Tag: Chained CPI

Or as Shakespeare’s Juliet said, “what’s in a name? that which we call a rose; By any other name would smell as sweet.” Not quite.

In this case calling chained CPI, “superlative CPI to make it more palatable to the voters and politicians who oppose it as a cut to future Social Security benefit, does not make it any less noxious or toxic:

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Spending savings from superlative CPI with protections for vulnerable     $130 B

As Pres. Obama’s idol, Pres. Lincoln said, “You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time.”

No, Barack, we will not be fooled by you.

Up Date: 3/3/13 23:18 AM EST: Post and learn. It seems that there is a “superlative CPI”, from letgetitdone in a comment at Corrente:

Hi TMC, There is a “superlativeCPI ,” but it’s not “the chained CPI” which is really “the Catfood CPI.” An actual superlative CPI, would cost adjust for the higher proportion of seniors’ household budget they must spend on rapidly increasing health care costs. It would also adjust for living area. so that seniors who live in high cost areas, can remain there if they choose, rather than moving to lower cost areas where their meagre SS pensions don’t go very far. In the real world, living costs in New York City are 2 1/2 times more than living costs in say, rural Kansas or the UP of Michigan. SS payments should be adjusted for these important regional differences.

Up Date: 3/6/13 12:39 AM EST A cut is a cut. I want to thank Hugh at Corrente for this explanation.

Then there is the Chained CPI which is a modification of the CPI-U. It is being pushed by the anti-old, austerity-minded as a replacement for the particular version of the CPI-W I just described above which already tends to understate inflationary effects on Social Security recipients. And there is the annoying Administration reference to it as the superlative CPI. Again context is important. The CPI survey collects information on prices. These are first averaged individually by geographic area. This is called “lower-level aggregation”. The example which they use is the price of one item (apples) in one locality (Chicago). The BLS then does what it calls “higher-level aggregation” (note the use of the comparative): the price of apples regionally and nationally, the price of food nationally, the price of all items nationally, etc. The Chained CPI involves another level of analysis and what must follow the comparative but the superlative? (..)

http://www.bls.gov/cpi/cpisupq…

The example used is that the CPI-U and the CPI-W have prices for pork and beef. What the Chained CPI seeks to measure is, in the event of a price increase in pork, the effect of consumers switching to beef. The BLS example is, of course, innocuous. The one some of us are more concerned about is seniors being forced to choose between beef and cat food. Substitution basically reduces the effects of inflation. Calculating a CPI based on it will inherently be lower then others (CPI-U and CPI-W) which do not. What it ignores, some would say deliberately, is quality of life. (..)

http://www.bls.gov/cpi/cpieart…

What is important to understand is that the various schemes to cut the size of the Social Security COLA, including the one currently in place are cumulative. You have no doubt heard of the miracle of compound interest. Well, what these schemes amount to is negative compound interest being charged against our seniors. What is always left off the table is the question of what constitutes a living retirement, perhaps because it would lead to the related discussion of what constitutes a living wage. Instead we get a numbers game, divorced from the very social issue the number is supposed to address.

What Atrios said: Republicans Don’t Care About Cutting Social Security

The big flaw in the premise of the grand bargain is that Obama is asking them to give away their precious by increasing taxes on the rich in exchange for something they don’t care much about. Cutting taxes for rich people is their whole purpose. Cutting Social Security? Well, if they can use Social Security cuts to cut taxes for rich people, sure. But cutting Social Security in order to increase taxes on rich people? Really not interested.

401Ks are a disaster

We need an across the board increase in Social Security retirement benefits of 20% or more. We need it to happen right now, even if that means raising taxes on high incomes or removing the salary cap in Social Security taxes.

Over the past few decades, employees fortunate enough to have employer-based retirement benefits have been shifted from defined benefit plans to defined contribution plans. We are now seeing the results of that grand experiment, and they are frightening. Recent and near-retirees, the first major cohort of the 401(k) era, do not have nearly enough in retirement savings to even come close to maintaining their current lifestyles.

Frankly, that’s an optimistic way of putting it. Let me be alarmist for a moment, because the fact is the numbers are truly alarming. We should be worried that large numbers of people nearing retirement will be unable to keep their homes or continue to pay

Economics and law professor at the University of Missouri, Kansas City, William K. Black joined Paul Jay, senior editor at The Real News Network to discuss President Barack Obama’s State of the Union address and his economic proposals.

President Barack Obama told Democratic delegates and congressional members meeting at the annual House Democratic retreat at Lansdowne Resort in Virginia that the he wants a “big budget deal”

President Barack Obama said he wants to reach a “big deal” on the budget that will cut the nation’s deficit without slashing spending on education and research that is needed to ensure future growth.

