This is a speech by Pete DeFazio from last year during the debt ceiling debacle. It explains the chained-CPI pretty well. DeFazio does make some statements for effect, but it is all fundamentally correct:

H/T Digby

I found this on Brainy Quote

Frank Conniff of Mystery Science Theater 3000 has written and directed a radio musical, The Wonderful Pundits of Oz. It is quite a polished production with songs that are definitely better than anything by Andrew Lloyd Webber and a very good cast. The problem with it is that the script could be tighter. A lot tighter.

I don’t mean to be too critical. The truth is, it is still damned funny and I have little doubt that you will spend the next hour and fifteen minutes doing something worse than listening to The Wonderful Pundits of Oz. I mean, you’re reading this, right? But whenever I enjoy something like this radio play, I can’t help thinking about my own work. The fact is, I am extremely jealous of Conniff. Clearly, he can take a script that is “only” pretty good and get a lot of really talented people to work on it. Since no one is interested in producing any of my scripts, I have the advantage of being able to polish them. A lot. Until the end of time.

Last night, I returned to the second episode of “The Post-Postmodern Comedy Hour.” When last I left it, I thought it was in a good state. So good, in fact, that I thought that all I had to do was a little copy editing and that I could send it off to some friends to get comments. Alas. It has lots of problems. But these aren’t big things like the structure is all wrong or the characters don’t work or it isn’t funny. The problems are more around the edges: awkward bits of dialog, scenes that fall flat, momentum problems. And that’s what’s going on in The Wonderful Pundits of Oz. But frankly, much, much more.

Now I feel like David Mitchell in the wedding speech skit from That Mitchell and Web Look[1] The truth is, the radio play is a lot of fun. My problem is that I think it could have been a whole lot better. People often question me about my compulsive rewriting. It can’t really be getting better, diminishing returns, blah, blah, blah. But I always come back to one of my favorite scenes in All That Jazz. Joshua Penn is complaining to Joe about the editing of “The Stand-Up” taking too long. Joe has him sit down at the moviola and watch a scene. Staring at the screen in frustration and admiration he says, “It is better. Oh, God, it is better.”

So I wish that The Wonderful Pundits of Oz were better: quicker, sharper, funnier. But that doesn’t mean it isn’t good or even quite good. And I bet it is better than anything on TV tonight. And where else can you see Emo Philips play a psychopathic Toto? Nowhere else, that’s where!

[1] Here is the skit. It is very funny.

I was bothered all last night after seeing somewhere (The Ed Show?) that a two year elimination of the debt ceiling might be part of the Fiscal Cliff agreement. What happened to President Obama’s resolve that he wasn’t going to allow the Republicans to extort the United State in this way in the future? Apparently, I was taken in when I wrote, Why the Debt Ceiling is No Problem. He seemed so convincing. But it appears that he was just bluffing and we have the usual Democratic Party president: limped dick and badly in need of a belief system.

I’m not the only one to notice this. Matt Yglesias wrote earlier today:

If I could depend upon allies like the president, I would become a Republican. Then I might get the policy I want!

Let’s say that President Obama and Speaker Boehner agree on a deal that allows $1 trillion of the scheduled tax increases to take place over the next decade and cuts $1 trillion in spending over the same period. Most Republicans will view that as a deal with a 1-1 ratio of spending cuts to tax increases, and a lot of them will consider that ratio inadequate. But Democrats will look at the same deal and think about it differently. They believe that they don’t need any deal to get large tax increases. If they extend only the middle-class tax cuts, either before or after January 1, they get $800 billion in revenues. So from their perspective, the deal makes $1 trillion in cuts for $200 billion of extra revenue: a 5-1 ratio. It would be hard enough for both sides to agree to the same ratio; it’s even harder when they aren’t calculating that ratio the same way.

—Ramesh Ponnuru
An Obstacle to a Deal

[Part of this is wrong. Initial Social Security benefits are based upon wages. They aren’t set and then adjusted upward by the CPI. Sorry for this error. -FM]

I’m getting sick of having to talk about this stuff. The chained-CPI change is even worse for future retirees than it is for current retirees. According to Greg Sargent at The Plum Line, the Center on Budget and Policy Priorities is willing to go along with the chained-CPI madness “if it is offset with a small increase in Social Security benefits for longtime beneficiaries.” Remember: the CBPP is a liberal group. But does that also mean that they are brainless?

If we use chained-CPI for Social Security, it will mean that the cost of living adjustments will be at least 0.3% too low every year. For current retirees, that means that in ten years, they will see about a 3% reduction in their real (inflation adjusted) benefits. This comes to roughly $100 per month. This is important and we should not accept it. The CBPP is suggesting that we adjust very old retirees’ benefits up. There are two problems with this.

