The Concern Trolls Very Serious People Are Out

Damn but just when I reach a point where I think things can't get any stoopider inside the Beltway, we have a week like this one with the release of President Obama's "budget" and once again the reality of stoopid is even worse than imagined.

Word leaked last Friday (April 5) that Chained CPI was going to be part of President Obama's budget, prompting me to point out a simple truth, "A Bad Idea Is a Bad Idea, No Matter Who Proposes It." Of course, starting Monday, all the usual suspects and even a few somewhat surprising suspects started pushing the idea as a wonderful thing, maybe even as good as sliced bread.

The first cheers I saw, came from the Wall Street Journal. It is difficult to detail all the errors in this piece but it starts with the idea that Social Security has any bearing on the Budget in the first place the goes on to "explain" why Chained CPI is just such a good idea:

The chain-weighted CPI registers slower inflation than the usual CPI because it allows for the substitution effect of price changes. When the cost of one item rises, consumers switch to a similar product that has not risen in price (or not increased as much). The substitution can occur intra-item (whole wheat bread instead of white bread) and inter-item (beer versus wine). The chained CPI takes the shifts into its calculation; the traditional CPI does not.

Of course, these types of discussions never point out how the folks who are already "substituting" are supposed to pay for price increases, just as it fails to recognize the basic facts of Social Security, including the fact that the average monthly benefit is $1,264 per month, which is barely more than a minimum wage job pays and we all know how richly you can live on minimum wage. (Yes, that's snark.)

The Washington Post also is on the bandwagon and loving them some Chained CPI, once again pretending that Social Security is a part of the overall Federal Budget:

Most important, the president committed himself in writing to more than $100 billion in Social Security spending restraint over the next decade, along with $400 billion in health program reductions.

Ruth Marcus yesterday earned her WaPo0 money by being oh so very concerned with how the Republicans react to the President:

The conundrum of President Obama’s budget is that he has produced a “come let us reason together” proposal aimed at a Republican Party that has demonstrated no interest in being reasonable.

On Tuesday, Jared Bernstein of the Center on Budget and Policy Priorities wrote a blog post comparing Paul Ryan's "budget" with the President's by stating that if Ryan's budget is (self-described) as visionary, then the president's is "strategic." Bernstein quotes his colleague, Robert Greenstein (President of CBPP) who produced a statement in favor of President Obama's budget, and specifically, in favor of Chained CPI.

I can't begin to detail all the errors in Greenstein's statement but will try to address the most egregious ones. First off:

As it stands, the package makes tough policy choices while largely adhering to the principle, as enunciated by the Bowles-Simpson commission, that deficit reduction should not increase poverty or inequality. Nevertheless, the budget’s substantial spending cuts, both in entitlements and discretionary programs, would have real-world consequences for millions of individuals and families.

While there was a Bowles-Simpson commission, there was nothing "enunciated" by the commission as there was no report since the recommendations could not achieve the necessary vote count to be accepted as official. And once again, we have someone who should know better (and most likely does) trying to conflate Social Security as part of the overall Federal Budget.

Then there's:

Experts widely regard the chained CPI as a more accurate measure of inflation for the population as a whole. It may well be, however, less accurate for elderly individuals and many low-income people and, thus, understate the inflation that they face.

What experts are saying this? The best I have found is that the NY Times had an article claiming this that they would later correct as Dean Baker points out here.

Reuters presents it as The Grand Bargain while the Christian Science Monitor presents it as a great idea because liberals are angry so that must mean it is bi-partisnay or something.

Tiger Beat On the Potomac (h/t Mr Pierce) of all people, actually gets to the nut in their lede:

President Barack Obama says he’ll protect the most vulnerable seniors from his “chained CPI” proposal – but he’s not going to protect everyone. Not even all seniors.

The White House, fighting back against liberal critics who say he’s giving away too much, released details Wednesday of the protections Obama would include to make sure older seniors and low-income people don’t get hurt by lower benefits.

There it is. As I said the other day and will say many more times I'm sure, IF YOU HAVE TO MAKE SPECIAL PROVISIONS TO ASSURE PEOPLE ARE NOT HURT, YOU ARE DOING IT WRONG.