Obama said negotiations with congressional Republicans over avoiding the $1.2 trillion in automatic, across-the-board spending reductions set to begin March 1 shouldn’t push aside the effort for a broader plan to cut government debt.

While the president stood firm against “government by crisis” and the need for more revenue in any future deficit reduction deal, and much like the Republicans, who keep saying that they will close loop holes in the tax code but not which ones, there have been few details in how that deal would be accomplished. Nobel Prize winning economist points out that any reduction in government spending at this time would “destroys jobs and causes the economy to shrink”

This really isn’t a debatable proposition at this point. The contractionary effects of fiscal austerity have been demonstrated by study after study and overwhelmingly confirmed by recent experience – for example, by the severe and continuing slump in Ireland, which was for a while touted as a shining example of responsible policy, or by the way the Cameron government’s turn to austerity derailed recovery in Britain. [..]

But aren’t we facing a fiscal crisis? No, not at all. The federal government can borrow more cheaply than at almost any point in history, and medium-term forecasts, like the 10-year projections released Tuesday by the Congressional Budget Office, are distinctly not alarming. Yes, there’s a long-term fiscal problem, but it’s not urgent that we resolve that long-term problem right now. The alleged fiscal crisis exists only in the minds of Beltway insiders.

(my emphasis)

Prof. Krugman discussed with MSNBC’s The Last Word host, Lawrence O’Donnell the consequences of such a deal at this time would mean and what the government should be doing to restart the economy.

The New Deal, Social Security, The Great Society, Medicare, Medicaid – concern for the welfare of “the little guy.” These are the marquee items which have defined the modern Democratic Party to its constituency.  These sorts of programs have been the sweet nectar in the plant which has allowed liberals and lefties to excuse the Democrats flings with the Military Industrial Complex, foreign dictators and bankster thugs along with the usual graft, corruption and peccadilloes.

The Democrats have, in modern times, always looked after society’s island of misfit citizens and the oppressed, cast off from the society and economy.  This is what allowed lots of principled people to pull the levers for folks that were committing war crimes and conducting illegal wars of aggression for resources and business interests. It is what allowed principled anti-war legislators to coalesce in a party which did some pretty awful things. The Democrats were going to watch out for the interests of the little guy whether he was a hero in one of their wars or not.  

An article entitled, “Defining the modern Democrat,” lays out the basis of the identity of the Democratic Pary:

The modern Democratic Party was born, just over a century ago, when another young orator from the Midwest-William Jennings Bryan-rocked the national convention in Chicago in 1896.  Because of its stirring climax, Bryan’s address is widely known as the “Cross of Gold” speech and, in most histories, is accompanied by an arcane explanation about the gold standard and 19th-century monetary policy.

Unfortunately, the focus on gold obscures Bryan’s real import. His candidacy redefined the Democratic Party as the voice of the common man. It ultimately led to Woodrow Wilson’s election and the formation of Franklin Roosevelt’s New Deal coalition, which dominated American politics for most of the 20th century. …

Bryan and his Democrats promoted a wide, rich menu of reforms – a graduated income tax, the Federal Reserve, women’s suffrage, direct election of U.S. senators – that became law in the Progressive Era.

The Great Commoner, as Bryan was known, was “the first leader of a major party to argue for permanently expanding the power of the federal government to serve the welfare of ordinary Americans.

The ambitions of William Jennings Bryan were carried out by other great Democrats and enacted with the enthusiastic support of Americans.  They are the bedrock of our social contract and a legacy of the 20th century that most Americans would like to keep vital and secure.

Last night the House of Representatives voted to make permanent the Bush/Obama tax cuts on all but the top 1% of tax payers and increasing taxes on on 77.1 percent of U.S. households, mostly because of the expiration of a payroll tax cut. With the bill set to be signed by Pres. Barack Obama, Congress and the White House move to the next manufactured crisis that this bill set up, the draconian sequester cuts to defense and non-defense spending and the debt ceiling, also a manufactured “crisis.” The bill did hold off those draconian cuts for two months, just in time for spending to hit the debt ceiling.

Pres. Obama made it clear in his address after the passage of the “Fiscal Cliff” bill, that he would not allow the debt ceiling to be used as a bargaining chip in negotiations over spending.

“I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed. We can’t not pay bills that we’ve already incurred.”

“If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic – far worse than the impact of a fiscal cliff.”

