A Non-Hysterical Progressive Analysis of so called Social Security Cuts on the Table

Thu Jul 07, 2011 at 06:28 AM PDT
A Non-Hysterical Progressive Analysis of so called Social Security Cuts on the Table
by HamdenRiceFollow

I like to read and write about economics and finance but hesitate to do so because (1) it's hard to explain anything without explaining everything, and the draft diaries just get too long until I have to abandon them, (2) a lot of DKers have a lot invested in certain views about economics and finance that are not really open to empirical (ie factual) analysis, but instead are based on political commitments and emotion, and (3) despite how crazy the Republican Party is, once in a while Democrats, Republicans, technocrats and policy wonks actually agree on something, and even if the most credible progressive policy wonk institute says a particular assertion is true, if a Republican also says it's true, and someone on DK finds a link to said Republican saying such rare sane assertion, it becomes automatically discredited.

But today's hysteria over the "cuts" to Social Security on the proverbial political table and the even wilder assertion that the Obama administration is committing political suicide by discussing them, let along enacting them, has persuaded me to provide a dollars and sense (as well as economic theory) explanation of what's going on.

If you don't like economics, public finance or numbers, then let me not bury the lede and explain exactly what's on the table. If enacted, the average social security recipient would get 14 cents less of an increase per month, but only in a month in which the social security benefit actually went up by about $34. So the assertion being made in several diaries is that social security recipients will revolt because their average monthly benefit went up from $1,044 to $1,078.31 instead of $1,078.45. Of course someone would have to point out some highly technical macro economic measuring theory first, and then get them riled about about that monthly dime at a time when they are actually getting a net of more money. So yes, it does look like 11 dimension chess (offering the Republicans nothing of substance).

The so called "cuts" being discussed are not cuts in actual benefits, but cuts in how increases are to be measured based on the consumer price index...

READ THE ENTIRE ARTICLE: http://www.dailykos.com/story/2011/07/07/992060/-A-Non-Hysterical-Progressive-Analysis-of-so-called-Social-Security-Cuts-on-the-Table?via=siderec

CONgressional paychecks WILL BE the 1st CUTS if the DEADline is missed.

http://supratruth.newsvine.com/

Have you read the OP headlines? It looks like freeperville around here.

<snip>

The idea is to change the way Cost of Living Adjustments (COLAs) are calculated across the federal government. Currently, the COLAs for tax brackets, pensions, and Social Security are tied to different measures of the Consumer Price Index (CPI). Because spending habits change when living costs increase, some experts think these measures are too generous, and want to change all of the COLAs to a different, smaller measure of inflation: the so-called "chained-CPI."

On the tax side, this would likely draw more revenue: Tax brackets would rise more slowly than incomes, so people would get kicked into higher brackets more quickly and, voila, more income subject to taxation.

But on the benefits side, this means money out of people's pockets, even current retirees and pensioners. Responding to a letter of concern from House Democrats' top Social Security guy the program's chief actuary explained that moving to "chained-CPI" would constitute an immediate 0.3 percent benefit cut. That may sound small, but the effects would compound, and "dditional annual COLAs thereafter would accumulate to larger total reductions in expected scheduled benefit levels of about 3.7 percent, 6.5 percent, and 9.2 percent for retirees at ages 75, 85, and 95, respectively."

In a recent brief, the National Women's Law Center, which opposes reducing the Social Security COLA, turned similar numbers from an earlier SSA memo into a handy chart:



<snip>

Link: http://tpmdc.talkingpointsmemo.com/2011/07/chart-of-the-day-the-stealth-social-security-cut-in-debt-talks.php

:shrug:

The diarist also addresses this (twice!) with this quote:

Now I think we should have a policy debate about whether social security should be designed not just so that seniors maintain their standard of living but have a constant increase in that standard of living. But if you want to make that argument, then the chained CPI isn't really the place to make it. There have been some interesting statistical experiments with a proposed CPI-E -- that is a consumer price index calculated for what the elderly purchase, which would, for example, be weighted toward medical expenses and excessively colorful polyester shirts (just kidding about the last item).

I was referring to another part of the article.

In the "Updates", the author write:

"I agree with the issue of compounding, but again, keep in mind we are talking about compounding an error in estimating SSI's purchasing power. If you want purchasing power to increase in time, let's debate that, but let's not do it through a math error, but through a policy choice. After all, progressives are supposed to be fact based and empirical.

Read the whole thing. It makes alot of sense.

It's $4/month, in the first year, $8/month in the 2nd year, $12/month 3rd year, and so on. The error was HamdenRice's, when he thought "0.38 percentage points difference" meant 0.38% of the increase. He thought that if it would have mean a $34.45 increase would be $34.31 instead. But it's 0.38% of the total $1044 amount that's the difference - so instead of $1078.45, they'd get $1074.48.

So, no, it doesn't make a lot of sense. HamdenRice didn't understand the basics of the chained or unchained CPI figures.

AFTER the cuts.

HCR bill surprises kinda like.

Nothing to see....move along.

from denying the policy will happen to arguing that it's not so bad.

More downthread, too.

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Too much math for talking heads and pundits, though.

Nice to see that he's still dealing in fantasy economics when trying to defend any of Obama's actions. Sad to see that he is still divorced from reality.

and yet some here on DU seem to have taken your use of that phrase quite personally.

:rofl:

Facepalm = 0 recs.

The use of the wording "non-hysterical", other view points as "invested" and not open to empirical evidence, and the claim those that disagree do not understand economics reminds me of "professional left", another condescending adjective.

"A Non-Hysterical Conservative Faux-Democrat Analysis blah blah blah?"

PS--it's not 11-dimensional chess. It's tiddlywinks.

:scared: :scared:

Sid

for trolling it nonstop, along with his tag team partner, who was named NorthernSpy. Two peas in a pod, both banned, finally.

I'd like to see the details on DU and discussed rationally. SS is being treated as a sacred cow where even an attempt to cut waste is deemed horrible.

It is talking about reductions in future benefits and trying to justify them. It is talking about chained CPI.

How, exactly, do you want to "talk rationally" about chained CPI?

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=439&topic_id=1439901&mesg_id=1450613

or, 2 days ago, when it first turned up here: http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=433&topic_id=703173&mesg_id=703427

While it seems unclear to me if the change in index is being considered, the analyses of what it would mean to people (not HamdenRice's analysis - the ones that got the math right) are correct. And this isn't 'cutting waste' - it's saying that the effect of inflation on retired people should be in line with spending where people substitute new, cheaper versions of goods for old ones. But that is mainly in high-tech areas, which are not what most retired people on modest SS incomes spend their money on. There's a very good case that you should stick with the old method of calculating inflation for retirees, to be fair to them.

And have found out something about it.

But until I can take the time to understand all of that, I'm not jumping on the bandwagon that it's wrong. that's what gets encouraged around here.

Thanks for sharing.

I'm not going to make it a sacred cow and jump on the bandwagon.

Your post is just in bad faith. You knew what I was saying and pretended otherwise.

:hi:

p.s. a decrease in the real value of future benefits - which is why these cuts are projected to reduce ss expenditures and thus help subsidize tax cuts for billionaires - IS A MOTHER-FUCKING CUT IN BENEFITS.

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