The Chained CPI concept is goulish. As I understand it,

[Raven]

the theory is that when prices rise people, especially seniors adjust their spending accordingly. AARP gives the example of apples and bananas: when the price of apples rise, I will no longer buy them...I will buy bananas which are cheaper. So, in effect, the government will pay me less thus assuring that I will never be able to buy apples again. If you take the concept a little further there may be a point where I can no longer afford to buy fruit of any kind. This appears to me to be a race into poverty with the government leading the charge. The ability of a senior to buy fruit is the least of the problem with this twisted concept since the formula would apply to all kinds of essential goods and services.

So by my calculation under this proposal my government will not only not help me stay out of poverty, it will give me a push in that direction.

Why does this Chained CPI concept have any traction at all in Washington? Because these gouls know that when I can no longer afford fruit or drugs my children will step up to the plate and help me out. I have said before that the fight over SS and Medicare has generational implications and the sooner the 30-40-50 years olds realize that, the better for all of us.

[indurancevile]

1. knr. "Why does this Chained CPI concept have any traction" the better to rob us

[Divernan]

2. And consider the implications for seniors in cold weather.

When , NOT if, the price of heating oil/electricity increases, rather than adjust the COLA, the government will tell seniors to turn the thermostats down to 50 and wear more layers of clothing indoors. Gasoline prices increase and you have no public transportation available? Start walking, grandma - try not to trip over your walker and block traffic!

In case you haven't seen the latest WH spin being floated here on DU, they are claiming that the COLA's have been too high for decades anyway - guess we're lucky we're not being ordered to repay them!

Re: your point that adult kids will have to step up to help older relatives. Currently 25% of Americans are helping out relatives financially. Any cuts to Social Security OR Medicare OR Medicaid will have a secondary but IMMEDIATE financial impact on many more Americans than the current recipients of these funds.

[WinkyDink]

3. "adult kids will have to step up to help": Um, yeah. Especially us WITHOUT OFFSPRING.

[RKP5637]

6. All of my family and many relatives are dead. Friends are dieing off. Yep, guess

I'll walk down the street and ask some random unknown adult kids to step up and help. I wish we would just rename this place "Bullshit Nation" and be done with it all. And create a national slogan of "Hurry up and die!" And get the facts out.

This isn't a country, it's a collection of greedy bastards out to make a buck. People really have to be coming from a hellhole to want to live in the US.

[area51]

32. +1

Truth in advertising: we should rename this country the United States of Sparta. We leave people to die, and our only reason for existence is wars.

[RKP5637]

34. Yeah, it is that, isn't it, our chief product and export, and our only reason for existence is wars.

[Divernan]

7. I feel for you. I'm blessed w/3 adult kids. But none of them

have ever married. In my family, we have this old-fashioned notion that if you're going to procreate, it's the responsible thing to do to marry your co-parent. So my kids have no children to help them when they are elderly. If I did have grandchildren, I would be so very worried about this miserably bleak political/war/economic situation they face in the coming decades.

But the bottom line is that you measure the decency of a government by how it cares for it's elderly and weak. The USA, compared to other industrialized and even some third world countries, is about to be downgraded from a C Minus to an F.

Nightmares of Soylent Green.

[RKP5637]

35. Soylent Green is not beyond the new US IMO, we just haven't gotten there yet. This

country is just a shadow of what it was when I was a kid. Now, we have a generational lack of knowledge of what the US used to be. Yep, it was clearly a hellhole for some, and that was really bad and evil, in other ways it worked. Now, it's one descending disappointment and the politicians are clueless and many are on the take, so they don't give a F. There are clearly some good ones, but their ranks are getting thinned out, and the crazies are rising into politics.

[RKP5637]

4. And the way it is now we have 2 years of no increase with COLA and told, oh, costs are

stable. Hell, the way they calculate COLA costs are stable, they leave out what's going up in cost. It's all a bunch of pure BS, like just about all gov. statistics, and the rest ... spun to give whatever statistics one wants. Crap in = crap put. Just like unemployment around 10% when the real rate is about 20%. Smoke and mirrors, slight of hand, the whole pack of them. Like barkers at a sideshow. Sure gives one real confidence in the future. Now we get the Chained CPI bullshit.

[Divernan]

17. Saw a report comparing 2011 food costs with same foods in 2009.

Cost increases averaged out to 20%. Of course, the lower your income, the greater the percentage spent on food!

[RKP5637]

29. We were just up at the grocery store now remarking about how much the costs

had gone up again in just a couple of days. It just doesn't end.

