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From the Christian Science Monitor we hear defenders of Social Security warning of how devastating a shift to the inflation adjustment formula called the chained CPI would be. The program does not end in ten years but continues to compound "savings" forever.

"If news reports are correct and the White House is considering this benefit cut, then President Obama has broken faith with seniors and his commitment to keep Social Security out of the deficit debate," Max Richtman, president of the National Committee to Preserve Social Security & Medicare, said in a statement released Tuesday. "The chained CPI would mean an immediate benefit cut of $130 per year for the typical 65-year old retiree and would grow exponentially to a $1,400 cut after 30 years of retirement."

... Adopting a so-called chained Consumer Price Index would affect not only benefits such as Social Security or government pensions, but also the way that tax brackets adjust from year to year. ... The chained CPI system would push more US taxpayers into higher brackets, over time, than would occur under the current way of measuring inflation.

... But the new index could reduce the number of people eligible for antipoverty programs such as Medicaid, food stamps, and home heating assistance. Obama wants to shield lower-income recipients from the impact of an inflation change, the Associated Press reported, citing people familiar with his plan.

Just say no to switching to a chained CPI. The Social Security Trust Fund is solvent through 2034 and should not be part of these hostage discussions. President Bush's unfunded expansions of military spending, and tax cuts broke the surplus budget handed off to him by President Clinton, these should be the areas adjusted to get us back on track.

Hey, if this "chained CPI" inflation adjustment is so great why don't we apply it instead to the military budget and congressional salaries? Oh wait, ... then we wouldn't be implementing the 50 year old Republican plan to displace social and "entitlement" spending with military spending and tax cuts.

Let's not be stupid Democrats. Betraying Social Security recipients is not way to win back the House in 2014. If President Obama is sincere in his pronouncement that he wants to find a way shield the poorest Social Security recipients from the impact of down-graded inflation adjustment then don't implement the chained CPI, but take money out of the bloated military budget instead.

The symbolic import of this switch in Democratic Party principles would be so great, we may be better off with no deal at all than to be seen as conspicuously folding to Republican maneuvering, as we have done so many times before.

1:12 PM PT: Micheal Tomasky, of the Daily Beast,  writes The Chained CPI and Votes in the House

You've read by now that Obama is offering to Boehner a deal that includes indexing Social Security benefits to the so-called chained consumer price index as opposed to the regular CPI. Without getting into how each measures inflation, which is beside the point for our purposes, the long and short of it is that indexing benefits to the chained CPI will reduce benefits as people get older, a cut on the order of 3 percent a year for people in their mid-80s. ...

Tomasky notes that last February the Center for Budget and Policy Priorities was open minded to the chained CPI, as long as four conditions were met. One condition was an increase in benefits to older Social Security recipients, "so that their benefits are not reduced as much." We heard no discussion of an increase in Social Security Benefits being mentioned in this bill, although to be fair, we do not know the details yet.

Tomasky also finds it interesting that the chained CPI will raise taxes in a regressive way as it will influence to calculate tax rates.

Another, and this is an interesting policy matter to me, is the idea that the chained CPI be used to calculate tax rates as well as benefits. That is to say. Our marginal tax rates kick in at certain income levels. For example, in 2011, the 25 percent rate kicked in for a married couple filing jointly at $69,000. That number goes up every year according to the regular CPI.

That would push more taxpayers into the higher rate, and it would do so regressively, because for really rich people, there's no higher rate to be pushed into, you follow? So it amounts to a tax increase, albeit a very small one, around .2 percent. So it brings in a little more revenue, and the CBPP wants that revenue to go straight to deficit reduction.

Originally posted to HoundDog on Tue Dec 18, 2012 at 12:37 PM PST.

Also republished by Social Security Defenders.

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