Hell No! Chained CPI is a Cut. You Either Care About People or You Don't.

And when one makes excuses for chained CPI without doing any research because they'll blindly follow whatever a politician proposes regardless of the consequences, that is a choice of action taken. Action that actually shows how one does not care about people. It can be witnessed. It can be read and it can be judged, so I will be doing so now.

Pointing this out harshly will not hurt seniors like the action of cutting their SS income while their cost of living of has risen roughly 0.27 percentage points faster per year than the CPI-W which is what is used now for their COLA. This has been the trend on health care costs for them from 1982 to 2011. Some point out that since 2011 recent trends have slightly changed on that front, but the fact remains that on housing and utilities among other things there is no reliable substitution bias for seniors, and chained CPI is still not a more accurate measure of inflation.

The BLS needs to perform a full on elderly index since the CPI-E is merely experimental, but the lack of a full elderly index just goes to show that the White House is using incomplete data to push for chained CPI while pretending they can protect the most vulnerable. Their lies rely on garbage analysis when taking into account the full data set that we actually have. To add insult to injury, when one is defending this action orally or in writing because of their perceived party loyalty, though it's not really party loyalty because this isn't what FDR envisioned whom defined the modern Democratic party, it shows disdain for the most vulnerable in our society. That is a fact.

All of those actions, not party labels, show whether one cares about the most vulnerable in our society or not. There are a lot of great people on this site, and I love the many here who absolutely care, but there are too many people here who just don't and it shows. Many of them have denied this was on the table based on what this Democratic Rep said or what that Democratic Senator said, but here we are.

Regardless of the specifics we won't know about until after the cuts are made, everyone in D.C is talking about this. Focusing on the lack of specifics those in D.C never reveal until their dirty deeds are done is a favorite derailing tactic employed by some bringing this up to deny it is taking place. However, let's indulge this fantasy that everyone in D.C is misrepresenting this plan and we will wake up on New Year's Day with Medicare for All and the SS age lowered to 55. Let's pretend for a second that there were many negative trial balloons that have not been born out. Let's pretend there was a public option which was dead when it was reported as such back then to now.

Let's also pretend there was or is real financial reform instead of the Frankly Odd giveaway to Wall St keeping TBTF. In that case, wouldn't one say that spreading harmful rumors about the merits of austerity right now is still a big part of the problem? It is if one knows anything whatsoever about framing and how that drives political action across the political spectrum and board.

After all, who could have imagined the White House would put SS cuts on the table after we were supposed to take heart in all the selective statements from Democrats that this was never going to happen? I for one, but not just I. Others in the real reality based community predicted this whole self made debacle a long time ago when this whole mess started in 2010 as I predicted it would.

And it is self made. Despite Markos's front page piece having some good points, I have to disagree with him in calling it capitulation. This isn't something the President has to do. This isn't really something he is being pressured to do. He wants to do this. David Mizner has a handy timeline showing that this was quite evident early on.

No one forced him to keep from doing nothing and letting the Bush tax cuts expire. No one forced him to put the full faith and credit in John Boehner's hands in 2010 where it will stay after only an extension of a few years until we go through this austerity game again. President Obama chose to have full faith in the hostage taker Speaker Boehner taking the full faith and credit of the US as a political hostage. Now because of the mess he created for us, President Obama is choosing to cut SS by adopting a lower metric for COLA by adopting chained CPI in this grand betrayal, but maybe that was the plan all along.

And because he actually believes in neoliberal Robert Rubinomic deficit terrorist craponomic lies, he is counting on your scared sacrifice and demise of your future and your grandparent's safety net. That's what we get. Not the war profiteers, Wall St. CEOs, and Oil Barons that will keep that 93% of this so called "recovery." I find this unacceptable because of morals, ethics, and sound economics, but how does that make the rest of you feel?

For those wanting to gild the dead lilly, the first step is probably denial as I heard last week. The second step is anger and name calling directed towards those that have been consistently right about all of this calling them "conspiracy theorists." I know this is partly what Friedrich Nietzsche described when he said that sometimes people don't want to hear the truth because they don't want their illusions destroyed, but it's even worse when it's the lives of our most vulnerable citizens that suffer from those illusions.

