Chained CPI- Your Pocket is Going to be Picked Again

Interrupting My Series on the Economics of Abortion-
You’re About to Get Shafted Again by Chained-CPI Via Stealth Tax Increases

While working on the next installment of my series on the economic impact of abortion, I was prompted to address the truth about chained-CPI by a Republican in my Twitter timeline. He mentioned he “likes” the concept, but I sense that like many who have not seriously looked at the facts and data surrounding chained-CPI, his opinion is based on sound bites rather than real analysis. To provide a little background, this individual is young, and I assume is either a GenXr or a Millennial. Understandably, both of these generations have everything to complain about when it comes to the situation that exists in the Social Security scheme. We all do. It’s been a shell game since first cooked up by Keynesian economist, Alvin Hansen back in the 1930s.  Enter the latest proposal by the Republicans and Democrats to “fix the system”—chained-CPI.

There are many Democrats screaming against chained-CPI, (which would naturally make a conservative wonder if they’re against the proposal it must be good) as faithful conservatives we are compelled to ask our own questions rather than relying on partisan hype from either side of the aisle. Let’s tear it down and look behind the curtain independently.

First of all, to believe bare-bones CPI is truthfully reported requires one to suspend all disbelief. It is not a true reflection of real inflation in anything but an alternate universe. I believe most of my readers are well aware of this already, so I won’t bother to provide the historically shady actions of previous administrations (both parties) to “adjust” CPI to paint a rosy picture of the economy on their individual watches.  For those wanting to review the history, please visit economist, John Williams’ data on the historical adjustments to CPI Below is the current chart from Shadow Stats for an accurate view of real CPI-U. Chained-CPI comes out of the gate at the onset with a fictional base on which the government bureaucrats will make adjustments:

cpi

Chained-CPI is even worse than the fable of CPI-U
Re-weighting Bias

To begin, it’s important to remember that calculations of inflation have consistently lowered inflation figures rather reflect any increases. This does not benefit you, it benefits the government and the Federal Reserve and the perpetual lies they spew.

Chained-CPI will use geometric mean rather than arithmetic mean.  In financial mathematics, computation using geometric mean is less than arithmetic mean if all numbers are equal. Therefore, chained-CPI will understate real inflation data based on this theorem alone.

CPI is re-weighted by looking back in time, not current and not forward. This leaves open the opportunity to re-weight CPI by favoring those items that will give the appearance of lower inflation— naturally to favor the actors in the Beltway.

Tastes Great, Less Calories?

Politicians pushing chained-CPI would like you to believe it’s a palatable solution for cutting costs. The pro-chained-CPI argument relies on the premise it will save money based on a more accurately reflected rate of inflation, and therefore save Social Security with little effect on anyone but those who are dependent on benefits. They rarely mention this also includes a cut in veteran’s benefits– those amongst us who deserve our loyal support for having laid there lives on the line for us. We have come to expect Democrats to push cutting benefits and programs for veterans, but the curtain is pulled back where Republicans stand as well on this topic if they support switching to chained-CPI as far as I’m concerned.

Republicans would also like us all to believe that they are against tax increases. This is a stalwart principle of conservatism. Yet, if a tax is stealthy they often rely on the probability the conservative base won’t be savvy enough to catch them raising taxes. Let’s look at the tax increases under chained-CPI. Keep in mind current tax code adjusts tax brackets via CPI-U, and this will be switched to chained-CPI should this proposal pass. What does this mean for you? Tax brackets will be adjusted less frequently, and if your income rises you’ll be pushed into a higher tax bracket.

taxincrease2

Most leftists would point out in the chart above that millionaires are getting away with a small increase, which is true. They’re already being punished by the highest possible tax bracket under current progressive tax policy! Bracket creep cannot change for the “more than a million” in income unless Congress cooks up a higher bracket.  But what of the middle-class? Both sides of the political spectrum beat their chests that they want a stronger middle-class, yet look at the chart and see who will be hit the hardest by chained-CPI—the middle class! As noted by the Cato Institute, “It would be an anti-growth tax increase because it would push families into higher tax brackets more quickly over time, subjecting them to higher marginal tax rates.” Further, the Joint Committee on Taxation in Congress reported that if individual income taxes were indexed to the Chained CPI starting in January 2013, by 2021, sixty-nine percent of the gains in revenue (the now common nomenclature for taxes) would come from taxpayers with incomes below $100K. They will raise taxes via tax brackets that will provide an automatic increase forever!

