By Nancy J. Altman, a writing fellow for Economy for All, a project of the Independent Media Institute, has a 40-year background in the areas of Social Security and private pensions. She is president of Social Security Works and chair of the Strengthen Social Security coalition. Her latest book is The Truth About Social Security. She is also the author of The Battle for Social Security and co-author of Social Security Works! Produced by Economy for All, a project of the Independent Media Institute.
Donald Trump’s recent budget proposal included billions of dollars in Social Security cuts. The proposed cuts were a huge betrayal of his campaign promise to protect our Social Security system. Fortunately for Social Security’s current and future beneficiaries, he has little chance of getting these cuts past the House of Representatives, which is controlled by Democrats.
So Trump and his budget director/chief of staff Mick Mulvaney, who has long been hostile to Social Security, are trying another tactic to cut our earned benefits. They are pursuing a long game to reach their goal. In a divide-and-conquer move, the focus is not Social Security. At least, not yet.
Last week, the Trump administration revealed that it is planning to employ the so-called chained Consumer Price Index (CPI) in a way that does not need congressional approval. “Chained CPI” might sound technical and boring, but anyone who has closely followed the Social Security debate knows better. It has long been proposed as a deceptive, hard-to-understand way to cut our earned Social Security benefits.
Trump plans to switch to the chained CPI to index the federal definition of poverty. If he succeeds, the impact will be that over time, fewer people will meet the government’s definition of poverty — even though in reality, they will not be any less poor. The definition is crucial to qualify for a variety of federal benefits, including Medicaid, as well as food and housing assistance. The announcement was written blandly about considering a variety of different measures, but anyone who knows the issue well can easily read the writing on the wall.
So, what does this have to do with Social Security? Like the poverty level, Social Security’s modest benefits are automatically adjusted to keep pace with inflation. If not adjusted, those benefits will erode, slowly but inexorably losing their purchasing power over time. These annual adjustments are already too low, but they are better than no adjustment at all. The chained CPI would make these adjustments even less adequate. The top line of the following chart shows what a more accurate adjustment would look like. The line below it shows what the current adjustment does to benefits, and the bottom line shows what the stingier chained CPI would do:
Proponents of the chained CPI say that it is better at measuring “substitution,” but don’t be fooled. The current inadequate measure already takes into account substitution of similar items. This is the idea that if the price of beef goes up, you can substitute chicken. In contrast, the chained CPI involves what are called substitutions across categories. If your planned vacation abroad goes up, you can stay home and buy a flat screen television and concert tickets instead.
Of course, neither form of substitution is much help to seniors and people with disabilities whose health care costs are skyrocketing. There’s no substitution for hospital stays and doctor visits. Those who propose the chained CPI are apparently fine with letting seniors who can’t afford even chicken substitute cat food.
The idea of substitution within or across categories makes no sense for people with no discretionary income. If all of your money goes for medicine, food and rent, how does substitution make sense? If you are so poor that your children go to bed hungry, how do you substitute?
Back in 2012, President Barack Obama proposed a so-called Grand Bargain to cut Social Security using the chained CPI, in return for Republicans agreeing to increase taxes on the wealthy. The goal of this Grand Bargain was ostensibly to reduce the deficit, despite the fact that Social Security does not add a single penny to the deficit.
Grassroots activists around the country fought back, and Obama ultimately realized his error. He removed the chained CPI from his budget proposals and endorsed expanding, rather than cutting, Social Security’s modest benefits. Social Security expansion is now the official positiono f the Democratic Party.
Yet Republicans have still continued to push Social Security cuts, including the chained CPI. Back in December 2017, they passed a massive tax cut for corporations and the super-wealthy. Afterwards, they used the predictable deficits their tax cuts caused as an excuse to call for cutting Social Security. Senate Majority Leader Mitch McConnell and other Republicans made well-publicized statements about the so-called “need” to cut Social Security. What was much more secret was a provision in the tax bill which replaced the measure used to index the tax brackets with the chained CPI.
Now, Trump wants to apply the chained CPI to the calculation of poverty rates. This will directly hurt many seniors and people with disabilities by making it more difficult to qualify for Medicaid and other programs many of them rely on, including food and housing assistance. It is also a long-term threat to Social Security itself.
The strategy is clear: Trump and his Republican supporters in Congress plan to apply chained CPI everywhere else, and then say that it is only common sense and indeed fair that we apply it to Social Security as well. We should be consistent, right?