Dylan Mathews has a decent Chained CPI primer. He explains how a cut of over 5 percent, and more as it compounds as you go further into the future for those retiring at 65 is actually painful and significant.

Everything you need to know about Chained CPI in one post

Here’s how it works: Numerous government programs, most notably Social Security benefits and the income thresholds for tax brackets, are indexed for inflation. But inflation can be measured in a number of ways. The tax code, for instance, uses CPI-U (Consumer Price Index – Urban), which measures prices for consumers in urban areas, to adjust the income cutoffs for different tax brackets. Social Security uses CPI-W, which is like CPI-U but only counts prices paid by urban wage-earners, not all consumers.

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That adds up to a big cut in Social Security benefits. Imagine, for example, a person born in 1935 who retired to full benefits at age 65 in 2000. According to the Social Security Administration, people in that position had an average initial monthly benefit of $1,435, or $17,220 a year. Under the cost-of-living-adjustment formula and 2012 inflation, that benefit be up to $1,986 a month in 2013, or $23,832 a year. But under chained CPI, the sum would be around $1,880 a month, or $22,560 a year. That’s a cut of over 5 percent, and more as you go further and further into the future:

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The results by using chained CPI for taxes are also striking. The Tax Policy Center calculated the income tax increases that would be caused by a switch to chained CPI. They’re not big — a little more than $100 a year for most families — but they’re oddly regressive:

You can now see through all the crap we hear about middle class tax cuts being the holy grail worth destroying our safety net; after all, although small, there will be regressive tax increases within this flawed metric. That's right, switching to the chained CPI would lower the indexing of tax brackets to inflation as well as push people with lower income into higher brackets taxing them more. The hoarders of capital under this plan do not have much higher to be bumped up and now that only those above $400,000 will have the Bush Tax Cuts expire this adds to that point.

For instance, I'll go further; those great middle class deductions we always hear the POTUS and Congress boast about will also be reduced:

In 2012, Many Tax Benefits Increase Due to Inflation Adjustments

By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:

• The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.
• The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
• Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.

Credits, deductions, and related phase outs.

• For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.

You see, if the indexing is lower as it would be by chaining CPI-U or CPI-W those deduction indexes would be lower causing an effective regressive tax hike as well. Speaking of taxes, some are making excuses for this deal pointing to the so called tax increases on the wealthy and increased revenue as somehow rendering this grand betrayal worth it. Too bad they don't have the data to back up their claims there, either. Luckily, CEPR economist Dean Baker did the calculations and points out that the decrease in Social Security income from chained CPI is 3 times more than the revenue raised by taxing the wealthy celebrated by this White House in the fiscal cliff deal. This is, of course, both insulting and ironic given it was well below the threshold they promised as well as the VP's promise that Social Security wouldn't be touched in 2012.

Dean Baker Statement on the Chained CPI and the President's Budget

Using the chained CPI to calculate benefits would have a much larger impact on the income of most retirees than President Obama’s tax increases last year did on the wealthy. For a couple earning $500,000 a year, their taxes went up by $2,300 a year. That is less than 0.5 percent of their pre-tax income and a 0.6 reduction of their after tax income. Since Social Security is about 70 percent of the income of the typical retiree, switching from the current index to the chained CPI would be a reduction in income of more than 2 percent, more three times that of the tax increase to the wealthy.

So we can see by the data that there is no holy grail from the pathetic minuscule taxes raised from the fiscal cliff deal. There is also no amount of revenues that are worth crippling the New Deal. Spending isn't dependent on revenue anyway because we create our own currency. It's a lie spun to all of us that we need to sell out social security recipients for revenue increases. It's also pathetic that there is even talk of this by the white house in comparison to other administrations that raised revenue without sellout deals.

Selling out the most vulnerable in this continuing embarrassing debacle started in 2010 to the Budget Control Act in 2011 to the Super Congress to the stupid sequester hurting people to spitting in seniors face is based on economic ignorance and corruption. The lies about protecting the most vulnerable are extra insulting as well as refusing to endorse Democratic Representative John Conyers's bill to repeal the sequester altogether. They are extra insulting because the White House rejected the only two solutions that would get us out of this mess they made; a high value platinum coin or invoking section IV of the 14th amendment.

