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Home Publications Blogs Beat the Press Washington Post Takes Another Shot at Reducing Social Security Benefits

Washington Post Takes Another Shot at Reducing Social Security Benefits

Monday, 26 November 2012 11:19

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.

Comments (11)Add Comment
reducing growth rate
written by jennifer reft, November 26, 2012 11:37
Adjusting those annual increments merely reduces the rate of growth in seniors’ benefits; it does not actually cut them.
That is quite a line there. It is truely amazing that with the amount of financial loss and poverty increases in the past few years what sorry-assed safety net exists is too much for some people.

Adjustments Will Be Made
written by Bart, November 26, 2012 12:02

"The immediate impact is negligible — just $1 billion in the first year. That gives future retirees time to adjust."

The necessary switch to cat food will be an easy adjustment. Bowels- Simpson have it all figured out.
canned or cereal
written by frankenduf, November 26, 2012 12:23
yo Bart- thanx for that quip- i could never figure out why it was called the "catfood commission"! :)
Cap the benefit
written by Charlie, November 26, 2012 1:01
It is so easy. Whatever the maximum monthly benefit is January 2013, freeze it. Total budget impact grows with time, it only effects top earners at the start and allows future retirees to plan accordingly, as they will know what their maximum benefit will be.
written by coberly, November 26, 2012 1:03
an aspect of this that Dean misses:

since the WORKERS PAY FOR IT THEMSELVES it does not matter whether the chained CPI is "more accurate" or not. If workers want to pay for a benefit that allows them to keep eating chicken as they get older instead of switching to cat food, there is NO REASON for them not to do that.

WHO is being saved any money by cutting the CPI? the answer is no one. the workers are being suckered into saving less now in order to eat less when they are old.

for an extra eighty cents per week, the workers could save enough to keep the present CPI, the present benefit rate, the present retirement age.... why are they not being allowed to do this?
written by coberly, November 26, 2012 1:14
look, we use a cpi as a measure of inflation to give us a starting place to think about how we adjust "fixed" benefits so people are not gradually starved to death by inflation. but there is no such thing as an "accurate" measure of inflation. it is little more than a guess, or a political decision. the prices of things change relative to each other and sometimes we want more of one and sometimes more of the other. we can pick an "average" but it's a fairly arbitrary average.

the thing to to is look at how well people are doing. and if "the elderly" are switching to cat food (or turnips) or something they don't like as much as what they are used to, and we wouldn't either, and

since we know that WE are going to be elderly some day, a decent regard for ourselves as well as them would suggest we set the "tax" (really "savings") rate high enough so the elderly are not pushed into degrading, miserable poverty. especially if we can do that with no real cost to ourselves (eighty cents per week is not a real cost).

in the end we are only paying for our own future standard of living. whether that is "keeping up with inflation" or "keeping up with a rising standard of living" is something we can let the economists argue about. meanwhile we need to do what will be best for us.. balancing our present wants with our future needs... as well as doing the decent thing for our elders.
written by coberly, November 26, 2012 1:18
one thing for sure the "chained cpi" is not an honest measure of inflation. if you count "substitution" of a cheaper product for the consumer's preferred product, you are NOT using a measure that holds "standard of living" constant.

you are using a phony, weaselly, dishonest, artificial construct you or your favorite shyster economist can call "inflation," but its a lie.
written by istry b4 isms, November 26, 2012 5:01
This has been bothering me for a long time, and I know Dean Baker will know the answer, even though it's not a comment on this latest piece. When "they" say that raising taxes on those earning more than $250K will raise taxes on small businesses, isn't that because small businesses have been given a tax 'break', allowing them to file as individuals, rather than businesses, a tax break that saves them time and money in needing accountants to help them file their taxes more responsibly, which, if done, would probably provide the lower rate an economic stimulous oriented tax policy would afford them???
How They Live Now
written by Alan Goldhammer, November 27, 2012 1:17
Wow, $1200/mo. Now subtract from this $105 for Medicare Part B, $30 for Medicare Part D and now you are down to $1070/month. If you don't have some other annuity or pension money coming in, it's hard to see how one can live on this. Of course the WaPo and other newspapers figure that everyone had wonderful jobs with great benefits and socked away lots of IRA and 401(k) money. What a joke when the reality is quite different. Even if one had a bare bones efficiency apartment at $450/month (if such things exist) and say utilities are another $100/month, one is left with $570 to cover everything else. Pity the poor/rich social security recipient.
Honest Measure of Inflation
written by H-Bob, November 27, 2012 6:36
"Actually, economists do not know if this index is a more realistic measure of the rate of inflation experienced by the elderly" -- so we should use the price of cat food as the inflation index ?
written by Brett Greisen, November 28, 2012 11:53
From Social Security each month, you subtract Medicare A/D premiums, deductibles, + co-pays on MD office visits, annual screenings, Rx costs + all the usual household expenses. But the annual CPI increase doesn't cover the increased A/D premiums, the increased co-pays, etc.

Social Security & other Federal Pensions must be attached to the E-CPI measure which has been "testing" for years & covers all expenses for the elderly. The chained CPI & the W-CPI penalize all recipients since they don't cover energy & food & assume the same spending as younger, healthy people instead of older, multiple chronic illnesses that many disabled & elderly have

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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.