This bill was not the best deal as this article on the behind the scenes Senate dealings by Ryan Grym at Huffington Post tells it:

The White House sent Reid a list of suggested concessions as his staff debated what to send back to McConnell. Reid looked over the concessions the administration wanted to offer, crumpled up the paper and tossed it into his fireplace. The gesture was first reported by Politico and confirmed to HuffPost by sources with knowledge of it, who noted that Reid frequently keeps his fire going and is fond of feeding a variety of proposals to it.

Reid’s staff then called McConnell’s office with a simple message: Our last offer stands. There will be no further concessions. McConnell took to the Senate floor, complaining that he had no “dance partner” in Reid, and called Vice President Joe Biden, a man he assumed would be more willing to give. McConnell was right.

Perhaps the most important concession he wrangled from the administration, which Reid had been unwilling to make, was a two-month extension of the sequester, automatic cuts to defense spending and domestic programs that were supposed to be triggered Jan. 1. Reid wanted much more, worried that the two-month period will simply set up another colossal showdown that will also rope in the debt ceiling and funding for the government. “The deal itself is OK, but sets up Democrats for [a] worse fight and strengthens Republicans’ hand for what they really want: cuts,” said a Democratic source close to Reid. “Biden gave away the store on timeline. Two months and we’re back at this and in worse shape.”

President Barack Obama has vowed not to negotiate over the debt ceiling, but Democrats in the Senate are worried that they’ve now lost their leverage. “Everyone knew taxes would be raised on high earners,” said the Democratic source. “So with that out of the way, what do we bargain with?”

All they had to do was let the tax cuts end and pass new tax bill that included extension of unemployment benefits, ended unconstitutional the debt ceiling nonsense and added some stimulus to really create jobs, since we all know that tax cuts don’t. But no, Pres. Obama had to have this done and kept backing away from his so-called “line in the sand.”

If anyone believes at this point that Obama stand up to the threats of a government shut down by Republicans refusing to raise the debt ceiling without serious concessions on Medicare and Social Security, consider these three reasons to doubt from Jon Walker at FDL Action

1) Failure to stick to previous lines in the sand – In past negotiations Obama has failed to stick to his previous lines in the sand. Obama did not stick to his demand that the Bush tax cuts end for income over $250,000. Similarly despite saying he would not play games with the debt ceiling, Obama seemed to treat it as just another bargain chip when trying to get a deal with John Boehner.

2) Dismissing unilateral action – The Obama administration has dismissed unilateral action to address the debt ceiling. Doing something like invoking the 14th amendment would probably be the easiest way to defuse the fight, but the administration has declared that “not an option.” Even if the Obama team didn’t think it was a legally viable solution by completely removing the threat it has weakened its bargaining position.

3) Allowing the creation of a new super cliff in two months – When WP Joe Biden took over the negotiations from Sen. Harry Reid the major concession he made was to have only a two month delay of the sequestration cuts instead of a one year delay.

Meanwhile the “irrational exuberance” of Wall St’s feral children over the tax deal abounds with the markets closing on a high. Let’s see what happens in two months when we sit on the edge of another cliff.

Up Date 16:33 EDT: Republican Senators have taken Social Security off the table as part of the negotiations for the “fiscal cliff.”

With the deadline for the expiration of Bush Tax cuts and austere spending cuts, the Senate negotiations have reached a stalemate. At the last minute, the Republicans demanded significant cuts to Social Security benefits. House Majority Leader Harry Reid (D-NV), who was described as  “shocked and disappointed” and this may well be the “poison pill” that ends the charade of “fiscal cliff” talks.

The development came after a long weekend of negotiations during which the two sides had been making progress.

The aide said Democrats had shown flexibility on the major sticking points involving taxes. They had not ruled out maintaining the tax on inherited estates at the current low rate, as Republicans prefer. And they had been open to a deal that would allow taxes to rise on many fewer wealthy households than President Obama had proposed. Republicans were seeking tax increases only on income higher than $400,000 or $500,000 a year, while Obama wanted to set the threshold at $250,000 a year.

But Obama was pressing for $30 billion in new spending to keep unemployment benefits flowing to the long-term unemployed, and he wanted to postpone roughly $100 billion in automatic spending cuts set to hit agency budgets next months. In exchange for those items, Senate Minority Leader Mitch McConnell (R-Ky.) insisted Sunday that Democrats put cuts to Social Security benefits on the table, noting that Obama had offered to do so as part of the big deficit-reduction package he had been negotiating with House Speaker John A. Boehner (R-Ohio.)

Republicans declined to comment on the new offer, but noted that Obama endorsed the adjustment, known as chained CPI, again Sunday, in an interview on NBC’s Meet the Press.

President Obama suggested that he was open to the highly unpopular proposal to cut increases to Social Security by linking it to the “chained CPI” in the context of a larger deal.