Trump thinks that he can get away with executing this long-game attack on Social Security quietly, while the media and public are focused on his tweets, name calling, and scandals. But we must not be distracted. If we do not stop this attack in its tracks, our earned benefits will be next.
If you want to forestall another fight over cutting Social Security through the chained CPI, call your members of Congress, write to your local paper, and tell your friends: No chained CPI! No chained CPI for our earned benefits! No chained CPI for the most vulnerable among us!
This quiet effort to embed the chained CPI is a fight Trump does not want to have, certainly in an election year. But it is one we will bring to him. Grassroots activism defeated the chained CPI before. This time it will be harder because Trump can substitute the chained CPI without legislation. That means we have to simply fight harder. If we stick together, we surely will win. And we must. All of our economic security depends on it.
This is low hanging fruit for the Democrats. You’d think they’d be all over it. But noooo!
Some of the Dems are holding out for the Grand Bargain instead. Future prez Biden will sign.
The real assault on SS may be Trump’s trade war if it brings back inflation. If that happens COLA changes will be much more meaningful. If I have my history right the COLA itself came about in the 1970s when inflation was raging.
Indeed. Reading this –
– I thought the author was much more sanguine than I would be.
That’s because they are, as I saw someone quote on NC yesterday, two wings of the same Vulture. Obama was willing to make the “Grand Compromise” if you recall.
I can’t seem to get through to my Dem friends that the problem is not the Republicans and Trump, they are a known quantity, it’s the Dems who dissemble and confuse us into believing they represent the “folks” and blokes out here.
Still 40% of the voters vote for Reps and they aren’t all super rich people whose interest it might be in, so it seems there are about as many people getting fooled there too. But I do understand they might not even be worth debating with.
It is my limited understanding that the “poverty level” is defined by food costs ONLY. So it has never been a particularly good measure.of the cost of living.
Poverty calculations do not consider capital gains, so it is entirely possible that some hedge fund managers in Connecticut qualify as impoverished.
*does a little research* I was only kind of right. the original “poverty line” was developed by multiplying the cost of the “economy food plan” for a family in 1963 and then multiplying by three. Since then it has been adjusted using CPI-U.
Once again, no real coverage in mainstream media about the issues that matter like this one. Without trying, one can find a host of issues directly affecting the lives of citizens and our nation get only sporadic coverage on the fringes. It’s more profitable for them to cover Trump and Russia, Trump and discredited collusion narrative, Trump and his insane tweets, Trump and The two-party duopoly, Trump the problem to our all our ills, literally everything Trump, Trump, Trump. All while each in the the two-party duopoly plays its respective role of distraction so that the Washington Consensus and corporate control of our government go unnoticed. The old acronym still applies: SNAFU. What polls I’d like to see are one that measure if more Americans are “woke” compared to 2016. It’s hard to gauge.
The same people who own the media, own the Republicans and own the Democrats are the one’s who want to own Social Security. Unless Senator Sanders is elected President, there will be more cuts and/or elimination of social insurance programs. We have a genocidal elite and they want it all.
Unemployment is genocide, lack of affordable housing is genocide, mass incarceration is genocide, lack of affordable medical care is genocide, international sanctions are genocide! Because the market, go die, genocide.
Joe Biden and his ilk are monsters. It is time to name these crimes for what they are, and to admit what these political operatives are, monsters. “See no evilism” is a plague on this country. These are crimes against humanity. The establishment Democrats are pushing the author of mass incarceration, Joe Biden for President. That is all you need to know about the Democratic Establishment and what they have in store for the rest of us. For the Republicans that goes without saying.
Hear, hear. Repeat this additional message:
Student debtors, now 45 million, 22% of whom are in default, that number expected to rise to 40% by 2023.
Joe Biden Backed Bills to Make It Harder [read Impossible] for Americans to Reduce their Student Debt, no matter what.
Harness the power of those 45 million X % students faced with carrying debt to their grave, Plus all those about to retire, and retired seniors and about to retire and retired military, and you bury Biden and resurrect Bernie’s chances.
Another way to get that message out?
Only around 1666 days, 23 hours, 14 minutes and 11 seconds to my first SS entitlement, for which $XXX,XXX.xx was deposited during my working years, taken out of my earnings.
