The trick Washington is using to cut Social Security and Medicare

December 18, 2012

Let's get something straight: "Chained-CPI" cuts Social Security benefits and increases taxes. That's why it's part of the negotiations. Full stop.


(Source: AFP)

But you often wouldn't know it. The policy typically gets sold on extremely technocratic grounds. Here, for instance, is the case made by Erskine Bowles and Alan Simpson's Moment of Truth Project:

With so much of government set to autopilot, the measurement we use for inflation plays a very important role in public policy. Currently, the federal government generally relies on the consumer price index (CPI) to index provisions of the budget and tax code to account for cost-of-living changes. However, this measure actually overstates inflation and, as a result, drives up the deficit unnecessarily.

Chained-CPI, in this telling, is simply an effort to correct a measurement error in the way we calculate inflation. It's a tweak, a fix, a policy designed to achieve a higher level of technical precision. And who could be against that?

There's something to this line of argument. The way we measure inflation right now really does mismeasure inflation. Chained-CPI really is a bit more accurate. But that's not why we're considering moving to chained-CPI. If all we wanted to do was correct the technical problem, we could make the correction and then compensate the losers. 

But no one ever considers that. The only reason we're considering moving to chained-CPI because it saves money, and it saves money by cutting Social Security benefits and raising taxes, and it's a much more regressive approach to cutting Social Security benefits and raising taxes than some of the other options on the table.

The question worth asking, then, is if we want to cut Social Security benefits, why are we talking about chained-CPI, rather than some other approach to cutting benefits that's perhaps more equitable? The answer is that chained-CPI's role in correcting inflation measurement error is helpful in distracting people from its role in cutting Social Security benefits. Politicians who are unwilling or unable to offer a persuasive political or policy rationale for cutting Social Security benefits are instead hiding behind a technocratic rationale. We're not "cutting benefits," we're "correcting our inflation measure."

A similar dynamic is behind the popularity of raising the retirement age, or the Medicare eligibility age: Its advocates can pretend that it's not a cut, but a technical adjustment made to account for the fact that Americans are living longer. Compared to other approaches to cutting benefits, raising the retirement age is, again, a substantively unwise, regressive approach. But it can be justified as a mere technocratic tweak.

This is bad policymaking. If we want to cut Social Security and/or Medicare, we should have a conversation about how to cut Social Security and/or Medicare, decide what our priorities are -- Progressivity? Making the health-care system more efficient? Total deficit-reduction? -- and find the policy that does the best job achieving those goals. The effort to mask cuts in technical adjustments just leads to worse cuts, as the top priority isn't protecting the poorest or improving the program, but finding a policy sufficiently confusing that you can pass it before most people realize what it is.

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Sarah Kliff | December 18, 2012