Billionaire Peter G. Peterson wants to cut Social Security via the chained… (Brendan Smialowski/Bloomberg…)
Ed Lorenzen, a representative of a clutch of Washington groups aiming to cut Social Security benefits for you and me, takes issue with my recent blog post calling out one of their "reforms" as a stealthy, and deceitful, benefit cut.
Lorenzen even tries to enlist me in his campaign by selectively quoting from my 2005 book, "The Plot Against Social Security," in his essay, published today on The Times' website.
Lorenzen is executive director of the Moment of Truth Project and an "advisor" to the Committee for a Responsible Federal Budget. Both are associated with hedge fund billionaire Peter G. Peterson, whose hostility to Social Security is well-documented.
The "reform" in question is the chained consumer price index, a novel measurement of inflation that Social Security critics like Lorenzen claim is "more accurate" than the current CPI used to calculate annual cost-of-living raises for retirees and other beneficiaries.
As I've pointed out before, there are no grounds to claim that any index is a "more accurate" measure of general inflation than any other. Any index can track price changes only within its designated market basket, and add conjectures about how consumers will respond to those changes.
An index based on a market basket typically gathered by urban wage earners and clerical workers may or may not be "accurate" in measuring inflation for residents of rural Iowa, or for retirees no longer earning an urban wage. Deciding to use that index to calculate inflation adjustments for Social Security recipients, as is the case today, is a decision based on administrative expedience, not "accuracy."
The chained CPI, which incorporates speculation about whether consumers facing price increases habitually stop buying more expensive items in favor of something else, just looks at consumer habits a different way. Is it more "accurate"? No one can say. All we know for sure is that it rises at a slower rate than the conventional urban CPI. That's its charm for Lorenzen and his clientele -- it will cut the cost of Social Security, though it will do so by cutting the size of cost-of-living increases for retirees.
Lorenzen claims that I addressed the chained CPI in my book. He's wrong. All I wrote was that "many economists maintain that CPI consistently overstates inflation ... because it doesn't account for so-called substitution effects." That's not a reference to, and certainly not an endorsement of, any alternative measure. Nor does it contradict my statement last month that there are "no grounds" to claim that chained CPI is a more accurate measure of inflation, as Lorenzen implies.
Lorenzen also maintains that the chained CPI was endorsed by Robert Ball, perhaps this nation's most eminent advocate for Social Security. Ball died in 2008 and thus is no longer with us to debate Lorenzen. But although he did initially support the chained CPI as arguably more accurate for the population in general, he eventually became disaffected with it.
If Lorenzen really was interested in accurately measuring inflation for Social Security, he would endorse the CPI-E, an inflation measure the Bureau of Labor Statistics has developed specifically to track expenses incurred by the average senior on Social Security. It does so by overweighting such items as healthcare and housing.
But the CPI-E rises at a slightly faster rate than the CPI. For benefit cutters like Lorenzen and backers like Peterson, who will never have to worry about the dollars that the chained CPI will take out of seniors' benefit checks, that simply won't do.
Should Social Security benefits be cut? We can have that debate. But it's improper to pretend that we're only debating whether a given inflation index is "accurate."