About "the" chained Consumer Price Index ...

[1StrongBlackMan]

Everyone is all hair on fire about the mere mention of a Chained CPI, as a concession in the "cliff" negotiations, as it would have the elderly eating catfood. Not knowing a lot about Chained CPIs, I let google, and the media, be my friend.

What I found was that the Chained CPI that everyone is talking about would cost the typical beneficiary about -2.6% per year under what the current CPI model provides. That comes to about $126/month ($1,500/year) in Cost of Living increases after 20 years. (Source: David Cay Johnson; TRMS, 12/18/2012) It

But what I, also, found was that there are several "Chained CPI" models, including a "Chained CPI-E" that is specifically designed to apply to the elderly. (http://www.annuitydigest.com/cpi-e/definition) According to DCJ, this model would actually increase the cost of living adjustments for its beneficiaries by $158/month (after 20 years) over what the current CPI model provides.

If I, now, know this, having spent about 40 seconds on the google and listening to a 5 minute interview ... don't you think the Democratic negotiators might also know this? Especially after thinking about what Pelosi actually said about the Chained CPI "Concession"?

"The details of this are not all ironed out, but they all mitigate for helping the poorest and neediest in our society, whether they're Supplemental Security Income recipients, whether they're 80 and older or whether they're truly needy in-between," said Pelosi, adding it was "worth making a compromise" to avoid going over the fiscal cliff.

http://www.huffingtonpost.com/2012/12/18/nancy-pelosi-fiscal-cliff_n_2324042.html

[Recursion]

1. There's nothing inherent in chaining itself that requires a cut

In fact, chaining increases the uncertainty about what spending will be in the future.

The CPI is hopelessly outdated; if the result here is that we rethink how we calculate it, I'm all for that.

[muriel_volestrangler]

23. By the nature of supply and demand, chained indices will go up slower than non-chained

because people, as a whole, will always substitute goods and services that are going up slower than ones with higher inflation; and chained indices are affected by substitution more than non-chained ones.

The effect is that a chained index reflects what someone might be able to keep their cost of living down to, if they look for all the savings possible, to keep their standard of living constant. Meanwhile, GDP will tend to rise, but anyone dependent on a cost-of-living increase will never see any part of that. Throw in that the elderly consistently suffer from higher inflation due to larger healthcare costs, and they get screwed.

[alcibiades_mystery]

2. We have the usual problem of people not knowing

that much about policy, coupled with sensationalist writers seeking hits. Even the prose of some of those source pieces yesterday was embarrassing.

[mac56]

3. There you go again, uncovering facts....

[marew]

4. So you think major oil companies,

corporations should continue to get billions in subsidies and pay no taxes, people like Romney who makes $58,000 a day and can pay 10% in taxes, etc. should get what they want while the working class, the middle class, the poor- get screwed over first. How thoughtful of you!

[1StrongBlackMan]

5. You're bumping your head on the reactionary floor, again ...

I said no such thing ... In fact, if you had actually read what I wrote, ... I said the exact opposite.

[cui bono]

43. The people who keep rationalizing this, to defend Obama I guess,

are not looking at the big picture or the future.

It won't stop here. The Republicans will continue steamrolling until SS is privatized and it will be a Dem president that does it!

And yes, how can people on this board really say this is fine when all those subsidies go out to corporations and capital gains tax is 15% at best???

This is the problem when you have people so ready to defend and accept anything Obama does because if he does it, it's not so bad. But if GWB had done it boy, oh boy... you would have heard a different tune from the same posters.

[Hoyt]

6. +1 Does that mean we can now focus on the positive aspects of the rumored "deal?"

Like -- extension of unemployment benefits; tax increases on wealthy; significant defense cuts; no increase in Medicare age; stimulus that will hopefully improve economy, help young folks find jobs, and preserve long-term viability of SS, Medicare; etc.

Or do we still have to fret that Obama is going to screw the poor intentionally just for the hell of it?

[1StrongBlackMan]

12. +1,000,000 n/t

[savalez]

45. +KABILLION!

[forestpath]

7. The older seniors get the bigger a hit it will be on them. That is unconscionable.

Those who already have so little to live on should not have to give up one cent jjust to cushion the well off.

Funny how President Obama called it "Romneyhood" when Mitt Romney proposed it. Now he embraces it himself.

[Hoyt]

11. The rumored "deal" says there are protections for those at lower end of SS scale.

Don't know exactly what that protection is, or what's the threshold is -- but I think they will be protected.

As one who will likely get hit by impact of chained-CPI, I think it may well be worth it for other aspects of deal which help a lot of folks such as unemployed, youth, victims of lagging economy, etc.

[forestpath]

14. I don't believe in setting one group in need against other groups in need.

Nor do I believe there will be any protections for those at the lower end of the SS scale. That is phoney reassurance to placate people.