My first check should arrive in about 90 days. Hopefully, I’ll be able to get a few more before it disappears. I completely understand though that the funds will be needed to fight the enemies of this great country. I stand ready to make this sacrfice for the greater good. I have some good cardboard at the ready to provide for my future accomodations. Hopefully one or two of the dogs will stick around to keep me warm.
Well said. This is indeed the battle to fight. Going forward, all policy will be done by stealth (including by algorithm) while being sold to the masses as something good for them. You know the old saying: you can fool all of the people some of the time, and some of the people all of the time…
Those who see what’s going on need to gird themselves intellectually and morally to bring all of this BS out into the open, so that everyone can understand what’s really going on.
Hear, hear! for Naked Capitalism. Who among us has the willingness and ability to get the essence of these messages to the wider public, so we’re not just preaching to our choir?
Trump plans to switch to the chained CPI to index the federal definition of poverty. If he succeeds, the impact will be that over time, fewer people will meet the government’s definition of poverty — even though in reality, they will not be any less poor. The definition is crucial to qualify for a variety of federal benefits, including Medicaid, as well as food and housing assistance.
As well as military disability and military retirement benefits. Support the troops? Not so much… Tell me again how much Trump and the GOP (or any politician supporting chained CPI) support the troops. Send troops to foreign wars then cut their benefits…
Yeah, military veterans won’t let this fly, either. They are very aware of any proposals to modify their benefits, and they’re not afraid to fight them, either.
In retrospect, I guess Obama’s chained CPI gambit was a Sneak Attack on the other programs that use CPI, though I don’t recall the protest being framed that way.
I do recall learning that CPI-E would be a better measure for SS as reflecting the kinds of purchases that older people make, but just stopping things from getting worse was the bare minimum in the Obama world. We need to be cautious about going that route again, certainly including not imagining a “Dem House” would protect even the SS part of it.
Divide-and-conquer can be a subtle tool.
It seems that there is almost a moral punishment mentality among many in the US and world. Hurt the other. Be vocal and overt in that (repugs).
Or, be neutrally dispassionate, license and consent toward abuse (neocon dims).
Where the heck are the compassionate progressive voices that advocate for social justice, sustainable life, and less militarism and violence to ourselves, other species, and our fragile planet? We really need a new paradigm and direction.
Lemmings— To the Brink!
Besides Sanders, AOC, but we certainly need more of them.
Trump may be lucky to escape the bloodbath,but the next potus will not.
The authors of this piece do the lemmings no favors with the constant sleight of hand in this screed.
Medicaid will explode this system on the current path during the next term.
Well make your case because noone knows what you are talking about. And do you mean Medicaid or Medicare? MediCARE is about the only thing that keeps the healthcare system afloat financially, period. So if that is what you are trying to argue, it would be inaccurate.
If you mean Medicaid as you said, well how, long term care costs, or just Medicaid expansion? I don’t think Medicaid is a large part of the healthcare system anyway so it’s hard to see it as collapsing anything, but reimbursement is low, and sure long term costs are costly and I could see them in theory becoming a problem.
TIL that substituting chained CPI for CPI has already occurred for the indexing of tax brackets in the 2017 tax [cuts for rich people and corporations] bill.
Also, COLA, referenced above, is calculated using CPI-W, so perhaps another sneak attack is in the works.
So-called “chained inflation” measure is a very suspect measure. It states that if a price of one thing in the basket of goods goes up in price, then, consumers will switch to a substitute whose priced did not go up — canceling out the inflationary effect.
Of course, the reason the substitute is cheaper is that it probably is of lower value in the first place. Now comes the cascading effect: you get less money from COLA adjustments, you switch to more, cheaper substitutes — the process starts all over again.
then, consumers will switch to a substitute whose priced did not go up — canceling out the inflationary effect
Hamburger cost too much? Switch to cat food. ( yes, low income people have done that) That’s why Obama’s Simpson-Bowles commission was called The Cat Food Commission.
May I suggest the catch of the day, a shrimp s’can’pi?
Useful counter-argument to the “Social Security is a big Pyramid Scheme” schtick:
If Social Security is a Pyramid Scheme then so are the Fire Fighters, Policemen, and Politicians as people beneft disproportianetly from these organizations, and in especially in the case of Politicians, the primary beneficiaries are the people at “the top”. In short, Government would be a Pyramid Scheme then. So, are you some sort of anarchist then?
Insurance is probably the best pyramid scheme but Firefighters/Policemen are (or were) government sanctioned forms of insurance outside of pure monetary compensation typical to what we colloquially call insurance.