[Lugnut]

47. It's pure unadulterated BS.

Food and fuel prices are and have been up as are utility bill increases. Medicare premiums haven't gone up but the supplemental policy premiums are and in a very big way. You don't have to be a financial genius to figure out that no COLA since January, 2009, isn't working out well for those who rely on SS benefits.

[enough]

5. I had no understanding of my parents' financial situation until I became their caregivers.

I think you're right that younger generations don't understand the importance of these programs in their parents' lives, and the ruthless fact that if the parents become destitute, it will fall on the adult children to step in.

This also goes for Medicaid, which currently will pay for a nursing home if the old person is has come to the end of their assets. Medicare does not cover this. Without Medicaid, a lot of people are going to find their elderly parents on their doorstep with a suitcase. Yes, many of us would CHOOSE to take care of out elderly parents at home (which is what I did), but most people don't realize that without these programs, they will be FORCED to.

The idea that these programs only help the elderly receiving the benefits is sadly mistaken.

[RKP5637]

37. And many offspring will be financially or logistically unable to care for

their parents, and a good deal well might not give a F. Many can't even take care of their children responsibly let alone aging parents.

I think I will live to see the day here when people are just dieing in the streets and flop houses, and those were some of the roots of this country.

IMO we are living through the failure of a deranged out of control capitalistic system where people are bred not to give a F about other people and only the accumulation of wealth is important, and money is god, in a sociopathic society.

[unblock]

8. the idea is that if the price of ALL goods rise by 5%, then inflation is somhow less than 5%

one would think that by definition, if the price of every single good rose by 5%, that inflation would be up by 5%.

but no, according to the wonderful world of chained cpi, if prices go up by 5%, you won't be able to afford some of your favorites any more so you'll have to substitute cheaper goods. so at the end of the day, perhaps you'll spend 3% more, but get 2% less in terms of what you wanted. so inflation is 3% rather than 5%.

this is obviously not a measure of inflation, it's a measure of spending.

the folks in washington love it because it's a way to cut spending without explicitly cutting spending.

but this isn't really a new concept; as i understand it, cpi has been "tweaked" about 27 times in the last 20 years or so.

[Raven]

9. yes and over time it won't just be "favorites" people can't afford

it will be essentials.

[Sirveri]

44. not quite but close.

If all goods raise by 5% then C-CPI raises by 5%. If you look at the detailed CPI reports you'll notice that each item is weighted, so what chained CPI does is to adjust this weighting depending on what prices shift and how. My principal misgiving about this is how will they correlate C-CPI to consumption changes. Will they actually calculate the real changes in consumption, or will they simply use a mathematical algorithm. My guess is that they'll just pull a number out of thin air and use that, making this a broken measure of change in inflation.

And you're right, it's not a measure of inflation, it's a measure of spending(technically consumption), because those are the numbers they shift.

[unblock]

45. thanks for clarifying the details. in practice my example is useful i think, if slightly inaccurate

mainly because it's not realistic that everything ACTUALLY changes by the exact same amount,

i suppose i could make the example slightly more complex in order to be more accurate. this appeals to the economist in me, but the politico in me wants to keep things simple even if it's a bit off. what to do, what to do....


in any event, i don't see how they can do the weightings without some human intervention to determine what's a valid substitution. i mean, you can't substitute an ipad to compensate for the rising cost of bananas. is any fruit a substitute for any other fruit? is cod a valid substitute for halibut? is hamburger a valid substitute for filet? are soyburgers valid substitutes for filet? is dog food a valid substitute for filet?

you need humans to make these calls and that makes chained cpi subject to manipulation and/or error.

of course, original cpi always had the problem of determining the basket of goods and how to change it over time. but the substitution concept just adds another way to abuse the statistic.

[robcon]

10. Chained CPI is standard economics - called the substitution effect.

When the price of a good goes up, sales of that good declines, and other things are substituted.

Chained CPI is a better measure of the real effect of inflation.

[Raven]

12. How does one find a "substitute" for warmth and health, pray tell?

[Change has come]

49. Or somewhat healthy food...

that doesn't come from frickin China.

[Divernan]

16. You spout the latest neocon talking point - earlier COLAs were too high

Who the hell says chained CPI is a better measure of the real effect of inflation? Besides you and the White House spin room, that is? Come on, give us a cite, give us some experts! And do, pray tell, explain why this theory has just sprung full blown from the heads of the corporate hacks/hired guns who have usurped the administration. Let me guess. Timothy Geithner?