First, if we know that the chained-CPI is wrong—that it won’t allow benefits to keep up with inflation—why are we doing it? The answer, as I’ve already discussed, is that those in power in Washington want to cut benefits. But they are cowards and don’t want to be seen as doing so. So they use this convenient backdoor to gut Social Security.

The second problem is that this will affect future retirees even more. Think of the poor sucker retiring 75 years from now. His Social Security check will be worth about half what a current check is worth. There is nothing that the CBPP is proposing to fix this.

Can it be possible that Democrats don’t understand that not increasing Social Security benefits with the rate of inflation is just a long term plan to destroy the program? The Republicans have tried for years to destroy the program in other ways. They have failed. This way is sure fire, it just takes a long time. Accepting chained-CPI is like a time bomb that conservatives want to put into law.

And note: this doesn’t just affect Social Security. It affects everything. In particular, it will push people with low incomes into higher tax brackets. So it is (yet another) regressive tax increase. This is madness!

Yesterday, the long time senator from Hawaii, Daniel Inouye, died. He was 88 and had been in a wheelchair for the last year. So it is not of much surprise. He was a good guy—a reliable liberal voice in the senate. The most famous story about him—which to some extent informed his career—took place after returning to San Francisco, after having lost his right arm in World War II. He walked into a barber shop with his lieutenant’s uniform on, and was told, “We don’t serve Japs here.”

Most obituaries focus on Inouye’s war record, his work with Kennedy, civil rights legislation. But Matt Yglesias focuses on Inouye’s position as president pro tempore of the senate. It meant if the president, vice-president, and Speaker of the House were all killed, Inouye would have been President of the United States—at least until last Money. Now it would be Patrick Leahy. Yglesias is very bothered by this.

There are problems with Presidential Succession Act of 1947. One thing that he mentions is the fact that in a time of crisis the administration could switch parties. For example, if the president and vice-president were both killed, the administration would suddenly be Republican. That would be the last thing we need to deal with in a moment of crisis.

But then Yglesias goes into how the president pro tempore is just a title they give to old senators who are usually inches away from death. This is true. Yglesias writes, “Strom Thurmond served as president pro tempore even after voluntarily relinquishing the right to chair a committee out of recognition of his advanced age and declining capacity for work.” Which, all things considered, is kind of a tacky thing to mention the day after Inouye’s death.

He’s right though. We should do something about this. But is it worth a thousand words? Is this really what the death of Daniel Inouye brings to mind? I don’t want to be one of those people saying it is too soon to talk about the Presidential Succession Act of 1947. But really…

Ezra Klein is again reporting that a Fiscal Cliff deal is almost done. And once again, I don’t get this deal. He says that we will see the 39.6% tax bracket but only for incomes over a million dollars. There will be something less for incomes over $250,000 amount. In return for this, the president gets an extension of unemployment benefits and some unnamed stimulus spending. But the payroll tax cut will end. And the biggest thing of all: we will change the way that cost of living adjustments to Social Security are made.

People are calling this new chained-CPI a reduction in benefits. It is most definitely that! But it is also a backdoor way of destroying Social Security. The program will not keep up with inflation. The truth is that the current COLA for Social Security is probably too low, because of what seniors actually buy. For example, they buy a lot of drugs that don’t go down in price and they buy relatively few electronic devices that do.

The trick to chained-CPI is that it assumes that people will substitute. If flashlights get too expensive, people will switch to lanterns! Really. Although it is more along the lines of energy substitution. If heating oil gets too expensive, people will switch to gas. The problem is that this is very likely not an option. When was the last time you changed your water heating system because the price of energy changed? And how much did it cost? But again, the point is not to more accurately model how prices increase; it is to destroy Social Security; or at least to cut it without anyone noticing.

I can very much see Obama going along with this. But it is madness. As I’ve written before, this is not a good deal. What exactly does he think he’s getting? A temporary extension of unemployment? Less tax rate increases than he would get if he did nothing? Unnamed stimulus? None of this makes up for permanent and worsening changes to Social Security!

Update (18 December 2012 8:48 am)

Paul Krugman reports that the deal supposedly includes a capital gain tax increase back up to 20%. Also it is supposed to cap itemized deductions. Even with these, I don’t like the deal. But as Krugman puts it, “If I’m wrong about [the extra tax increases], this is easy: no deal.”

Update (18 December 2012 9:56 am)

Jonathan Chait is at it again. He makes an argument that he, more than almost anyone, should know is bad. He claims that tax increases are the key because “not even conservatives” wanted to cut discretionary programs when they came face to face with them. But that was 20 years ago. As Chait has noted before, the Republican Party is a little different now.