The article in Slate titled CPI Unchained by Matthew Yglesias must be read and comprehended by every American that may possibly one day receive Social Security. While the politicians are claiming that the battle over the fiscal cliff will not involve Social Security, every American citizen will need to remain vigilant.
It is easy to manipulate a program as big as Social Security in forms that are not immediately evident. In his piece Mr. Yglesias details some shenanigans that both Republican and Democratic politicians seem to support. Specifically it involves indexing Social Security to inflation differently.
Mr. Yglesias explains it this way.
The way the index works is that the Bureau of Labor Statistics sends its minions out through the country to find out what things cost. They write this down, and the bureau notes the change over time. Then it weights the change in the price of different things according to how large a share they are in the typical consumer’s overall basket of purchases. An increase in the price of cars is a bigger deal than an increase in the price of violins because the average American spends much more on cars than on violins. The bureau also adds in some fancy math and a bit of hand-waving to try to account for changes in the quality of goods and the arrival of whole new products. The idea is to track the prices of a constant basket of goods over time.
“Chaining” the index means taking a slightly broader view of how the baskets should work in order to account for switching behavior. One reason people buy pork, for example, is that it’s cheaper than beef. But so is chicken. So if pork prices rise, price-sensitive shoppers will probably shift and buy less pork and more chicken. In other words, the price of pork went up, but the overall impact on meat prices is smaller than a naïve look at the movement in pork prices would suggest.
One must realize that over the years this type of indexing progressively makes social security recipients poorer and poorer. Not only does it affect current recipients, but future recipients as their starting base would have started from a declined position, than had Social Security kept pace with real inflation.
One should note that Social Security is an entitlement that most have worked for. It is a pact between workers and society. One works during their most productive years knowing that they will receive a living stipend that they paid for based on their level of income.
Whenever America has “wanted” to go to wars to protect mostly the interests of the Plutocracy, mostly middle class, and poor Americans have bled and died to fight these wars. Middle class America has paid for the country’s infrastructure and military thorough regressive taxes, low wages, and the purchase of overpriced products. Middle class America has afforded the wealthy their wealth and security.
Dependable Social Security is the least that must be afforded to American retirees. They have earned it. While it is true that the baby boom will put a strain on Social Security, that strain is temporary and must be amortized over a generation.
Currently the wealthy pays no Social Security taxes over $110,000 of their income. This means the person who makes $110,000 pays the same amount of social security as that person that makes $100 million. This is patently unfair and should be where the solution to the Social Security shortfall starts. While there is a fallacy that there are not enough rich people to make up the shortfall, real arithmetic makes that the lie that generally goes un-refuted in the mainstream med The top 20% of Americans make over 50% of all income, the top 40% almost 75% of the income.
One should not believe that there is some attempt to soak the rich. The very hardworking middle class citizen is simply being made poor by the systematic pilfering through various methods. Indexing Social Security as described above removes the duty of those that have not paid their fair share into it and whose wealth because of compound growth, have extracted more capital from society consummate with their work or deeds. Social Security is an entitlement that must remain unchanged.