Bloomberg: Cut Social Security and Food Stamps to Help Economy

A while back, we were jumping up and down about the government’s attempts to implement the use of a “chained-CPI.” If implemented, it would lower the government’s measure of inflation and reduce cost to Social Security, Food Stamps and other payments that are regularly adjusted for inflation.

Sure, it’s a bit technical, but in other words, it would save the government about $300 billion over 10 years by taking money directly from America’s weakest and poorest groups. Some conservatives noted that the change would also shift tax brackets, effectively pushing people into a higher bracket and requiring they pay a higher tax. Furthermore, it would be regressive, falling much more heavily on the poor. 

The Associated Press agreed.  They wrote:

“By 2021, taxpayers making $10,000 to $20,000 would see a 14.5 percent increase in their income taxes with a Chained CPI, according to an analysis by the Joint Committee on Taxation. Taxpayers making more than $500,000 would get a tax increase of 0.3 percent, while those making more than $1 million would get a tax increase of 0.1 percent.”

The proposal finally died when AARP came out against it. Soon after, Nancy Pelosi held a press conference saying she wouldn’t support any cuts to Social Security.

We predicted it would be back and here it is. A Bloomberg op-ed written “by the editors” describes the chained-CPI as a “slam dunk, even in an election year.” Worse yet, they think taking money from the poorest elements of society would help the economy. They write:

“It has been widely recognized for almost two decades that the current measure, the consumer price index, contains several biases that cause it to overstate inflation anywhere from 0.3 percentage point to 0.8 percentage point, depending on which expert you talk to. The miscalculation has damaging consequences for the U.S. economy. The CPI is the benchmark that determines cost-of-living adjustments for a wide range of government programs, including Social Security and federal employee pensions. It also is used to peg income-tax brackets, exemptions, deductions and credits.”

They note that by fixing this “error” they can drive down adjustments to cost-of-living increases on some government programs, thereby lowering costs.  What exactly does the new measure do? The BLS defines it this way:

“If the price of pork increases while the price of beef does not, consumers might shift away from pork to beef. The C-CPI-U is designed to account for this type of consumer substitution between CPI item categories.”

You switched to cheaper food so your purchasing power is the same, right? Of course, we’re being sarcastic. As one anonymous commenter noted, “See? While the price of beef has increased, the price of cat food has remained stable. Tough luck Gramma. Meow Meow.”

If implemented, the chained-CPI will remove $300 billion from the poorest elements of the real economy. As we said before, we hear from Republicans that taxes hurt growth. We hear from Democrats that a strong working class is important for building the economy. Now we have a plan that simultaneously violates both principals and both parties are expressing support. What a surprise!

Bloomberg’s analysis that “the miscalculation has damaging consequences for the U.S. economy” is particularly offensive. It’s not as though Social Security and welfare recipients are fat cats getting wealthy off the system. If anything, inflation is under-represented in government statistics. For Bloomberg to argue that we can improve the economy by cutting Social Security and Food Stamp payments is barbarous!

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