Trading 1 flawed formula for another?

Social security plan angers Obama's base, perplexes economists

By Kevin G. Hall

McClatchy Newspapers

Published: Tuesday, April 9 2013 9:00 p.m. MDT

WASHINGTON — President Barack Obama's coming push for less generous increases in Social Security benefits is angering his party and perplexing economists, many of whom question why he'd replace one ineffective measure with another.

In his proposed federal budget Wednesday, Obama will urge a shift away from the way the government has calculated benefits for nearly four decades. It would save the government $230 billion over the next 10 years — which would please those alarmed by sky-high deficits and debt — but do it by slowing the growth of benefits to the elderly and others — a cause for alarm among his liberal base that thought his re-election meant such popular entitlements would continue untouched.

Obama will propose to shelve the standard measure of inflation, the consumer price index calculated by the Labor Department, as the basis for automatically adjusting the size of Social Security checks.

Instead, Obama wants what's called a "chained" consumer price index. This alternate way to calculate monthly Social Security benefits involves the assumption that consumers don't always pay higher prices, but rather respond by seeking less expensive alternatives.

The net result is a less generous measure of inflation, which would save the federal government what it pays retirees, the disabled and others on assistance programs such as Social Security, some veterans benefits and other assistance programs.

"It's a backdoor benefit cut. It's not a more accurate measure of the costs facing seniors," said Monique Morrissey, an economist with the Economic Policy Institute, a liberal think tank. "If anything, the current (cost-of-living adjustment) underestimates inflation (faced by seniors)."

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