> What is the "CPI adjustment?" Is this is, or is this ain't
> a shaved CPI? Or, is the "adjustment" not the CPI, but a
> diminished chord of the CPI used to compute COLA?
The adjustment is just the latest in an ongoing series of modifications to the CPI by the Bureau of Labor Stats (BLS). This their job. They are constantly trying to improve the measure. The recent adjustment was about .2 or .3 percentage points downward. This means the CPI will reflect less inflation than otherwise. Since the CPI by law is used to adjust brackets in the personal income tax and Soc Sec benefits, among other things, a lower CPI means higher taxes and lower benefits, unless Congress changes the law in some respect.
> And "summary" number. What's that? You say was "2.1". Was that
> the CPI? So it was lowered to 1.8. Is that the shaved (umm,
> adjusted) CPI? If so, it was reduced 0.3% No? Yes?
The summary number is the percent of taxable payroll that must be saved every year, starting today, to bring the Trust Fund into 75-year balance. Savings can be gained by tax increases, benefit cuts, or some combination. Balance means that under current law and projections, the fund will have no shortfall for 75 years, including a cushion of a year or so in constant reserve. The summary number used to be 2.1 until the most recent CPI changes. Now it will be 1.8. Any change in the CPI is factored into the summary number, since the change will mean higher tax collections and lower benefit payments over the 75 year period. The amount shaved from the CPI need not equal the change in the summary number. They are two different things.
"CPI-1," also referred to as "diet COLA" (sic) means changing Soc Sec law (not the CPI), to stipulate that benefits only will be adjusted annually not by the CPI, but by the CPI minus 1 percentage point.
> And what is CPI[sub 2]? The CPI for indexed bond holders?
Brad mentioned that the CPI would be the same for Soc Sec and bondholders. I had heard the contrary, but I don't want to challenge him on it until I am certain. As you indicate, this would make for an interesting scandal.
> Boy, I can see it now:
> A CPI for you and a CPI for me
> And we will raise a fami-lee
> Of CPIs.
> > EPI has a paper by Howard Chernick and Ed Wolff
> > on the effect of CPI reduction on benefits.
>
> Is this paper at the EPI site? If not can you slip it to me?
Remind me during week, when I'm at work. Send me a mailing address. It's not up on the web yet.
Regards,
Max