Such a simple damn concept. But of course, with all the people doing the cheerleading, none of them are people who actually have to live on Social Security so for them, it is only an intellectual exercise, not reality.

And because I can:

A Bad Idea Is a Bad Idea, No Matter Who Proposes It

Let me state this right up front - Chained CPI is a bad idea. A very bad idea. Former Clinton Labor Secretary Robert Reich explains why here:

Even Social Security’s current inflation adjustment understates the true impact of inflation on the elderly. That’s because they spend 20 to 40 percent of their incomes on health care, and health-care costs have been rising faster than inflation. So why adopt a new inflation adjustment that’s even stingier than the current one?

Social Security benefits are already meager for most recipients. The median income of Americans over 65 is less than $20,000 a year. Nearly 70 percent of them depend on Social Security for more than half of this. The average Social Security benefit is less than $15,000 a year.

Dean Baker also explains why here (from The Nation 12/18/2012):

While this is a reasonable way to construct a price index, it may not be reasonable to apply the consumption patterns and the substitution patterns among the population as a whole to the elderly. The Bureau of Labor Statistics (BLS) has constructed an experimental elderly index (CPI-E) which reflects the consumption patterns of people over age 62. This index has shown a rate of inflation that averages 0.2-0.3 percentage points higher than the CPI-W.

The main reason for the higher rate of inflation is that the elderly devote a larger share of their income to health care, which has generally risen more rapidly in price than other items. It is also likely that the elderly are less able to substitute between goods, both due to the nature of the items they consume and their limited mobility, so the substitutions assumed in the chained CPI might be especially inappropriate for the elderly population.

CNN Money seems to be in favor of Chained CPI but they add a significant caveat near the end:

By contrast, other liberal economists do see chained CPI as a more accurate inflation measure but say adjustments should be made to protect the most vulnerable from any hardships caused by the smaller benefit increases under chained CPI.

Obama has indicated he would support such adjustments, although he hasn't specified what they would be.

One option could be a one-time increase to Social Security benefits for seniors once they're in their 80s, said Goldwein, senior policy director at the bipartisan Committee for a Responsible Federal Budget. Another option: Exempting Supplemental Security Income, which pays benefits to poor seniors and the disabled, from chained CPI.

My bold. Please note: IF YOU HAVE TO MAKE SPECIAL PROVISIONS FOR THE LOWEST INCOMES YOU ARE DOING IT WRONG!

I say again: IF YOU HAVE TO MAKE SPECIAL PROVISIONS FOR THE LOWEST INCOMES YOU ARE DOING IT WRONG!

The Center on Budget Policy and Priorities has a list of 10 basic facts about Social Security here. Facts #4, #6, and #7 are especially pertinent (though all are important):

Fact #4: Social Security benefits are modest.

Fact #6: Almost half of the elderly would be poor without Social Security. Social Security lifts 14 million elderly Americans out of poverty.

Fact #7: Most elderly beneficiaries rely on Social Security for the majority of their income.

This is a link to the Social Security Administration's "Monthly Statistical Snapshot" (as of February 2013). As of February 2013, the average Social Security Retirement benefit is $1,264.88. This works out to be $15,221.28 per year. A mythical (non-existent) full-time minimum wage job ($7.25 x 40 hrs per week x 52 weeks) receives $15,080 per year. This is a blog post I wrote a couple of years ago showing how far the minimum wage goes these days. Short answer? Not very far at all. I tried to find the median Social Security benefit but was not able but given that the highest Social Security monthly benefit today is $2,513 for a person who retired at age 66 in 2012. In order to receive the highest monthly benefit, a person has to have earned maximum Social Security wages for their entire work life.

Once again, the people who will least need the use of Social Security are the ones most in favor of the cuts. For those who offer the cliche of "Everyone most have skin in the game" I will reply, "My skin in the game is all the years I have worked and earned Social Security and I will not see it destroyed so the 1% can avoid paying the bill that is now due from their "borrowing" of FICA wages to fund tax breaks.

I have not even mentioned the Veterans who will also be affected by Chained CPI. Their "skin" is the blank check they wrote when they signed their name and swore the oath of enlistment.

And because I can: