November 26, 2012
It seems to really pain the Washington Post editors that retirees can collect Social Security checks that average just over $1,200 a month. The amount of ink that they have devoted in both their opinion and news pages to cutting benefits could probably fill the Great Lakes. They’re at it again today pushing a cut in the annual cost of living adjustment by adopting a chained CPI as the measure of inflation.
As expected, the piece uses more than a bit of sleight of hand to make its case. For example, it tells readers:
“Economists have developed a more realistic measure of inflation, known for obscure reasons as the “chained CPI” (consumer price index), which has averaged a little under 0.3 percentage points less per year than existing measures.”
Actually, economists do not know if this index is a more realistic measure of the rate of inflation experienced by the elderly. The Bureau of Labor Statistics (BLS) has constructed an experimental elderly index that has typically shown a rate of inflation that is roughly 0.3 percentage points higher than the standard measure of inflation.
This is just an experimental index and it is not “chained,” which means that it does not pick up the effects of substitution among items by the elderly, however if the Post’s concern is to have a “more realistic” measure of inflation then it would join the call of more than 250 economists for having BLS construct a full chained CPI.
This index may end up showing a higher or lower rate of inflation than the current index, but it would give us a better measure of the inflation rate experienced by the elderly. Congress’ intent in establishing the cost of living adjustment in the first place was to have benefits keep pace with inflation. An elderly CPI would do that, switching to a chained CPI is simply an underhanded way to cut benefits.
The Post also tells us:
“Adjusting those annual increments merely reduces the rate of growth in seniors’ benefits; it does not actually cut them.”
Yes, save this one for the Post’s Kids section. The cut reduces the real value of benefits. This is not an argument for adults.
It then adds:
“The immediate impact is negligible — just $1 billion in the first year. That gives future retirees time to adjust.”
Huh? Did anyone say that the cut in benefits would only apply to future retirees?
Once again the Post wants to cut Social Security benefits but does not have the courage to be honest about what it’s proposing. It must really bother them that workers can get $1,200 a month in retirement.
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