I would like to call cutting Social Security by adopting the chained CPI the worst idea seriously being considered in Washington, but that title already belongs to raising the Medicare eligibility age. Chained CPI is at least a strong contender for second place.
First, cutting Social Security at this time is incredibly misguided because the private retirement system is clearly failing. Traditional company pensions are quickly becoming a thing of the past. Private retirement savings, like 401(k), have also failed to live up to their promise especially during the great recession. If anything, Social Security benefits should be increased to make up for the failure of the private retirement systems.
Second, adopting a slower inflation index for senior citizens is completely unjustifiable. It is simply not a more accurate measure of inflation for this age group. Much of their spending is on health care and that has grown faster than other sectors. The Bureau of Labor Statistics actual has a separate consumer price index for the elderly based on their purchasing habits. It found inflation for the elder is actually slightly higher than the official measurement the government is currently using. Adopting a slower cost of living adjustment would make this problem even worse.
Finally, if you insist on cutting Social Security benefits, the chained-CPI is one of the worst possible ways to do it. The slow measure of inflation is a series of small cuts that builds with every passing year. That means the burden of cutting benefits this way falls primarily on the oldest individual. This is both idiotic and cruel. The oldest Americans are the one most likely to exhaust their private savings, most likely to need extra help, and are least able to perform a job to augment their income. Even getting the same level of savings with a simple across the board reduction in everyone’s base benefit would at least be better policy.
The sole reason chained-CPI has gotten so much traction, despite being one of the worst possible ways to cut Social Security, is purely about PR. Politicians think they can pull a fast one on the American people by claiming a cut is really just a “technical fix.” Since some politicians are scared of publicly supporting cuts to Social Security but also want to cut the program, they have lined up behind this terribly designed gimmick.
Photo by 401(k) 2013 released under Creative Commons License