There is a very flawed rec list diary on the rec list which not only got its math wrong and forgets what compounding is, but if you read the beginning it talks about inflation being overstated since the 1990s.
Since the mid 1990s, economists have worried that the consumer price index generally used by the federal government slightly over estimates inflation.
Because so many revenue and spending issues depend on the consumer price index, this means that benefits and burdens of tax payers and benefits recipients are generally not being accurately measured.
Everyone knew that the CPI was wrong, but we continued to use it for many reasons. For example the federal government knew that many, many businesses use the CPI for contracts between each other, and changing the CPI would basically affect tens of thousands of private transactions. The CPI, as some economists noted, is one of the many economic number the government continued to publish even though they knew it was wrong
lol. Everyone? Au contraire! How do we know it was or is wrong? Who are these economists anyway? Would they happen to be the same economists who failed to see the housing bubble(unlike Dean Baker in 2002), circa Alan Greenspan? That's right, every kossack who rec'd that diary is supporting an offshoot of a flawed metric promoted by Alan Greenspan(What's next? A diary praising Ayn Rand?). As you will see shortly after the Liberal Lion's death, Dean Baker reminded us of the importance of Ted Kennedy's work protecting SS from this kind of garbage analysis as he invited Dean Baker to Congress to testify about it:
I first met Ted Kennedy in the fall of 1995. The context was truly bizarre.
Alan Greenspan had testified to the Senate Finance Committee in the fall of 1994 that the consumer price index (CPI) overstated the true rate of inflation. He told the committee that if it lowered the annual cost of living adjustment (COLA) for Social Security to correspond to the true rate of inflation, rather than the CPI, it could largely eliminate the budget deficit.
Greenspan told the committee that the gap was between 1-2 percentage points annually, so that after a decade, his plan would cut annual Social Security payments by more than 10 percent. And, the great thing was that Congress could do this cut by claiming it was just a technical adjustment.
Over the next half year, the idea of changing the COLA for Social Security gained considerable support in Congress from both parties. (Daniel Moynihan was the strongest proponent.) There was also support for the idea in the Clinton White House.
In this context, I was invited to talk to Senator Kennedy and his staff about the CPI, since I was one of the few economists who disputed the claim that the CPI overstated inflation. I was very happy when I got to his office to see 5 senior looking staffers. I assumed that these were the people that I really had to convince and I focused my attention on them, only occasionally looking back at Kennedy to avoid appearing rude.
After about 10 minutes of boring econ jargon (price indices are even boring to economists), Senator Kennedy started asking me probing questions. It was clear that he had listened carefully and understood everything I said. I then began to focus my attention directly on Kennedy and we had a very good discussion of the issues. I walked away with a very valuable ally in this fight.
snip
Then we got to the CPI. He briefly, but accurately, laid out the case that the claims for an overstated CPI were weak. He then introduced me as an expert on the CPI and invited me to say a few words to the committee.
The ensuing discussion again went all over the place with Kennedy largely remaining silent. However, at the end of the debate, the CPI adjustment was off the table.
More from Dean Baker on basically another way to say what the flawed diary was actually saying(It seems in a way the WaPo already beat that kossack to this flawed excuse):
Hey Stupid Seniors! The Post(and some kossacks) Says a 9 Percent Cut In Social Security Benefits Won't Hurt
The rationale for the benefit cut is the use of an alternative measure of inflation, the chained consumer price index, that assumes substantial substitution between consumption items in response to prices changes. The Post asserts that this index is a more accurate measure of inflation.
Actually, the Bureau of Labor Statistics has an experimental elderly index that measures the rate of change in the basket of goods and services consumed by people over age 62. This index shows that the inflation rate experienced by the elderly increases by an average of 0.3 percentage points more than the overall CPI to which Social Security benefits are indexed.
While this is an experimental index that does not track the actual purchasing patterns of the elderly (e.g. examining the specific retail outlets where they shop and the items they purchase), those who are interested in an accurate cost of living adjustment would advocate a fuller elderly index.
There's a rule that is widely known and that rule is that anything derived from a false premise is utterly useless even if it looks pretty on paper, like those equations for CDS and CDOs Alan Greenspan also supported while further inflating the housing bubble until he admitted even he didn't understand them. Therefore the whole premise of that flawed supposedly realistic diary was utterly useless, especially when you realize when looking at CPI-E, and in general, inflation is actually understated for seniors. There are several reasons why older Americans faced slightly higher inflation rates over the past 25 years and older Americans devote a substantially larger share of their total budgets to medical care. With medical inflation our biggest budget problem(rising higher than overall inflation), I don't think anyone can deny the CPI-E is more accurate for seniors than assuming stupidly that the chained CPI is no big deal and won't be counted as a net cut all things considered.
But "everyone knows the CPI in general overstates inflation! Greenspan has been saying so since the 90s! And what has he ever been wrong about?"
I don't know about you, but when professing on a Democratic blog to represent Democratic platforms, I'm going to trust Ted Kennedy and honor his memory and victory for SS as well as his ally Dean Baker(and his superior analysis of the data relevant to this discussion) more than Alan Greenspan or any Rubinite or Rubinite wannabe with no real credibility.
Update: First time on the rec list since 2007. Thank you and keep calling and writing the WH and Congress to stop this scam and honor Ted Kennedy's victory!!