The Hoax That is Chained-CPI

The basic premise of chained-CPI relies on the notion that inflation comes down as people switch to lower priced items while normally purchased items increase in price, therefore it’s a more accurate and timely measure of inflation. The entire concept becomes twisted right then and there. Of course people will switch to lower priced items as INFLATION increases! They have no choice, unlike the Federal Government, to cut corners and stay within a budget! If ground beef becomes too expensive, people switch to chicken. If chicken becomes too expensive I guess they’ll switch to cat food. This is how chained-CPI is recalculated! Forget current monetary policy is killing purchasing power. Forget real wages have not increased since the 1970s. Let’s breakdown this policy:

  • Inflation increases under current monetary policy and consumers tighten their belts and buy cheaper goods to take care of their needs
  • Chained-CPI is calculated based on YOU tightening your belt to substitute for higher priced goods and stay within a budget
  • Because you tighten your belt to stay within your household budget the government will now increase taxes across the board, AND cut benefits to seniors, the disabled and veterans.
  • The vicious cycle continues to reduce your living standard because higher taxes and cuts to benefits will once again force ALL consumers to buy even lower priced items or simply go without altogether. The Chained-CPI will once again be lowered due to your prudent fiscal behavior!
  • Seniors and savers who are already being punished by zero interest rate policy take yet another hit to income. This, by far, is the most heinous part of chained-CPI and adds insult to the ongoing injury by the Federal Reserve.

This is not a partisan issue- this is insanity wrought on all of us! This will not fix Social Security, as I will show with further installments on the economics of abortion. The pyramid that supports Social Security has been horribly reduced by killing 56 million babies over the past forty years. Replacing that loss in our population will not be solved by more fiscal “tricks.”  Perhaps Crazy Joe Biden wasn’t too far off when he made his infamous “chains” claim during the 2012 election. Both parties are planning to keep us in economic chains with Chained-CPI whether it’s a cut in benefits or a hike in your taxes!

Repeat after me:  There is nothing conservative or free-market about raising taxes.

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Obama’s War on Our Children – Part I

Saint Nicholas of Myra
Patron Saint of Children

Behold, children are a heritage from the LORD, the fruit of the womb a reward. Like arrows in the hand of a warrior are the children of one’s youth. Psalm 127:3-4

Rather than review Obama’s unconscionable position on abortion and infanticide, which we must completely reject as faithful Catholics and Christians, Part I will address the misnomer that is the Left’s “War on Women,” and present some of the startling economic statistics concerning our children under the oppression of Barack Obama’s economic policies.

Sidestepping the Real War

Shortly after the Obama Administration made clear to the Catholic Church they were not going to make any exceptions to the contraceptive mandate, included in The Affordable Healthcare Act, they immediately began to regularly ballyhoo a fictitious “War on Women,”—an obvious attempt to solidify the female voting base and off-set losses from the Catholic voting base. By waging this “war,” those on the Left have communicated to women that they are one-dimensional and only the sum of their reproductive body parts, unable to provide for themselves without the chronic need for government intervention in their private lives.  This campaign stunt has dishonored decades of effort and achievement by women to become independent and individually responsible for their personal decisions, but what is worse is the camouflage it has provided for the real underlying economic dénouement of Obama’s policies toward women, and most importantly our children. What is hiding behind this agitprop meme is the true war—the insidious economic war on our children.  Those on the Left continue to ignore the plight of children and young adults unless it is to overreach their hand in what our they are learning in school, allowing the mishandling of them at airports or leveraging control over the food they consume. While the benefits of good eating habits are important, you will never hear Michelle Obama mention statistical reality under the lack of leadership from her husband—one out of four children in America now rely on food stamps and would go hungry without that support. Obama’s supporters fail to acknowledge more children than ever are living in poverty, limited by educational choices, unable to find jobs during their high school years and post-college, as well as burdened with an overwhelming amount of student debt when they graduate. This is the real battle zone. Obama’s statist policies are failing our children miserably on the most basic levels, as well as threatening their ability to achieve the American Dream. Robert J. Samuelson writing on the affluence of American society said, “For millions of younger Americans—say, those 40 and under—living better than their parents is a pipe dream. They won’t.”

Children in Poverty

Recent census data states that 22% of American children now live in poverty. The rates are even higher when breaking down the statistics for ethnic groups. For black children the rate is 38% and for Hispanic children that rate is 35%. But it gets even worse. Twenty percent of children living in poverty are living in extreme poverty with incomes of $2 per day per person in the household, not including food stamps. This statistic sounds like something that would be reported from a third-world country, but it’s not. This is happening right here in America. By the end of school year 2011, The Department of Education reported one million students were homeless, an elephantine 33% jump between 2007-2011. Social worker and homeless advocate, Beth McCullough, interviewed in the Huffington Post said, “The face of homelessness is changing.” More specifically, it’s getting younger.” The typical “fix” from the socialists is more redistribution to solve this crisis, which is exactly the wrong solution, and nothing more than a piece of duct tape on a bursting dam. An economy based on low and non-progressive tax rates as well as additional non-constraining economic growth policies are the best and permanent solution in helping these children out of their dire situations. Obama prefers to cling to policies that only serve to worsen the problem and not solve it at the root cause, failing the most vulnerable in our society.

