AARP Screams Bloody Murder, Warns Against Changing CPI Definition And Cuts To Social Security In Pursuing Budget Compromise

While it is unclear what precisely has given Obama confidence to announce that his meeting with congressional leaders on deficit reduction and the debt limit was "very constructive" one thing is very likely: it involved the change of the definition of CPI. As we reported some time ago, one of the serious proposals to deal with the deficit situation is to make a revolutionary actuarial adjustment and change the way the actual definition of inflation. As we reported: "Lawmakers are considering changing how the Consumer Price Index is calculated, a move that could save perhaps $220 billion and represent significant progress in the ongoing federal debt ceiling and deficit reduction talks. According to congressional aides familiar with the discussions, the proposal would shift how the Consumer Price Index is calculated to reflect how people tend to change spending patterns when prices increase. For example, consumers tend to drive less when gas prices increase dramatically.  Such a move is widely seen by economists as resulting in a slower rise in inflation." Today the WSJ's Damian Paletta follows up on this ludicrous yet serious proposal: "One proposal in the budget talks that is getting a serious look from all sides would switch the government’s way of measuring inflation and delivering a big impact on tax, spending, and entitlement programs. How big? It could save roughly $300 billion over 10 years. That big. The idea of using this different measure of inflation, known as a “chained” consumer price index, has won support from numerous deficit-reduction commissions as well as many liberal and conservative economists." Yet reminding everyone that there is no such thing as a free lunch in finance, the "biggest savings—an estimated $112 billion—would be from slowing the growth in the cost-of-living adjustments for Social Security beneficiaries." Sure enough someone is unhappy. Enter the AARP which is already screaming, justifiably, bloody murder should the administration proceed with what will be an outright slashing of Social Security obligations. "AARP will not accept any cuts to Social Security as part of a deal to pay the nation’s bills,” said Rand.  “Social Security did not cause the deficit, and it should not be cut to reduce a deficit it did not cause." Did Obama's war with America's seniors just enter Defcon 1?

First, some more details on what is actively being contemplated as a "budget rescue" measure":

The idea of using this different measure of inflation, known as a “chained” consumer price index, has won support from numerous deficit-reduction commissions as well as many liberal and conservative economists.

To be sure, it’s complicated stuff. But it’s seen as a central way of reducing the deficit because it simultaneously cuts spending growth and increases tax revenues. And many also like it because much of its impact doesn’t come from “cuts” in spending. Rather, it would reduce the “growth” of spending pegged to inflation. And it would affect the way tax brackets and deductions adjust for inflation, so it could appear less like a tax increase than simply raising tax rates.

Some liberal groups and top lawmakers believe that it’s the same thing as slashing benefits and have been holding press conferences pre-emptively blasting the idea to try and keep it out of any deal. And some influential conservative groups believe the impact on taxes is tantamount to a tax increase and are likely to fight it.

Perhaps with enemies on both sides the idea just might have a chance.

Spread across the entire budget, chained CPI is a big money maker. Reducing the deficit by roughly $300 billion over 10 years would make it one of the most vital components to any deal that aims to reduce the deficit by $2 trillion to $4 trillion over that span

Simply said, the proposal, if enacted, would reduce the NPV of the future SSN liabilities which as is well known are among the biggest portion of future entitlements, and while the data adjustment would not change much in current terms, it would impact how much is obtained from the fund by future SSN recipients.

Not surprisingly, the AARP has finally understood what changing the CPI definition means. The resulting angry letter is the first response. Many more will follow.

AARP CEO A. Barry Rand this morning offered the following strong statement as key congressional leaders meet with the President today to discuss a framework for a deal to raise the debt ceiling and to address deficit reduction.  AARP is focused on protecting Social Security and Medicare for the millions of beneficiaries who have paid into the systems over their working lives, and reiterates its position that Social Security and Medicare benefits should not be on the table for deficit reduction.

“AARP will not accept any cuts to Social Security as part of a deal to pay the nation’s bills,” said Rand.  “Social Security did not cause the deficit, and it should not be cut to reduce a deficit it did not cause.  As the President and Congress work to negotiate a deal to raise the debt ceiling, AARP urges all lawmakers to reject any proposals that would cut the benefits seniors have earned through a lifetime of hard work.

“AARP is strongly opposed to any deficit reduction proposal that makes harmful cuts to vital Social Security and Medicare benefits.  Social Security is currently the principal source of income for nearly two-thirds of older American households receiving benefits, and roughly one third of those households depend on Social Security benefits for nearly all (90 percent or more) of their income.  The deficit debate is not the time or the place to talk about Social Security.  AARP will fight any cuts that are proposed to this important program, including proposals to reduce the cost of living adjustment for beneficiaries (COLA)—such as the proposed chained CPI—which AARP also believes should not be considered as part of the debt ceiling or deficit reduction negotiations.

“AARP also strongly urges the President and congressional leaders to reject any proposals that would impose arbitrary, harmful cuts to the Medicare program or shift additional costs onto Medicare beneficiaries.  Half of all beneficiaries live on incomes of less than $22,000, and many already struggle to pay for their ever-rising health and prescription drug costs.

“Some have proposed requiring Medicare beneficiaries to pay even more for their Medicare benefits, either through higher co-payments or higher premiums.  AARP strongly urges you to reject higher costs for people in Medicare.  Before we shift additional cost burdens onto beneficiaries, Congress should address the real problem of increasing health care costs throughout the entire system.

“Throughout the deficit reduction and debt ceiling debate, AARP will continue its efforts to raise the voices of our members who depend on Social Security and Medicare for their health and economic security,” Rand concluded.

Alas, we doubt this statement will do much to change the mind of the administration which is now openly robbing America's elderly to fund its relentless spending and specifically the uberwealthy which continues to transfer the NPV of future obligations into currently overfunded checking accounts. We wonder how long before other popular organization enjoin the protest, although we have no doubt would be.