This President is not interested in solutions though, only austerity. Unlike what austerians like he (apparently) and the late Margaret Thatcher both said, there is always an alternative. The White House just doesn't care so they will peddle pseudo economic garbage to cover up their indifference to real alternatives that do not hurt people. That's right, this White House and this Congress are not really interested in better metrics; they're only interested in regressive ones that make no sense and will hurt the most vulnerable.

Not to mention seniors' incomes also go more to rent and utilities. Economist Dean Baker's house at the CEPR also has a good explanation of why the chained CPI is a cut. Particularly because if we had gone to chained CPI in 2001 the reduction in benefits would have effectively wiped out the entire 2012 COLA. This is important for anyone that loves facts and hates stupid austerity.

The Chained CPI: A Painful Cut in Social Security Benefits and a Stealth Tax Hike

The Chained CPI Would Result in Benefit Cuts for Retirees and Other Vulnerable Americans

Social Security benefits are already quite modest. In 2012, the average annual benefit forbeneficiaries aged 65 and older was less than $15,000. (2)Any additional reduction of benefits would have serious repercussions for retirees, 2-out-of-5 of whom rely on Social Security for 90 percent of their retirement income.

The Chained CPI is relatively new and has only been calculated by the BLS since 2002. It has shown a rate of inflation 0.3 percent lower than the current index used to calculate Social Security’s annual cost-of-living adjustment. Over time, changing to the Chained CPI would result in significant cuts to Social Security benefits: a cut of roughly 3 percent after 10 years, about 6 percent after 20 years, and close to 9 percent after 30 years. In addition, lower-income retirees would lose much larger proportions of their income than wealthy ones.(3)

As shown in Figure 1, if the switch to the Chained CPI had been made in 2001, the reduction in benefits would have effectively wiped out the entire 2012 Social Security cost-of-living adjustment.(4)

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This is of particular note as the rise in the retirement age has already resulted in a decrease in benefits relative to lifetime earnings. The full-benefits retirement age increased from 65 to 66 between 2003 and 2008, and it is scheduled to rise further to 67 from 2017 to 2022. These retirement age increases are cuts in benefits, since beneficiaries have to work more years before receiving them. Early retirees who begin collecting benefits at 62 between the years 2005-2016 are already seeing a decrease in benefits relative to lifetime earnings of 5 percentage points. For those retiring at 62 after 2022, when the retirement age reaches 67, the decrease in benefits will be 10 percentage points. Figure 2, below, illustrates the benefit cuts for these retirees as a result of the prior CPI changes and the scheduled increases in the eligibility age for full benefits.(8) Adopting the Chained CPI would mean additional benefit cuts, further eroding the retirement security of Social Security beneficiaries.

You See? The 1983 grand bargain on SS the President thinks was so awesome he agreed with Mitt Romney about it during the first 2012 Presidential debate has already weakened SS enough. Chained CPI also affects all government pensions and veterans' benefits which will get a smaller increase. Also the already embarrassing federal poverty threshold upward adjustment will be even worse while reducing the number of people eligible for programs such as Medicaid, Head Start, food stamps, school lunches and home heating assistance. This is not smart. This is not pragmatic. This is a betrayal I and others warned everyone about and now it is on the table.

The factual data I provided for those actually interested enough to read it should be enough to know that everything I said in this diary is true, but now I have to explain a very simple rudimentary economic concept that really shouldn't have to be explained. I have to explain it because we hear from some people that the chained CPI is not a cut but "only a decrease on the increase," in other words a cut but this goes straight over their head. Let's be real clear about this; if you don't think the chained CPI is a cut, you don't understand inflation, the CPI-U, CPI-W, or why former President Nixon added the COLA to SS because it had to keep up with inflation. Period.  

So if you believe this is not a cut to SS you don't need to be commenting about it or writing diaries about it. It just makes people less smart. I can't be kind about this. Anyone who doubts this needs to study the difference between real versus nominal value.

Chained CPI cuts Real Dollars from Real People who are really the most vulnerable to this idiotic austerity you are excusing. So let's make this real simple. This is a good simple explanation of what real dollars are versus nominal dollars.

