The problem with waiting overnight to post is that other people figure out the same thing:
If the true CPI-E increases faster than CPI, then chained-CPI is worse, not better.
It’s actually worse than that. The measure by which Social Security is raised turns out not to be what we usually call CPI (Consumer Price Index for All Urban Consumers), but CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers):
What George W. Bush referred to as “the miracle of compound interest” works both ways. Seniors see their Purchasing Power decline every year. So when Jared Bernstein, Sensible Centrist, says:
I support the change [to Chained CPI]—it’s a more accurate measure of price growth (though a chained index for the elderly would be better), and I’m sure it’s coming, so I want to get something for it. That ‘something’ is an offset from the benefit cut for poor, old elderly.
It would be nice to think he was Ernest Lee Sincere. But we know Jared Bernstein is not innumerate, so we have to assume he’s acting from malice aforethought, since this took me less than 20 minutes to put together from scratch, including the normalization:
The reason it took me twenty minutes: ten of those were spent trying—unsuccessfully—to find post-2007 CPI-E data. But unless Mister Bernstein and his cohorts are declaring that costs for the Elderly were actually deflationary from 2008 forward (at which point they would be correctly laughed out of polite society and relegated to Beltway Conversations…oh, wait…), note that CPI-W (the green line and, as noted above, the current, already substandard, measure) is below (that is, less than) the CPI-E line and above (that is, greater than) the Chained CPI line.
It takes three years–until 2010—for CPI-W to reach the 2007 actual CPI-E level. It takes four years, to 2011, for Chained CPI—the “more accurate measure,” per Mr. Bernstein’s blog post—to get to that level.
The man who says he “I want to get…an offset from the benefit cut for poor, old elderly” in exchange for going to the malicious Chained CPI is basically saying, “I’m going to create a larger and larger group of poor, old elderly in the future in exchange for a couple bowls of gruel now.”
We’ve seen other people make this mistake (most notably Victor Matheson—who, G-d help us, teaches economics at Holy Cross—in comments chez DeLong), but rarely are we so clearly reminded that not only is Barack Obama a poor negotiator, but (again: see Summers, Geithner) the people he had and has negotiating for him are venal.