Youth Unemployment

While most of the attention on unemployment in the U.S. focuses on the general population as a whole, little attention or discussion exists with regard to the problem of youth unemployment for millions of teens and young adults, many of whom need the money to help out at home or offset the steeply rising cost of college tuition. The current rate of unemployment for ages 16-19 is 23.9%, with those between 16-24 years of age experiencing unemployment at 17.1%. The most recent data for 2012 showed an uptick of youth jobs lost of 836,000 between April and July alone. Yet Hilda Solis, Obama’s Secretary of Labor, extracted only select seasonally positive data points out of the most recent report and declared a victory in this distressing labor environment for our children. Competing for entry-level jobs with older college graduates leaves few opportunities for our youth because of a lack of real job growth solutions coming out of the Obama Administration in addressing our economic woes, including a lack of comprehensive illegal immigration reform. While Obama often pushes the notion that everyone should go to college upon graduation, a recent survey conducted by Northeastern University reports only 50% of recent graduates are able to find a job. The report goes on to say 53.6 percent of bachelor’s degree-holders under the age of 25 last year were jobless—the highest rate in eleven years. In an effort to influence the voting youth bloc to his side of the court, Obama led the cry to freeze current student loan interest rates, yet a recent national survey conducted by Generation Opportunity reported 64% would prefer full-time jobs over lower interest rates on student loans. This should come as no surprise to anyone, except possibly our out-of-touch negligent Chief Executive on Pennsylvania Avenue. Low interest rates on student loans mean nothing if there is no income to repay the debt to begin with.

Student Loan Debt

Make no mistake about it; student loans are now a highly risky bubble, not to mention a monkey on the banks of our young people when they’re just starting out in life. Rapidly rising tuition rates and one trillion dollars of student loan debt are another front in the war on our children. In 2005, the banking lobby enjoyed a huge win with the passing of a law that does not allow student loans in a bankruptcy both public and private. The Democrats then doubled down in 2010 by including a provision in the Affordable Care Act for the federal government, via the Department of Education, to have sole control over student loan access. In essence this has exacerbated the problem of more and more students taking out loans they can’t afford to repay, removed student loan competition from the private sector and provided full rein for colleges to increase tuition with impunity. Once again, we have the potential of a taxpayer bailout should this bubble burst, and once again losses will be socialized on the back of the taxpayer. Until a free-market solution is applied in the student loan business we can expect even more inflationary pressures on the cost of higher education and the debt will continue to climb. Forcing banks to deal with student loans in a bankruptcy would force them to curb their lending practices and schools would be forced to find ways to lower tuition rates in a free-market fashion. Removing a glut of available funds via the federal government would also serve to contain the problem. This is not rocket science and would extract the moral hazard potential. The only answer the Obama Administration has offered is to hold rates on these loans at artificially low levels to prevent the levy from bursting, but he does not seek a true free-market solution in doing so. This is nothing more than a way to protect the banks, i.e., crony capitalism, and the huge federal debt mountain he continues to expand, but fails to lower the cost of education for our children or lighten their debt load upon graduation.

In addressing British society in 2010, Pope Benedict XVI said, “Just as “every economic decision has a moral consequence”, so too in the political field, the ethical dimension of policy has far-reaching consequences that no government can afford to ignore.” (Caritas in Veritate) What is Obama’s answer? In his speech at the Democrat convention he said, “The path we offer may be harder, but it leads to a better place, and I’m asking you to choose that future.” In contrast, John F. Kennedy said, “Let us not seek the Republican answer or the Democratic answer, but the right answer. Let us not seek to fix the blame for the past. Let us accept our own responsibility for the future.” As faithful conservatives and responsible citizens, it’s time we reject statist policies that avoid responsibility, and rescue our children off of Obama’s “path” of hardship that threatens their future. Blessed Mother Teresa said, “When a poor person dies of hunger, it has not happened because God did not take care of him or her. It has happened because neither you nor I wanted to give that person what he or she needed.” Our children need our help on November 6. They are struggling under President Obama’s economic policies and it’s up to us to remedy that situation for them at the ballot box.

For further in-depth reading: