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Home Publications Blogs Beat the Press The All-Knowing Washington Post Tells Readers What the Budget Deal Will Include

The All-Knowing Washington Post Tells Readers What the Budget Deal Will Include

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Wednesday, 13 July 2011 15:46

We no longer have to wait to see how the battle over the debt ceiling will turn out, the Washington Post already told us:

"No matter what the outlines are for a final agreement to lift the debt ceiling, the deal will include cuts to some of the nation’s major entitlement programs: Medicare, Medicaid and Social Security."

There you have it, right there in the first sentence of a Washington Post article.

This piece also told readers in the context of a discussion of lowering the Social Security cost of living adjustment:

"experts have long argued that the formula [the current consumer price index] overstates inflation because it does not take into account changes in consumer behavior in response to rising prices."

While some experts have argued this point, other experts have noted that research from the Bureau of Labor Statistics (BLS) showing that consumption patterns among the elderly are substantially different from the consumption patterns of the rest of the population. These experts have suggested that if the concern is making the cost of living adjustment more accurate (as opposed to just cutting it), Congress could just instruct BLS to construct a cost of living index that was based on the consumption patterns of Social Security beneficiaries.

Such an index may show a rate of inflation that is higher or lower than the current index. It would be impossible to know for sure without first doing the research. However, there is no doubt that such an index would be more accurate than the current one for measuring changes in the cost of living of the elderly.

Comments (3)Add Comment
Snap-Back Effects Prove Myth of Inflation and Deflation
written by izzatzo, July 13, 2011 6:25
"experts have long argued that the formula [the current consumer price index] overstates inflation because it does not take into account changes in consumer behavior in response to rising prices."


Exactly. Economists understand this as the well known Substitution Snap-Back Effect which renders neutral any possible inflation or deflation by offsetting prices in the opposite direction that leave welfare unchanged.

For example when heating prices rise the thermostat is turned down enough to keep the bill the same proportionate expenditure in the CPI and vice versa.

By using jackets, tents, sleeping bags and each other combined with unitary price elasticity seniors can huddle in the living room to prevent declines in body temperature as well, further demonstrating that inflation or deflation is a myth since total consumption of substitutable real goods and services never changes.

Cost of living adjustments should be suspended altogether since they actually cause whatever 'inflation' claimed to exist by distorting demand-side behavior with artificial relative prices on the upside.

Stupid liberals.
...
written by denim, July 13, 2011 8:48
Oh, sure! Also ran in the midwest:
http://en.wikipedia.org/wiki/Dewey_Defeats_Truman
Not an Original Thought
written by Ron Alley, July 13, 2011 10:41
Dean,

The Washington Post is not expressing an original thought, but merely repeating President Obama remarks without citing their source.


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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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