The other “monkey wrench” that McConnell threw into the mix was estate taxes which are scheduled to increase to the Clinton level of 55% on estates over one million dollars. The estate tax currently exempts the first $5 million of inheritance and taxes the remainder at 35 percent, which the Republicans want to keep. Pres. Obama wants to make it less generous, reducing the exemption to $3.5 million and taxing the remainder at a 45 percent rate. This tax only affects an extremely small number of people.

Under the Republican proposal, 3,800 people would pay the estate tax year, also near an average of $3.3 million. The GOP proposal would raise $182 billion for federal tax coffers over the next 10 years.

Under Obama’s proposal, 6,500 people would pay the estate tax next year, with an average payment estimated at about $3 million. The president’s proposal would raise $284 billion in tax revenue over the next 10 years.

No action by Congress would send the estate tax back to what it was in the 1990s – with a $1 million exemption and 55 rate percent for the remaining share. That would affect more than 40 million Americans.

Senate Minority Leader Mitch McConnell (R-SC) has reached out to Vice President Joe Biden to break the impasse.

Up Date 14:26 EDT: The House of Representatives has adjourned until Monday December 31

New Year’s Eve is four days away but you may want to start drinking now. True to form Congress is right on track to do nothing about anything, except maybe to try to repeal the Affordable Care Act. The House is still in recess, under what Senate Majority Leader Harry Reid (D-NV) called the “dictatorship” of House Speaker John Boehner (R-OH), with some major issues still in need of resolution. There is the mythical Cliff with its draconian spending cuts to everything except Medicare, Medicaid, and Social Security; the expiration of the Bush/Obama tax cuts and the end of unemployment benefits for two million long term unemployed. There is the farm bill that has lingered undebated in the House which will most likely result in steep spikes in the cost of dairy products and to throw another log on the fire, Treasury Secretary notified congress yesterday that the debt limit will be reached on December 31.

This past Sunday on MSNBC’s Up with Chris Hayes, host Chris Hayes discussed how the president and congress almost came up with a deal to avert a non-crisis and how Speaker Boehner’s “Plan B” failed. Chris’ guests were former Governor James Florio (D-NJ); Heidi Moore, Finance and Economics Editor for The Guardian newspaper; Dean Baker, Co-Director of the Center for Economic and Policy Research; and Dylan Glenn, Senior Vice President of Guggenheim Advisors and former Special Assistant to Pres. George W. Bush. Keep in mind that Social Security has nothing to do with the deficit. It is on the table because President Obama put it there.

Warning: Dylan Glenn and the lack of push back from Hayes and the others on Social Security may have you throwing things at your monitor, so secure any damaging objects before watching.

Back to the grind. President Barack Obama cut his Christmas holiday in Hawaii short, returning to Washington to try to cut a deal to avoid the mythical” fiscal cliff.” While there was much cheering from the president’s most avid supporters over the reports of his tough talk last week during negotiations with House Speaker John Boehner (R-OH), there is still a major concern that Social Security cuts are still on the table by tying cost of living increases it to the chained CPI. It is not just Republican and the president we can’t trust on this, it’s also Democrats. House Minority Leader Nancy Pelosi (D-CA) sees no problem with chained CPI. While there was no mention of Social Security in Speaker Boehner’s failed “Plan-B,” there is no indication from Pres. Obama that it won’t be offered again as a carrot to entice the Republicans to accept a tax increase on the top two tax brackets.

Until we hear it from Pres. Obama’s lips that it isn’t, Social Security is still a bargaining chip in the manufactured debt/deficit crisis. So it is back to the phone. Flood the White House and the Congressional phone lines with calls demanding that they keep their hands off Social Security.

White House

202-456-1111

Your senators

Your House member.

No cuts to Social Security.

Gaius Publius @ Americablog offers this helpful digest-

What are we protecting?

We’re protecting three social insurance programs. These are:

    ■ Social Security

    ■ Medicare

    ■ Medicaid

What are we protecting them from? Anything that:

    ■ Reduces benefits

    ■ Turns the program from insurance to welfare (which only the “deserving” have access to)

How are these programs being threatened?

As near as I can tell, these are the threats. Note to foxes – this is the hands-off list. Each of these seven items is a benefit cut:

Social Security

    1. Raising the retirement age

    2. Chained CPI instead of current COLA

    3. Means-testing benefits

Medicare

    4. Raising the eligibility age

    5. Increasing Part B premiums

    6. Increasing “cost-sharing”

Medicaid

    7. Shifting costs to the states by any means, such as “federal blended rate,” etc.

Keep it up everyday, jam the lines until the President and Congress get the message:

Barack Obama’s presidential legacy will most likely be that he was the Great Prevaricator. His plan has always been to protect the 1% and sell out the rest of us. So far he succeeded quite nicely, with just a few minor bumps in the road that were possibly preplanned.

