

      [ Parent ]

    •  Thank you. (13+ / 0-)

      n/t.

      The longer I live, the clearer I perceive how unmatchable a compliment one pays when he says of a man "he has the courage to utter his convictions." Mark Twain

      by Persiflage on Wed Apr 10, 2013 at 06:39:42 PM PDT

      [ Parent ]

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site