The bottom line is that President Obama has shown he is willing to bargain away our security in our old age. I will never trust him on anything again.

[Hoyt]

22. I don't feel that way, and choose the to look at big picture. Wish us both luck.

[1StrongBlackMan]

24. And you base the latter belief on ...

what, exactly?

The bottom line is that President Obama has shown he is willing to bargain away our security in our old age.

President Obama has done no such thing. I think you are hearing only what you want to hear.

[cui bono]

44. That does not make it okay.

Why is SS on the table at all? Is there a good reason? The reason given by Carney was that the Republicans asked for it.

[1StrongBlackMan]

13. Did you even read the OP?!?

[forestpath]

16. Yes. Your model does not apply.

[1StrongBlackMan]

21. Why not?

Have you seen the language of the rumored "concession" offer? Or, are you just disregarding what Nancy Pelosi and President Obama have said with respect to a Chain CPI that protects the elderly?

[patrice]

8. OMG, someone who actually went out and informed himself before delivering judgement! Imagine that!!

Now, THERE'S a revolution for you!

[Bluenorthwest]

9. So when the President says he's a huge Christian with issues about equality for gays

we should understand that his form of Christianity is one in which Jesus said 'that which you do to the least of these is a blessing to the rich'?
When a person uses Jesus to explain why they are against equality, as Obama has done, it is stunning to then hear that person turn around and explain that it is fine to take from the poor, the elderly, the sick, if you take less than the Republicans would have.
Any man who says 'I belvieve this faith' in order to slander his neighbor, who also redacts most of that faith in order to serve his peer elite is not a good man. This is what my mother taught me. She was correct.

[1StrongBlackMan]

15. And the ...

Non sequitor Award - President Obama Hate Category goes to ...

[Bluenorthwest]

10. 2013 increase from COLA for average Social Security beneficiary is about $21.

And you say that's too much for them to get? Seriously? That's what bothers you, old, sick people getting another twenty bucks? Do you fear they will invest it poorly or what? Buy too many charter flights?
Reality:
http://www.economicpopulist.org/content/chained-cpi-will-reduce-your-social-security-benefits

[1StrongBlackMan]

18. READ the OP ...

using the Chained CPI-E model, the COLA would be MORE than the $21.

[Liberal_Stalwart71]

17. This is amazing! Thanks for finding this. DCJ was on the networks the other day taking the Prez to

the woodshed over CPI. Wouldn't he know what you have posted here?

[1StrongBlackMan]

19. Presumably ...

But then again, maybe he like many others spoke about the current model, before researching that there are alternatives. Maybe, after he spoke some other industrious person pulled his coat-tail about the Chained CPI-E, so he went on TRMS to set the record straight (without having to say I spouted off half-cocked).

[Sunlei]

20. Thank you for researching the facts.

[Cognitive_Resonance]

25. Much ado about virtually nothing, but there's no reasoning with the all-or-nothing extremists nt

[femrap]

26. Per 'The Annuity'

link: "At the moment, Social Security COLA increases are based on the CPI-W--not the CPI-E."

And you think $126 increase in 2032 is going to keep up with inflation??? The purchasing power of the dollar is THE BIGGEST TAX OF ALL on working people.

Oh, and I believe you missed an important 'give' from the President. He is now going to let those who make $250,000 to $399,000 keep THEIR BUSH TAX CUTS.

That sucks. Big Time. Next thing you'll see is the repugnants will want that raised to $500,000/year in income.

Hell, I would increase taxes on those making $100,000/year.

If I had my way, we'd go back to Eisenhower's tax rates!

Fucking greedy people....maybe someday they'll have to eat their money.

Time's man of the year. Big Whoop. He just handed the wealthy a big tax break. He lied during his campaign. He specifically said $250,000 would lose the Bush Tax Cuts.

Now spending has to be cut somewhere else....just kill the elderly. Take me out back, put a bullet in my brain then off to the crematorium. Heaven knows the gov't ordered enough hollow points this past year.

Just more Kabuki Theater. And by the time the bill is signed, it will be worse.....all done behind closed doors between Xmas and New Year's Eve while everyone is trying to have a good time.

edit for spelling

[1StrongBlackMan]

30. Okay. Point by point ...

link: "At the moment, Social Security COLA increases are based on the CPI-W--not the CPI-E."

I know this. I am suggesting that since we do not know the language of the Chained CPI "concession" ... it very well may be a model shift; thereby explaining Pelosi's and President Obama's comments with respect to protecting the elderly.

And you think $126 increase in 2032 is going to keep up with inflation??? The purchasing power of the dollar is THE BIGGEST TAX OF ALL on working people.

