The chained CPI has been receiving much attention lately after being included in the latest offers from both the GOP and White House. Some critics of the policy have been voicing their concerns, and yesterday, CRFB chimed in again to clear up the misconception that moving to the chained CPI would be regressive.
One option on the table that has great potential to be included in a final deal is the chained CPI. As we explain in our updated paper on the chained CPI, "Measuring Up," the current CPI overstates inflation because it doesn't account for substitution between different categories as relative prices change. Today, Marc Goldwein, CRFB's Senior Policy Director, further explained this policy in a CNN radio interview using the example of ham and turkey sandwiches. You can listen below:
Just as President Obama and the Republican leadership are trading offers, three think tanks--the Heritage Foundation, the Center for American Progress, and the Bipartisan Policy Center-- each offered ideas that could be used in the negotiations.
The Urban Institute's Eugene Steuerle and Caleb Quakenbush have updated their estimates calculating lifetime Social Security and Medicare benefits and taxes. In order to compare contributions to benefits received, they assume that the contributions have a rate of return (discount rate) of inflation plus two percent.
With the release of September inflation numbers from the Bureau of Labor Statistics, the Social Security Administration also announced its cost-of-living adjustments (COLA) and change to the maximum amount of income to which the payroll tax is applied. The COLA for Social Security benefits next year will be a 1.7 percent increase, while the taxable maximum will rise from $110,100 to $113,700.
The Mercatus Center has released a new paper by Social Security Trustee Charles Blahous entitled "The End of Social Security Self-Financing." In the paper and an accompanying article, Blahous writes of the challenges faced by Social Security in continuing to finance its benefits with revenues from the payroll tax.
One of the criticisms of raising the retirement age is the belief that older workers delaying retirement may "crowd out" younger workers and cause higher youth unemployment. This theory, also known as the "lump of labor theory," is challenged in a new paper by Alicia Munnell and April Wu of the Center for Retirement Research at Boston College.
Social Security trustee Charles Blahous has a interesting new commentary on the long-run sustainability of the Social Security program. The combined Social Security (OASDI) trust fund is due to be exhausted by 2033, but that measure, Blahous claims, gives the mistaken impression that we still have time to wait to make changes.