DeFazio Deflates The Bad Economics Of The Chained CPI

Yesterday, U.S. Representative Pete DeFazio corrected a significant error in assertions by Republicans and the Obama White House that underlie the efforts to cut Social Security benefits through what’s called the Chained CPI. Right wing economists have asserted that senior citizens are being given too much in Social Security payments, because their cost-of-living isn’t increasing as much as the standard measure of inflation would suggest.

In a speech on the House floor, Congressman DeFazio pointed out that, actually, the opposite is true. He noted, “The consumer price index, as measured, significantly understates inflation that impacts seniors because seniors have a different buying pattern than 20-year-olds. They’re not out buying the latest iPhone. They’re buying a lot of medical care, going up much faster than measured inflation, pharmaceuticals going up at phenomenal, obscene rates. Housing, energy, and all those things make up a bigger percentage of their budget in retirement.

For years, I have proposed legislation to accurately measure the cost of living for seniors, which actually would increase their annual cost-of-living adjustments. But now come the White House and the Republicans to say we’re overstating inflation. Let’s just use chained CPI, it doesn’t matter, it’s all about substitution. If they can’t afford beef, they’ll do chicken; if they can’t do chicken, they’ll do pasta; if they can’t do pasta, they’ll buy dog food; if they can’t afford that, they’ll starve. That’s kind of the bottom line of these pointy-headed economists out there on how these sort of weird theories work…

There’s kind of a mixed message here. Republicans want to cut entitlements. They never supported Social Security and Medicare, but they just want to cut them to make sure they’re there in the future. Well, if you chain the CPI, Social Security, which is supposed to have adequate benefits to pay full guaranteed benefits until 2033, would pick up 2 years. So we cut benefits for 100 percent of seniors retiring now and in the future, and Social Security would last 2 years longer. That doesn’t exactly save Social Security, does it?…

If they wanted to save Social Security, if that’s what the White House is up to, if that’s what the Republicans are up to, it’s a much better way to do it without penalizing seniors. But that’s not really what it’s about. It’s to take a program, Social Security, which is self-funding, doesn’t draw on the general fund, doesn’t create any deficit, it’s to take money from Social Security and use it elsewhere to plug holes in our budget. That’s not right.”

bad economics

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