Friday, April 12, 2013

Chain Of Fools

(Editorial cartoon by Mike Luckovich and published 4/10/13 by the Atlanta Journal-Constitution.  Click on image to enlarge and then return.)

Doyle McManus had a very instructive column up in the Los Angeles Times dealing with the president's offer to convert the cost of living increase formula for Social Security to the Chained CPI.  He suggests that Obama is using this to get his "Grand Bargain" on the budget, a major aim for his second term.

In an attempt to meet Republicans halfway in the battle over taxes and spending, Obama has offered to change the formula for calculating Social Security's annual cost-of-living increase — an "entitlement reform" GOP leaders have long asked for.

The result would not change current Social Security benefits, but it would reduce future raises by an estimated three-tenths of 1% in the first year, or about $42 for the average beneficiary. Over the long run, thanks to the magic of compounding, a lower rate of increase would have a substantial effect. After 20 years, estimating very roughly, a retiree might be looking at a yearly payout more than $1,000 less than he or she would have received without the change. ...

Many economists say chained CPI is a more accurate way to measure the cost of living for retirees and therefore it should be the basis for Social Security adjustments.

Greenstein, the patriarch of liberal budget experts, doesn't agree. In fact, in a paper he issued on Tuesday, he argued that chained CPI is probably less accurate as a measure of inflation's impact on the elderly and the poor. Older people spend more on healthcare than on chained CPI measures, he noted. And poor people — who gave up steak long ago — can't substitute cheaper goods as easily as the middle class. ...

Even if GOP leaders buy in, the public will take some convincing. A Pew Research Center poll last month found that 55% of Americans think preserving Social Security and Medicare benefits is more important than cutting the deficit, including 73% of Democrats. (A slim majority of Republicans, 52%, believe cutting the deficit is more important.)   [Emphasis added]

I suspect that the elder Republicans are all among the 48% who don't believe that the deficit is more important than Social Security benefits, or would if they knew just how the shift to chained CPI is going to affect them.  McManus's column can be useful in that regard.

What is especially helpful in McManus's column is the history of Social Security increases over the years and his exposition on why the chained CPI is not such a good idea.  For that reason alone I'd recommend you click on the link and read the rest of the piece.

So, as Luckovich's brilliant cartoon points out, Obama's opening gambit is a loser all the way around, but the president apparently doesn't see it that way.  If he thinks getting a "Grand Bargain" is the most important thing in the world to put on his resume after 2016, he may be disillusioned come 2014.  Already the GOP has started airing comments about the Dems cutting Social Security.  If those comments seep into the public's consciousness, the next election could be a blood bath and that might be the last agreement of any kind that Obama gets.

I guess that doesn't bother him either, but it has made me angry enough to call my DC reps once again.  I hope you will do the same.

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