Once again the elephant in the room is revenue. Taxes. The cap on income subject to Social Security taxes should be raised substantially or capped. If the percentage of total income dollars subject to the SS tax was today what it was in 1986 there barely be a problem to discuss.
The roll back to pre-New Deal unbridled capitalism is the goal.
Once again, solutions that have the support of well over 80% of our population, raising the cap, are not permitted to be voted on in Congress. The rich have dictated that.
Why raise anyone’s taxes going into an election season.the federal govt. ought to attempt funding s.s. and medicare/medicaid using modern money theory concepts of direct monetary financing from the fed. Reserve.raising the cap would sell with the electorate i believe but not higher paycheck deductions.
Yes but magically revenue is never an issue when it comes to spending over a trillion a year on grotesquely evil foreign wars.
Revenue is not the issue. It’s just the excuse.
Good grief — the macroeconomically illiterate in the service of the socially pernicious.
Bu bu but by all means CALL • YOUR • FERENGI (CONgress) !!
Operatives are standing by …… laughing !
So Obama “realized his error” about the Grand Compromise he proposed with John Boehner. Not true. Obama really wanted to cut Social Security but only the more radical ‘Freedom Caucus’ Republicans killed it. The author of this article is giving Obama more credit than he deserves. Obama is a charlatan not that Trump is any better.
Agreed. Trump merely does in public what Pres. Sly, Slick and Wicked was smart enough to do in private.
Now that’s odd – why am I seeing ads for women’s fashion?
Aha moment: it’s because Jerri-Lynn’s name is on this article, and she writes about fashion. Not in quite the way they hoped for, but fashion. We see that a lot here – ironic connections with the topic.
And come to think (free associating here): Jerri-Lynn, you’re writing a book about Indian fabrics, right? If you ever get to Chicago, check in with the Field Museum of Natural History (which includes anthropology). When I was a summer intern there, lo these many years ago, they had some princess’s fabulous collection of saris. They might still have it. Maybe not on-topic for the book, but definitely worth seeing if you can get them to drag those out. A perk of interning was getting to see, and fondle, some of the back collections.
Bill Clinton started this charade with Republican help. He incorporated substitution and hedonic pricing in the CPI back in the 1990’s.
Here is a Barry Ritholtz article from 2007.
Substitutions and Hedonics: Inflation Data Absurdities
So much for the establishment Dems being on the people’s side.
Just another example of race to the bottom. Yes, the CPI calculation is rigged.
Oregoncharles: thanks for the tip about the Field Museum of Natural History. I’ll certainly try and check in there the next time I’m in Chicago and see if I can see those saris.
they also have a Patsy Cline collection:
“I’m sari, so sari!
Fortunately he cannot change the SS cola calculations that has to come from Congress. The elite are working hard to get their heads chopped off, that will be the end result of this if this corrupt system still continues on. My reps have been bombarded with letters from me for 5 years now that say I will work to unseat them if they were to cut anything in SS.
Speaking of death by a thousand budget cuts, by coincidence, I tried to call the Social Security Office today.
Their business hours were 9-12 on Wednesday. 3 hours?!?
They are taking care of more customers than Amazon, but they don’t have any phone reps available after hours. Talk about crapification of government services.
Why did I call? They denied my medicare enrollment based on ‘too much income.’
They counted my social security income $16000
and then an additional $16000 ‘other income’. Total $32,000. Ergo too much income.
But I have no “other income”. They appear to have counted my social security twice. This would be funny if it wasn’t victimizing people (me.)
I hope the government does a better job of auditing when they finally get around to investigating the obstructionist orangutan.
ALL the discussion of Social Security and Medicare benefits is based on one, outrageous assumption: The federal government cannot afford to pay for increased benefits, but the public can.
One only can pray that the bribed politicians, the bribed media writers, and the bribed economists one day will be forced to reveal the two fundamental truths of U.S. federal finances:
1. Even if the federal government collected $0 in taxes, it never can run short of dollars, and can afford anything.
2. Being Monetarily Sovereign, the federal government not only has the unlimited ability to created dollars, but also has the unlimited ability to control the value of those dollars.
Those who do not understand Monetary Sovereignty do not understand economics, and should shut the hell up until they do.
You’re suggesting the fed govt budgeting for endless wars uses a different accounting formula that govt budgeting for SS and domestic needs? Fie! How dare you! /s