What are "real dollars"? What is the definition of the term "real dollars"?

Yesterday we talked about "nominal dollars".

Nominal dollars are the amount of money that you paid for something in the past, without accounting for inflation.

For instance, a twelve-pack of Coca-Cola may have cost $1 in "nominal dollars" in 1965.

"Real dollars", on the other hand, account for inflation.

So, that twelve-pack of Coca-Cola that count $1 in 1965 dollars? Adjusted for inflation, it might cost you $6 or $7 today.

"Nominal dollars" = dollars of the day (say, 1965).

"Real dollars" = dollars of today

One more example - a car purchased in 1941 may have cost just $100 in the "dollars of the day" (or, nominal dollars).

However, that same purchase, when adjusted for inflation? Something in the neighborhood of $1,464, or $1,464 in "real dollars".

To recap:

Real dollars = dollars that have been adjusted for inflation.

Maybe a few of you don't think seniors deserve real dollars to buy the real resources they need keeping up with the real price level. Tell me, can you walk out of the store with a product that has risen in price with the nominal dollars you don't think equal a cut put on the counter? No, you would be arrested and those resources cut from your very loins. It's a cut. Get over it. After all, you're already over the vulnerable this would hurt if you try to deny this.

Trust me. You're alone on this. You don't know what you are talking about if you think this is not a cut. This is true whether you like me or my tone. Sorry. Actually I'm not the least bit sorry. When I find out people are excusing cuts to the disabled which Chained CPI would hit hard, it pisses me off. I'm funny that way.

So I will be taking action that shows I care and we need to contact the White House and Congress.

Even though most of Congress will do whatever the President wants because there are no more Democratic Senator Eugene McCarthys out there that criticize their own party leader in a significant way, we must try to show we care anyway.

That is how we will know who cares and who doesn't. Your actions below will also show this as well.

DailyKos Blogathon -- Week of April 8th (All times are Eastern, diaries published by the Pushing back at the Grand Bargain group) Monday, April 8 10:00 a.m. Roger Fox 12:00 noon eXtina 2:00 p.m. Guest crosspost by Yves Smith 3:00 p.m. poopdogcomedy 4:00 p.m. Horace Boothroyd III 6:00 p.m. slinkerwink 8:00 p.m. joedemocrat Tuesday, April 9 10:00 a.m. Guest crosspost by Bill Black 12:00 noon Livestream event diary 2:00 p.m. joe shikspack 4:00 p.m. Roger Fox 6:00 p.m. Priceman 8:00 p.m. TomP Wednesday, April 10 10:00 a.m. bobswern 12:00 noon  Words in Action 2:00 p.m. One Pissed Off Liberal (OPOL) 4:00 p.m.  Puddytat 6:00 p.m. 8:00 p.m.  SouthernLiberalinMD Thursday, April 11 10:00 a.m. 12:00 noon 2:00 p.m.  Liveblog event diary 4:00 p.m. 6:00 p.m. cosmic debris 8:00 p.m. angelajean Friday April 12 10:00 a.m. Reserved 12:00 noon Reserved 2:00 p.m. Reserved 4:00 p.m. Reserved 6:00 p.m. Reserved 8:00 p.m. Reserved

1. Call your senators and representatives and tell them "Hell No!" with a priority on contacting senators.  U.S. Capitol Switchboard at [phone].  You can find email contact information here 2.  Contact the White House and tell them "Hell No!".  Switchboard: 202-456-1414.  Email contact page is here. 3.  Petitions.  There are a number of petitions available.  Choose from the following or preferably sign them all. a. White House petition calling for no cuts to Social Security. b. AFL-CIO petition calling for no cuts to Social Security, Medicare, Medicaid and calling for more jobs, repealing the sequester and ending tax loopholes for the wealthiest individuals and corporations. c. Sen. Harkin's petition telling Pres. Obama not to cut Social Security. 4. Social Media.  Share this diary and promote this blogathon on Facebook and Google+ using the buttons at the top of the diary.  Send this out on Twitter and add the hashtags #HellNo and #NoGrandBargain.