Ryan and the Chained CPI

April 1st, 2014 at 9:09 pm

My Politico oped on the new Ryan budget is up and my wife just read it, liked it, but said, reasonably, that she didn’t get this part:

Ryan also dings President Barack Obama for abandoning the “one significant reform he’s embraced,” changing the way Social Security payments rise with inflation, but he once again offers neither that nor any other policy change to Social Security, instead proposing a process for somebody else to figure out what to do about long-term solvency of the program.

So, as she does a lot for me, the least I can do is explain this as it’s really quite irksome.

For numerous years, President Obama’s budgets included a policy that applied the chained-CPI to the increase in Social Security benefits.   Since this inflation measure grows more slowly than the one currently used, its use represents a reduction in benefits relative to current policy.

This change was and is anathema to many supporters of the program but the President included it in his budget as a symbol of good faith negotiations with Republicans who were constantly at him to do something “serious” on entitlements.

As it turned out, these R’s never showed any interest in actual negotiations.  Rep. Ryan never included the chained-CPI or any other Social Security reforms in any of his budgets.  And yet, when the President decided he’d had enough of this nonsense and left the chained-CPI offer out of his most recent budget, Ryan dinged him for it.  And still, he–Ryan–leaves it out of his own budget.

What I personally think of all the chained-CPI stuff is a different, though related, matter.  I do think chained indexes are more accurate, but if I were going to make the change, I’d be sure to do it with a chained index of prices faced by the elderly, which probably would grow more quickly than the overall chained-CPI.

But that’s not the point.

OK, that wonkish, weedish paragraph has been unpacked.  Next question?

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11 comments in reply to "Ryan and the Chained CPI"

  1. Perplexed says:

    -“Instead, we get a deeply misleading set of promises that we can have it all and more if we follow his path. It’s a dystopian vision disguised as a utopian one, and no one should fall for it.”

    This is the fallacy of Anarchism (or Libertarianism or whatever you choose to re-brand it as). It is being peddled as something new since Ayne Rand but existed long before she was even born; our choice to ignore this history and deny its importance enables these ideologies to be re-cycled as something new. Even more amazing is the degree to which these ideas, which used to be relegated to “back room discussions” among the unaffected classes, are now discussed out in the open without a hint of embarrassment or shame. With our news media now relegated to entertainment shows there is little fear of exposure.

    Why are we not instead on the counteroffensive and asking Ryan to defend why he would support anything other than optimal tax policy and not backing down until he provides a mathematically and empirically sound answer? (http://elsa.berkeley.edu/~saez/diamond-saezJEP11opttax.pdf) Why not ask him to defend why he supports the ideas of Bakunin and the anarchists over those of democracy? (http://dwardmac.pitzer.edu/Anarchist_Archives/bakunin/stateless.html) Have the media entertainment companies completely castrated the journalists that might expose the ideologies driving these proposed budgets? Its hard to believe that we’re really rehashing these anarchist ideologies now for so many years without even realizing the source and complete lack of empirical support support for them anywhere in written history. Bizarre.


    • Robert Buttons says:

      I would call the Libertarian position the LEAST Utopian, They basically say you CAN’T have it all, but the market is the most efficient vehicle for the distribution of goods. The whole premise of the “fatal conceit” is we DON’T KNOW how best to organize an economy.

      “mathematically and empirically sound answer”. Does that exist in economics? I would like to see an example.


      • Perplexed says:

        -“They basically say you CAN’T have it all, but the market is the most efficient vehicle for the distribution of goods.”

        No, they basically say: “you have no right to govern me.” They rely on some “utopian” vision that the “market” or some other unknown, unspecified, unaccountable “force” will take care of everything. The “market” is just a surrogate for this utopian force. Read Bakunin and the other 19th & early 20th century philosophers of Anarchism, there’s really not much mystery about the ideological foundations these philosophies are built on. There’s also no mystery about the lack of any empirical evidence to support that such a utopia has ever, or might possibly come into existence by abolishing government. Its all pure fantasy.

        Even more important than “what they basically say,” is “what they basically do,” which is to undermine democracies (as well as any other form of government) and cripple democratic institutions by doing all they can to deny them the funding they need to operate effectively. Anarchism and democracy are a paradox, its truly one or the other, they cannot coexist as they are competing philosophies of how to organize society.

        -“mathematically and empirically sound answer”. Does that exist in economics?”

        Of course it does, and the bar is set very low. All you need is some empirical evidence to meet the minimum qualifications and for your numbers to add up. That’s what make the complete absence of it so striking.


  2. tyler says:

    Do you think the poor should be exempt from payroll taxes?


  3. Tammy says:

    Thanks for clearing up that question. I was wondering if the reason why our President nor Paul Ryan address inflation in ratio to SS is because of what you hit on yesterday? You stated, –Starting around the 1990s, inflation fell and has stayed pretty low and well-anchored (meaning less responsive to temporary shocks)”. Wouldn’t this be due to shadow banking or crony capitalism (bubbles)?


  4. urban legend says:

    We cannot under any circumstances give the slightest consideration to a chained-CPI of any kind, whether specialized for the elderly or otherwise, until BLS changes what it publishes as the primary, black-letter “CPI” to a “chained” version. Any change that treats Social Security or any other government-based source of middle class income differently from other uses of CPI would be political suicide. It is really troublesome that some Democrats, most of whom seem to breathe in the DC atmosphere, don’t see this. Until they recognize that Democrats in most of the rest of the country are not Beltway centrists and never will be, the Democratic Party will always be subject to debacles like 2010. It is the base Democrats that do the hard work necessary for getting out the vote, the single greatest necessity for Democratic success. DC “centrists” including its left wing opine a lot, but they don’t do windows. It’s been disconcerting that the Obama team, with Rahm Emanuel’s serial insults of the Democratic base who put him in office in the first place as Exhibit A, has seemed incapable of comprehending that.


    • urban legend says:

      P.S. How about a 1000-word or so essay on what supposedly makes a “chained” version more accurate? The customary simplification — e.g., saying that if beef becomes more expensive seniors will shift to chicken — says exactly the opposite: it represents a decline in standard of living. Part of that essay also needs to explain why, if the chained version is more accurate, BLS has not changed to it as its primary published figure.


      • Jared Bernstein says:

        That beef/chicken eg is confusing because you’re right, it represents shift to a less desirable choice. But it could just as easily go the other way–the price of beef falls relative to chicken and so folks substitute beef for chicken, a preferred choice.


        • Procopius says:

          So what do you do when the price of cat food rises and you’ve already given up beef, pork, and chicken?


  5. coberly says:

    Whether it is more accurate or not (it’s not), it is a dishonest attempt to cut Social Security below survival level. And just whose money is it supposed to save? Social Security is not paid for by “the taxpayer,” it is paid for by the workers who will get the benefits. So you would be “saving” those workers… about 30 cents per week per year… at the cost of cutting their benefits an eventual thousand dollars per year when that’s all they have to live on.

    Go ask you financial planner how much sense this makes.


  6. Tom in MN says:

    I like this part: “with a bottom line that basically says America isn’t up to meeting the challenges it faces.”

    The same people that claim we are better than any other country (which causes various problems abroad) also claim we can’t afford things that other countries manage to do.

    The US is an incredibly rich country and we can easily afford to wipe out hunger and provide medical care for everyone in our country. They need to admit they don’t want to do it. But as you say, he won’t even admit that his budget is an austerity plan.


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