The Washington Post lead editorial today claims that the chained CPI-U is a better measure of the inflation facing the elderly than the current estimate of consumer prices used for that purpose. The editors argue that using the chained CPI-U is therefore not just an effective way to get substantial budget savings from a major entitlement program, but also a fair way to do so.
If the current COLA is set too high because it is calculated using a measure that systematically overstates inflation, then we ought to change it. But in fact, it doesn’t. Contrary to the Post’s assertions, the chained CPI-U and the current unchained version probably understate inflation for the elderly and disabled because the mix of goods and services they purchase is much more heavily weighted toward medicine and health services, where inflation is very high, than it is for younger consumers. In addition, elderly and disabled beneficiaries spend a greater share of their incomes on necessities like rent and utilities, and are therefore less able to substitute cheaper goods and services in response to price increases.
It is possible that Alan Simpson and Erskine Bowles didn’t know this when they recommended saving billions of dollars a year by reducing the COLAs on Social Security checks. Alan Simpson wouldn’t care anyway, since in his view, anyone receiving Social Security is just a greedy geezer sucking at the teats of a great milk cow.
But the Washington Post does know better, or ought to. Just one week ago, EPI released a statement signed by 250 Ph.D. economists and more than 50 social insurance experts with doctorates in related fields opposing the use of the chained CPI-U to set Social Security COLAs because it does not reflect the actual spending patterns of beneficiaries.
The Post editorial ignores these experts and characterizes the opposition to the change as nothing more than the “seniors’ lobby” protecting its self-interest. AARP is absolutely right to oppose a cut that will cost a typical beneficiary $1,750 a year after 20 years of retirement. What the Post itself calls “the compounding beast” will devour low income seniors and their modest Social Security checks.
Calling the chained CPI-U “a more realistic measure of inflation” without identifying whose inflation is being measured is dishonest. It’s a phony rationale for making social insurance cuts that will hurt millions of seniors and disabled Americans, when the better and fairer solution to our budget problems is to tax the wealthy who have spent the last three decades escaping their fair share of the burden.