The details of the deal being worked out by President Obama and House Speaker John Boehner are in flux, but the bad news is that one element that seems to be all but decided is -- there's no other way to put it -- a benefit cut for Social Security.
The instrument of this egregious and totally unnecessary cut is the "chained" consumer price index, which will be replace the conventional CPI in adjusting Social Security benefits to inflation. The key point to note is that the chained CPI rises at a consistently slower level than its traditional cousin.
I described this maneuver a year and a half ago as a ripoff of needy seniors. Nothing has changed since then. The difference between the chained index and the traditional version is cumulative, so that by the time the average retiree reaches 85, the cut amounts to $1,000 a year; by 95, the shortfall is nearly $1,400. Now the dimensions of the the theft become clear.
Here are the three lies about the chained CPI that have facilitated the ripoff.
1. It's a more accurate way of measuring inflation than the CPI. This is untrue as it applied to the elderly, whose cost of living tends to rise faster than the traditional CPI. That's because more of their expenses are tied to healthcare, which has shown a higher rate of inflation that the traditional market basket of goods and services.
2. It accurately reflects people's tendency to buy cheaper versions of goods when the brand names rise in price. Untrue for everybody. The traditional CPI already includes this adjustment, which occurs when you shift from Kellogg's corn flakes to the Vons no-name label. The chained CPI reflects a more stringent substitution -- more like that when the price of gas goes up, you spend less onfood altogether. Seniors on fixed incomes can't easily make those substitutions.
3. We need to cut Social Security to cut the deficit. Biggest lie of all. Social Security does not contribute one penny to the federal budget deficit. It can't, by law, and it doesn't today -- it's running a surplus.
What's most dismaying about this deal is that it so well reflects the mendacity and ignorance of our political leaders and the people in Washington who write about social insurance programs. Every time I've seen someone claim in print that Social Security must be cut because it adds to the federal deficit, that assertion has been based on a demonstrable factual error. When that's pointed out, the pundit's response is typically; "Well, yes, so I see. But it still contributes to the deficit."
The bottom line is that the CPI change is utterly unnecessary as a budgetary or deficit-cutting device. It's employed here for two reasons -- President Obama seems to think it shows he'll give on something precious to his progressive supporters in order to make a deal; conservatives love it because it chips a little bit more of the life out of Social Security, which they hate. The talk is that arrangements will be made to protect the neediest and oldest, but that's a chilly defense of an action that isn't needed at all.
This is exactly the sort of giveaway to conservatives that Obama suggested he would steadfastly oppose: One that makes a minimal difference in the grand scheme of things, but a huge difference to the individuals affected. Nearly 40% of Social Security recipients rely on the program for 90% of their income; the ratio is higher for those 85 and older, who have outlived many of their other resources.
The estimate is that this will save about $17 billion a year; that's about four-tenths of one percent of the federal budget. But how much will $1,000 a year mean to an 85-year-old with no other resources than Social Security?