[alcibiades_mystery]

18. Elasticity of demand plays a part, however, as the other posters are noting in layman's terms

And as I think was the OP's point, ultimately. One might - given a "standard economic" viewpoint - substitute cat food for human food, yet the demand for human food remains relatively inelastic. The OP is suggesting that people won't simply substitute as the standard economic chart would indicate, but will rather seek to supplement their income so that they don't have to substitute, which pushes the assumed social cost (Social Security as a viewpoint of the social good) on to individuals (privatization of the costs on to the family, etc.). When the posters downthread reply that one can't simply substitute for health and energy, they are restating the also standard economic viewpoint that particular goods have inelastic demand (if seniors can't run their air conditioners in today's Chicago heat, they could quite literally die - making the demand for electricity relatively inelastic in these circumstances: you can't simply substitute for it as a "standard economic" reading would suggest).

What everybody is worked up about is precisely this inversion: for finance capital, we have the individualization of profit, and the socialization of costs and losses. For our social programs, we seem to be moving toward eliminating the social profit (i.e., the social good derived from safety net), and merely individualize the costs.

[Divernan]

23. Speaking of Chicago,739 died in '95 heat wave.Here's what happens to the poor/elderly

http://www.press.uchicago.edu/Misc/Chicago/443213in.html

Dying Alone
An interview with Eric Klinenberg
author of Heat Wave: A Social Autopsy of Disaster in Chicago

Chicago felt tropical, like Fiji or Guam but with an added layer of polluted city air trapping the heat. On the first day of the heat wave, Thursday, July 13, the temperature hit 106 degrees, and the heat index—a combination of heat and humidity that measures the temperature a typical person would feel—rose above 120. For a week, the heat persisted, running between the 90s and low 100s. The night temperatures, in the low to mid-80s, were unusually high and didn't provide much relief. Chicago's houses and apartment buildings baked like ovens. Air-conditioning helped, of course, if you were fortunate enough to have it. But many people only had fans and open windows, which just recirculated the hot air.

The city set new records for energy use, which then led to the failure of some power grids—at one point, 49,000 households had no electricity. Many Chicagoans swarmed the city's beaches, but others took to the fire hydrants. More than 3,000 hydrants around Chicago were opened, causing some neighborhoods to lose water pressure on top of losing electricity. When emergency crews came to seal the hydrants, some people threw bricks and rocks to keep them away.

The heat made the city's roads buckle. Train rails warped, causing long commuter and freight delays. City workers watered bridges to prevent them from locking when the plates expanded. Children riding in school buses became so dehydrated and nauseous that they had to be hosed down by the Fire Department. Hundreds of young people were hospitalized with heat-related illnesses. But the elderly, and especially the elderly who lived alone, were most vulnerable to the heat wave.

After about forty-eight hours of continuous exposure to heat, the body's defenses begin to fail. So by Friday, July 14, thousands of Chicagoans had developed severe heat-related illnesses. Paramedics couldn't keep up with emergency calls, and city hospitals were overwhelmed. Twenty-three hospitals—most on the South and Southwest Sides—went on bypass status, closing the doors of their emergency rooms to new patients. Some ambulance crews drove around the city for miles looking for an open bed.

[alcibiades_mystery]

28. That's why I brought it up

It's a rather notorious case around these parts, especially on days like we had this week.

:thumbsup:

[grahamhgreen]

19. Standard voodoo economics.

[Odin2005]

26. Yes, because ramen is just as nourishing as fresh fruits and vegetables.

Take your RW crap and shove it.

[JVS]

31. Seniors have such low income that economic behavior starts taking on strange...

attributes with a lot of inferior goods and Giffen goods being consumed.

[Yo_Mama]

36. Exactly

That is why CPI-W is a better index for their real costs, although it still understates inflation for many lower-income seniors.

If you are already eating pasta, and in bad economic times many people switch to pasta, then relatively the cost of pasta tends to go up.
http://en.wikipedia.org/wiki/Giffen_good
I use this example because it did in fact happen during this recession.

This may explain why I saw an older lady in the supermarket last week going up and down the aisle with the pasta one one side and the tomato sauce on the other. She spent fifteen minutes carefully looking at each selection on the sauce side, and finally left without buying anything. That is what Chained CPI will mean to seniors. Pasta with no sauce.

Most seniors have very moderate incomes and are already buying carefully. Instead of substituting goods, they just will not be able to buy goods. When you are already at the bottom of the consumption scale, no substitution effect is possible.

