We've been told recently that the switch to Chained CPI will 'strengthen' the program for future retirees. Wondering exactly what in this program will 'strengthen' Social Security, I went to the google and snooped around. Here's what I found:
Every formulation of this puts 100% of the savings toward deficit reduction. Period. Someone has to pay for those Bush tax cuts, unfunded wars and defense contractors and it looks like it'll be the elderly for generations to come.
Here's what I've located from numerous sources:
If the government switched to chained CPI for cost-of-living adjustments, Social Security payments and other benefits would grow more slowly. And tax revenues would go up, because parts of the tax code are also indexed to inflation.Center on Budget and Policy Priorities:
Goldwein, who worked for the Simpson-Bowles commission, estimates that the switch would shave more than $200 billion off the deficit over the next decade. Because most of those savings would come in later years, it wouldn't be an immediate drag on the economy.
"Given that the economy is still weak, we don't want massive amounts of deficit reduction right now," Goldwein says. "That's the whole reason we're avoiding the 'fiscal cliff.' It's too much deficit reduction too fast. The chained CPI is the best of all worlds, because it gives you a credible way to reduce future deficits but with barely any effect in the short term."
The change needs to apply to both benefit programs and the tax code, and the proceeds from applying the chained CPI to the tax code should go entirely for deficit reduction. Using some or all of those proceeds to finance a reduction in tax rates should not be acceptable.Senate Republican Policy Committee
Titled "Better Inflation Measure Would Reduce Deficit"
Chained CPI – A Deficit Reduction OptionNPR again:
These two measures have several problems that overestimate inflation. First, they assume that consumers purchase the same basket of goods, regardless of what happens to prices. So if the price of muffins increases, they don’t consider that some consumers will switch to toast. Second, they can’t easily deal with the introduction of new products. Third, they can’t measure product quality. A product may cost the same as it did five years ago, but it could be of a much higher quality.
To address the problems with the traditional CPI measures, BLS in 2002 introduced “chained-CPI,” which is a modified version of CPI-U. Chained-CPI is meant to more closely measure cost of living. By switching to chained-CPI in calculating both federal benefits and tax brackets, we could reduce the deficit by $200 billion over the next 10 years.
Still, supporters of chained CPI say when it comes to deficit reduction, this is low-hanging fruit. And that takes us back to the produce section and Goldwein.The dopes at the AEI:
"We need something like $4 [trillion] or $5 trillion in deficit reduction to get our debt on a downward path. And we need it desperately," he said. "And that means — guess what? — Medicare and Social Security benefits are going to have to go down. People are going to have to start paying more in taxes. We're going to have to make some really tough choices.
Titled: The Chained CPI: A Path to Bipartisan Deficit Reduction
By indexing tax brackets more slowly, a switch to the chained CPI would increase revenue. By reducing the COLA for federal benefit programs, the switch would also reduce benefit outlays. Both the revenue increase and benefit reduction would lower the deficit. In its most recent survey of deficit reduction options, the Congressional Budget Office presented budgetary estimates for a switch to the chained CPI and summarized the policy arguments for and against that change. Based on its expectation that the chained CPI will increase 0.25 percent per year more slowly than the CPI-U and the CPI-W in upcoming years, the CBO estimated that a switch would increase income tax revenue by $72 billion, reduce Social Security benefits by $112 billion, and reduce federal pensions and veterans' benefits by $24 billion from fiscal 2012 through 2021.7Even the White House agrees:
"The only plan that we have seen that achieves the size and the balance that's required for sustainable — for long-term deficit reduction and for putting our economy on a sustainable fiscal path, is the president's," White House spokesman Jay Carney told reporters at a briefing.And you have to wonder if this isn't the end of granny starving - from the same link:
Given the pressing timetable, the two men are hoping to set the broad parameters of an agreement while taking care of urgent business like extending tax cuts for most earners, preventing sharp cuts in Medicare physician payments, and making sure millions of taxpayers don't get struck by the alternative minimum tax.Reducing the deficit is indeed a noble goal, but I fail to see how this plan does anything at all to 'strengthen' Social Security.
The idea is that other steps, like overhauling the tax code and additional cuts to popular programs like Medicare would take more time and be fleshed out next year.