I realize that too; but how is that relevant to the present discussion? The current CPI model is not a part of the negotiation. Maybhe it should have been, but it's not. But then again, neither is raising the minimum wage or a whole host of other issues.

Oh, and I believe you missed an important 'give' from the President. He is now going to let those who make $250,000 to $399,000 keep THEIR BUSH TAX CUTS.

That sucks. Big Time. Next thing you'll see is the repugnants will want that raised to $500,000/year in income.

And Democrats can just say no. And further, so what ... Nope ... I didn't miss it. But frankly, it's something I can live with, either (but $500,000, would probably be my limit ... So long as President Obama is able to craft a deal that prevents us from going over the cliff and does not harm SS or Medicare beneficiaries.


Hell, I would increase taxes on those making $100,000/year.

If I had my way, we'd go back to Eisenhower's tax rates!

And you would not reach any deal

Fucking greedy people....maybe someday they'll have to eat their money.

Time's man of the year. Big Whoop. He just handed the wealthy a big tax break. He lied during his campaign. He specifically said $250,000 would lose the Bush Tax Cuts.

Ahhhh, the reality of governance makes one a liar ... Okay.

Now spending has to be cut somewhere else....just kill the elderly. Take me out back, put a bullet in my brain then off to the crematorium. Heaven knows the gov't ordered enough hollow points this past year.

Just more Kabuki Theater. And by the time the bill is signed, it will be worse.....all done behind closed doors between Xmas and New Year's Eve while everyone is trying to have a good time.

[femrap]

34. I'll take the Cliff....

many are calling it a speed bump. There is no need to concede so much when there really is no need to. Wait....the 10 baggers will be gone next year.

MSM has made this 'fiscal cliff' not economists.

I just don't see how a dem can live with a $500,000 income that keeps the Bush Tax Cuts.

I really don't like being in the party of moderate repugnants.

http://www.zerohedge.com/contributed/2012-12-19/fiscal-cliff-hubris-small-differences

Read the last line.

[1StrongBlackMan]

38. It's not a "speed bump" ...

for the 3+ Million people whose U/C will stop; nor for the working work who will have to choose between spending more for day/after school care, leaving their children at home, or no working because of the end of childcare subsidies; nor for those current housed thanks to homeless (near homelessness) programming.

[1StrongBlackMan]

27. In reading many of the objections to ...

the Chained CPI, aren't many making the assumption that all elderly are poor?

And wouldn't any solution lead to means-testing of SS?

[muriel_volestrangler]

28. But the CPI-E currently calculated is not chained

The consumption of medical care by those aged 62 or older is a significant factor behind the belief that the elderly population experiences higher rates of inflation than the overall population and that the annual CPI-W COLAs are insufficient to cover their rising cost of living. In short, the argument is that the elderly consume relatively more medical care than the overall population and that medical care prices have risen more rapidly than prices in other consumption categories. The BLS has developed an Experimental Consumer Price Index for Americans 62 Years of Age and Older, often referred to as the Consumer Price Index for the Elderly (CPI-E), that takes into account increased utilization of medical care and seems to lend support to these claims.5 The actual COLAs based on the CPI-W and granted to Social Security beneficiaries from 1984 to 2006 have averaged 3.02 percent annually. If the same COLA calculations had been based on the CPI-E instead, the COLAs would have averaged 3.35 percent, 0.33 percentage points higher.6 In fact, a COLA based on the CPI-E would meet or exceed the CPI-W COLA in every year between 1984 and 2006 except 2005. In 2005, the standard CPI-W COLA would have exceeded a hypothetical CPI-E COLA by 0.30 percentage points.

Although researchers have identified a number of concerns regarding the CPI-E and do not deny that the issue is worth investigating, many doubt the need for or the practicality of constructing a price index specifically for the elderly.7 Furthermore, the newly developed chain weighted (C-CPI-U) provides strong evidence that the methodology used to construct both the CPI-W and CPI-E implies a substantial upward bias in the measurement of inflation. A correction of this upward bias in the measurement of inflation would actually imply smaller COLAs, not larger ones.8 COLAs based on the Chained C-CPI-U would have averaged 2.32 percent between 2001 and 2006, compared with 2.70 percent and 2.92 percent for annual COLAs based on the CPI-W and CPI-E, respectively, over the same period.9

In light of these perceived biases, it might seem natural to consider designing a chain—weighted CPI-E price index for the elderly. Such a price index could theoretically address the concerns represented by both alternative points of view. However, as this article demonstrates, both chain—weighted indexes and price indexes restricted to the OASDI elderly population suffer from significant limitations when used as the basis for COLA calculations. Furthermore, as the two currently perceived biases seem to be offsetting and of roughly equal magnitude, there is reason to suspect that such a hybrid index would be similar to the currently used CPI-W.

http://www.ssa.gov/policy/docs/ssb/v67n3/v67n3p73.html

Note there is no such thing as a 'C-CPI-E', just a 'C-CPI-U'.

