Do you hear a noise like power saws cutting away at your Social Security benefits? That's the sound of the politicians working on the "Chain Gang."
They're promoting the "chained CPI," Washington's latest gimmick for tricking voters and cutting their hard-earned benefits to protect the wealthy. That may sound like inflammatory rhetoric, but the numbers don't allow for any other conclusion. People retiring today could lose more than $18,000 in benefits over their lifetimes - and people who are already retired will feel the pain too.
What's wrong with this idea?
1) It's an underhanded way to cut Social Security benefits (its true intent).
2) It's unnecessary.
3) It's unfair to women, the poor, minorities, and the very elderly.
4) It reflects a un-American political culture of pessimism and lost faith in the future.
Any politician who signs onto a "chained CPI" approach to Social Security will feel the wrath of the voters - and deserves to.
No math required.
Although they're using hocus-pocus to make the idea sound complicated, it isn't. The government calculates the cost of living in order to do things like determine next year's Social Security benefits. The "chained CPI" approach would alter that calculation by including changes in the way people spend their money when prices go up.
As a government agency explains, "Pork and beef are two separate CPI item categories. If the price of pork increases while the price of beef does not, consumers might shift away from pork to beef." So if people can no longer afford pork, they're spending less. Under a chained-CPI approach cost of living adjustments (COLAs) would then go down.
See where this is going? If not, stick around.
The "chain gang" insists that this wouldn't be a benefit cut, just a more accurate calculation. That's an attractive argument with only one flaw: It's wrong. The "chained" approach would understate the cost of living for the elderly and disabled people who rely on Social Security.
In plain English, it would gyp them.
In fact, even the current system for calculate COLAs gyps them. Retired and disabled people pay twice as much for healthcare as the average person. Healthcare costs have been rising three times as quickly as overall inflation, so their living costs are already understated. Transportation costs are a much bigger piece of their budget, too, which changes the numbers.
What's worse, two of the areas targeted for additional government spending cuts are ... healthcare and transportation!
The chained CPI would kick this gypping process into overdrive by reducing the increases in their benefits. And while younger Americans might make cuts in their travel and health budgets, that's usually not an option for the elderly or the disabled, so the calculations will be even more inaccurate under this system.
The math is what makes the chained-CPI approach a benefit cut.. But the chain gang knows that a lot people are intimidated by math, so they hope voters -- and a lot of lawmakers and journalists -- won't understand what's being done to them.
That's what makes it underhanded.
It bears repeating, since so many politicians want you to forget it: Social Security doesn't contribute to the deficit. It can't, by law. It's completely self-funded through the payroll tax (which is what makes the choice of the payroll tax for a tax 'holiday' so insidious).
What's more, the dollars involved are trivial when it comes to the budget debate. Politicians say they're looking for $4 trillion in cuts over ten years. Even if benefits did contribute to the deficit the chained CPI would only save $122 billion, a mere 2.8% of the target.
That's peanuts for them. But it's not peanuts for the average woman on Social Security. She only receives $890 per month. By the time she turns 80 this program will be taking $45 dollars out of each month's check - nearly $500 a year. Why would Democrats (or Republicans, for that matter) agree to use her spending money to balance the budget? They'd help an old lady across the street -- then pick her pocket. Why?
Because that's how you show you're fiscally "serious" in today's bizarre Beltway culture. This warped "bipartisan" value system was spawned in large part with money spread around town by people like billionaire Pete Peterson. They see cuts in Social Security and other spending as a way to shrink government and keep taxes low for folks like ... well, like billionaire Pete Peterson.
Remember the expression about "robbing Peter to pay Paul"? Cutting Social Security is a way of "robbing Pa to pay Peterson."
The effects of the chained CPI are cumulative, so the longer you live the worse it gets. By the time you're eighty your benefits will have been cut by nearly 5% per year. Some chained-CPI supporters propose a "birthday bump" - small benefit increases after you've been retired for twenty years - but they wouldn't offset the cuts you will have endured before then, and they'll only benefit people who live long enough to "enjoy" them. (Minorities and lower-income people have shorter life expectancies, too, so the "bump" would unfairly benefit wealthier and whiter beneficiaries.)
The chained CPI would be unfair to women, who receive less in benefits on average than men and can least afford the cuts. They live longer than men, too, so they're more likely to see their benefits dwindle with every year that passes. (And remember, the "bump" won't offset those cuts.)
It would also be unfair to the middle class, which has has seen its retirement savings (much of which was invested in their houses) disappear because of Wall Street's shenanigans. And ir would be unfair to lower-income working people who are the least likely to have retirement savings or pension plans.
Remember the paragraph about how the chained-CPI figure goes down if people can't afford pork? That's not a sound way to calculate the overall cost of living. If I can't afford cable TV and stop watching it, Time Warner's prices don't go down. But under this plan, my misfortune also becomes my little contribution to next year's benefit cut.
How would this work for Social Security? Let's see: If old people stop buying pork their "chained CPI" benefit will go down. If that forces them to live on catfood, their benefit goes down again. And if that forces them to switch to the local supermarket's cheap generic brand instead of the tastier cat foods (Fancy Feast's "Grilled" line was my late cat's favorite), benefits would go down even more.
It's a death spiral. Soon we'll be calculating the cost of survival, not the cost of living. It's a process that leads nowhere but down, until even survival is factored out of the equation.
Besides, what would it mean if we adopted the chained-CPI mentality? What are we saying about ourselves if we calculate our cost of living by subtracting out all the things we can no longer afford? The chained CPI is institutionalized pessimism. It's a way to prefabricate our own shrinking future, to accelerate an ever-diminishing way of life while hiding the truth from ourselves.
That's why it's un-American. We've always been a nation of optimists who believe in growth. The chained CPI reflects a new and diminished political culture - one that believes in a future of dwindling resources, increasing deprivation, and inability to meet our own promises.
Voters in both parties and across all demographic lines oppose Social Security cuts. They'll see this for what it is - a sucker punch to the middle class and the most vulnerable among us. If our leaders sign onto it they'll be making a tragic mistake that we - and they - will come to regret.
For more on the chained CPI's impact on women, see this report from the National Women's Law Center.
For more about its impact on disabled and elderly recipients, see the National Association for Social Insurance.
For more on the different rates of cost inflation for the elderly vs. the general population, see this Congressional Budget Office report.
For a thoughtful criticism of the chained-CPI approach from a conservative who served in the Social Security Administration under President Bush and supported Social Security privatization, see this piece by Andrew Biggs on the website of the American Enterprise Institute.