Inflation for the very poorest in our society seems to be running over 15%. For those who are the next leg up, it's about 7-8%.

So many people talk about economics and haven't the foggiest idea of what economics really is. Chained CPI probably captures the real levels of spending (practically, a drop of living standard) for a 40-60% income level household. But for a 20% (of average income) household, it means pure privation, and in many cases, loss of life. The elderly and disabled are fragile.

[Shandris]

43. Notice your carefully chosen weasel word there.

'effect'.

Chained CPI is a better measure of WHAT MUST BE DONE IN ORDER TO OFFSET THE INFLATION THAT HAS OTHERWISE OCCURED while using the same amount of money.

Once you reach a low enough point, your 'chained' CPI continues to assume there's a lower place to go when there isn't.

But hey, what the fuck do you care?

[Bluenorthwest]

11. The souless people pushing this theft from the least among us

are amoral, vicious, reprehensible and inhuman. The next time one of them starts explaining that they are sooo Christian they can not bear Civil Rights, I will ask, Where the fuck is your God in this Mix knowing they will never, ever answer.
Hypocrites who worship themselves and call themselves God when they bow. Fuck them all. One and all.

[RKP5637]

39. IMO, real christians, the ones I learned about as a youth are few and

far between today. Many of these christians today slap the label of christianity on themselves and practice bizarre cult behavior. I'm not religious, but in my youth these so called christians of today would have been called the work of the devil.

[MadHound]

13. What nobody is saying about all this is that seniors have the some of the least ability to change

They can't substitute for medications, they can't substitute for cheaper health care, there are simply far too many things they can substitute for. They're not going to change residences for cheaper housing, they are set in their ways, that's a fact. As you get older you become much more a creature of habit and refuse to change certain routines and/or products.

Thus, this chained CPI is going to hit them doubly hard.

Not to mention that once this becomes the official measure for Social Security, it will become the official measure for government pensions, private pensions, cost of living raises for all our jobs, etc.

It is going to be nothing but another piece of trickery designed to screw all of us eventually.

[Raven]

14. Good points. Also seniors are least likely to be able to work to

make up for the loss.

[Divernan]

15. Excellent, excellent points!

[jtown1123]

20. K &R Chained CPI is Theft. Here are some more links:

http://www.huffingtonpost.com/dean-baker/the-drive-to-cut-social-s_b_906168.html

http://www.dailykos.com/story/2011/07/20/996725/-DeFazio-explains-why-the-chained-CPI-cut-to-Social-Security-is-such-a-bad-idea

[Raven]

22. Thanks for providing the links. n/t

[reformist2]

21. Why don't they cut to the chase and do a CPI for dog food.

[ashling]

24. But I don't like bananas

:0

[Raven]

27. You'll just have to get used to them...and buy them well ripened.:-)

[Odin2005]

25. Don't forget disabled people on SSI and SSDI, too.

I guess we are supposed to live off ramen. :eyes:

[Change has come]

50. This is why talk of cutting Medicaid is appalling.

I help people living with severe disabilities. Medicaid makes up the difference between what they receive in SSI and the actual cost of monthly expenses. If these fucks are able to cut Medicaid, we'll have to go back to the good old days of custodial care (10 person group homes or institutions). :banghead:

[brentspeak]

30. Obama might has well claim that ketchup is a vegetable n/t

[Faryn Balyncd]

33. Chained CPI sets in motion a vicious cycle which makes a race to the bottom self fulfilling.

[eridani]

38. It's like compound interest, only in reverse

Instead of getting exponentially richer, you get exponentially poorer.

[RKP5637]

40. Yep, well said, that's exactly what it is. n/t

[RedEarth]

41. This combined with cuts in Medicare and it's going to get

very difficult to stay above water for many seniors.

[FogerRox]

42. Chained CPI saves .2% of GDP, Job creation is of higher value

.3% to .6% as in the low cost Trustees scenario

http://www.dailykos.com/story/2011/07/18/988237/-Fixing-the-economy-also-fixesSocial-Security-Thusly-the-Peoples-Budget?showAll=yes&via=blog_694100

[demodonkey]

46. What's the substitution for heating oil?

Because my 93 year-old mother and I can't afford a new furnace, and I don't know HOW we are going to afford heat this coming winter.

(No, we don't have a gas oven that we can stick our heads into.)

[woo me with science]

48. K&R

This entire thread angers and depresses.

What have we come to, when Democrats are pushing this evil.