[1StrongBlackMan]

31. Maybe ...

you started highlighting too late ...

The consumption of medical care by those aged 62 or older is a significant factor behind the belief that the elderly population experiences higher rates of inflation than the overall population and that the annual CPI-W COLAs are insufficient to cover their rising cost of living. In short, the argument is that the elderly consume relatively more medical care than the overall population and that medical care prices have risen more rapidly than prices in other consumption categories. The BLS has developed an Experimental Consumer Price Index for Americans 62 Years of Age and Older, often referred to as the Consumer Price Index for the Elderly (CPI-E), that takes into account increased utilization of medical care and seems to lend support to these claims.5 The actual COLAs based on the CPI-W and granted to Social Security beneficiaries from 1984 to 2006 have averaged 3.02 percent annually. If the same COLA calculations had been based on the CPI-E instead, the COLAs would have averaged 3.35 percent, 0.33 percentage points higher.6 In fact, a COLA based on the CPI-E would meet or exceed the CPI-W COLA in every year between 1984 and 2006 except 2005. In 2005, the standard CPI-W COLA would have exceeded a hypothetical CPI-E COLA by 0.30 percentage points.

Although researchers have identified a number of concerns regarding the CPI-E and do not deny that the issue is worth investigating, many doubt the need for or the practicality of constructing a price index specifically for the elderly.7 Furthermore, the newly developed chain weighted (C-CPI-U) provides strong evidence that the methodology used to construct both the CPI-W and CPI-E implies a substantial upward bias in the measurement of inflation. A correction of this upward bias in the measurement of inflation would actually imply smaller COLAs, not larger ones.8 COLAs based on the Chained C-CPI-U would have averaged 2.32 percent between 2001 and 2006, compared with 2.70 percent and 2.92 percent for annual COLAs based on the CPI-W and CPI-E, respectively, over the same period.9

In light of these perceived biases, it might seem natural to consider designing a chain—weighted CPI-E price index for the elderly. Such a price index could theoretically address the concerns represented by both alternative points of view. However, as this article demonstrates, both chain—weighted indexes and price indexes restricted to the OASDI elderly population suffer from significant limitations when used as the basis for COLA calculations. Furthermore, as the two currently perceived biases seem to be offsetting and of roughly equal magnitude, there is reason to suspect that such a hybrid index would be similar to the currently used CPI-W.

http://www.ssa.gov/policy/docs/ssb/v67n3/v67n3p73.html

Experimental, be none the less, it exists ... just like the CCPI-U was, just before it was implemented.

[muriel_volestrangler]

33. It's not chained

What we have both quoted explicitly says it's not chained. The CPI-E exists; it then says they could develop a chained one. But they have not.

[1StrongBlackMan]

37. Okay ...

I see what you are saying.

I guess I conflated the CPI-E with what DCJ said on TRMS.

Thanks

[djean111]

29. Oh, so Carney misspoke when he said chained CPI is less "generous"?

Maybe you should let Obama and Carney know that!

[1StrongBlackMan]

32. No ...

He did not mis-speak. The effect of the current model is less "generous."

But in a negotiation where one side is calling for cuts and incorrectly believes that a term presented will give them that cut ... you let them keep on thinking that.

[BlueCaliDem]

35. Aw man! You took the Purists' latest toy away!

Shame on you, 1StrongBlackMan. You are NO Santa Claus!

I've noticed this anti-Obama meme is getting pretty strong around here. Why do posts that attack Obama for every wishy-washy reason - no matter how far-fetched - get high recs and your post barely hit 13?

[1StrongBlackMan]

40. Well ...

You know ...

[BlueCaliDem]

41. Unfortunately,

I do. The problem is, we're not allowed to call it as we clearly see it.

[1StrongBlackMan]

42. Yup n/t

[byronius]

36. K & R for thoughtful non-hysteria.

[gkhouston]

39. If it's going to give people more money instead of less, it's not a spending cut.

This is allegedly something the Republicans asked for. They're not about giving more money to the proles.

[MjolnirTime]

46. Those Ninnies running around here won't even look at the rational argument you've made.

It would end all their fun. They take pleasure in biting at Obama's heels.

[1StrongBlackMan]

48. It's hard to think ...

when your hair's on fire.

[limpyhobbler]

47. We shouldn't be talking about social security AT ALL.

Since it has enough money to pay out 100% of benefits for the next 20 years and any long-term issues can be solved by raising the cap.

The whole thing is a scam.

Anybody who tries to cut social security is a traitor. Especially Obama.