Two important points that Jane Hamsher and Jon Walker at FDL Action makes about Barack Obama, that even Marcos Moulitsas gets wrong, is:

1st, Ms. Hamshire writes that Pres. Obama did not capitulate on Social Security cuts and we should stop pretending that he did:

Everywhere you look, the media narrative is that President Obama is “capitulating” to Republicans by agreeing to cuts in Social Security benefits.

And I have to ask, where is this collective political amnesia coming from?

Obama has made a deliberate and concerted effort to cut Social Security benefits since the time he took office.  FDL reported on February 12, 2009 that the White House was meeting behind closed doors to consider ways to cut Social Security benefits, and that the framework they were using was the Diamond-Orszag plan, which was co-authored by OMB Director Peter Orszag when he was at the Brookings Institute.

The birth of the now-ubiquitous “catfood” meme came on February 18, 2009 with this FDL headline:

   Hedge Fund Billionaire Pete Peterson Key Speaker At Obama “Fiscal Responsibility Summit,” Will Tell Us All Why Little Old Ladies Must Eat Cat Food

[..]

The administration backed off its immediate plans for reforming Social Security. The New York Times reported that they were “running into opposition from his party’s left” who are “vehement in opposing any reductions in scheduled benefits for future retirees.” But NYT columnist David Brooks reported that shortly after the summit, “four senior members of the administration” called him to say that Obama “is extremely committed to entitlement reform and is plotting politically feasible ways to reduce Social Security.” [..]

In January of 2010, a bill sponsored by committed Social Security slashers Judd Gregg and Kent Conrad which would have created an official commission to make recommendations about the nation’s deficit was defeated by the Senate on a bipartisan vote – 22 Democrats and 24 Republicans voted no.

After the Senate defeat, on February 18, President Obama issued an executive order creating what subsequently became known as the “Catfood Commission” anyway. [..]

The composition of the Commission was conveniently stacked with 14 of the 18 members committed deficit hawks looking to start balancing the federal budget on the backs of old people.

And who supplied the staff to the commission? Why, Pete Peterson.

Are we to believe that the President was blissfully ignorant of the agendas of the people he appointed to this commission, created with the goal of bypassing Congressional process? [..]

The President has been very forthcoming about the fact that cutting Social Security benefits is something he wants to do.  When he said during the debate that he didn’t differ from Mitt Romney on entitlement reform, he meant it.   It’s time for people to remove the rose-colored glasses and stop projecting their own feelings on to the man.  It’s time to take him at his word.

This is what he has always wanted. Ignore it if you choose but the facts and Obama’s actions and words bear it out.

2nd, John Walker points out that Pres. Obama lied about not raising taxes on the middle class. By using the chained CPI, a lower measure of inflation, no only are SS benefits cut, it winds up being it would end up being a significant tax increase on the middle class by causing tax brackets to raise more slowly. While the tax increase would be very small at first, over the next decade it would mean the middle class will pay ten of billions more in taxes. John calls this the “Lie of the Year”

For five years Obama repeatedly and unequivocal promised not the raise taxes by one penny on anyone making less than $250,000. He did so in ads, campaign stops, emails, and interviews. There is probably no other single policy proposal that was more central to both of Obama’s presidential campaigns. Millions likely voted for Obama based on this firm promise.

Yet even before Obama’s second term begins, he has rushed to break this campaign promise. [..]

Obama was not forced by some extraordinary unforeseen event to accept this tax increase. Obama include this middle class tax increase in his counter offer. Obama didn’t need to do this, he chose to do it.

Right after Obama was re-elected, based on a promise not to raise taxes on the middle class, his first major action was to push for a middle class tax increase. This is a pathological level of dishonesty. The only thing more disturbing is the weak shoulder-shrugging response by most of the media to such a profound act of deception.

So whether the Bush tax cuts expire on Dec 31 or the rate of inflation is calculated by the chained CPI, middle class taxes are going up and SS recipients will be eating cat food.

There are those of us who knew this all along but everyone was focused  on the prospects of a Democratic resurgence that would govern from the left. They were blinded by the bright shiny object that was this man who gave a great speech and had an attractive family. But he came from the roots of Chicago Democratic politics and had an agenda that really wasn’t so hidden. He just lied and everyone believed him even though the facts were right in front of them that Pres. Obama is a right wing, corporatist, Republican and has been flat out lying to us all.

And when one make 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. 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, that shows disdain for the most vulnerable in our society and that is a fact.