The chained CPI is a statistically flawed and inequitable approach to determination of the cost of living. It should be opposed as a means of indexing Social Security and other safety-net programs with all of the vigor advocates for the elderly can muster. Nevertheless, the unfairness of the CPI enterprise in general should not be reduced to a discussion of its impact on the elderly.
One argument against the chained-CPI by my fellow progressives is that the elderly have a different purchasing pattern than the non-elderly. This is a specious argument. Goods and services purchased by upper income elderly households will be much different than the goods and services purchased by low income elderly households (say expenditures of the person living on the average monthly Social Security benefit of $1,230 versus a retiree with an income of $5 to $10 K per month).
Well-heeled retirees will devote more of their income to travel, entertainment, and other purchases unaffordable to the poor elderly. Furthermore, regressive taxes, user fees, and other necessary services will consume a larger proportion of the budget of a poor household than that of an upper income household. For instance, increases in charges for city services such as water, sewage, and trash pick-up* are amongst the largest increases we’re seeing in the CPI but these necessary services are weighted extremely low for the purposes of calculating the aggregate CPI.
Other current big increases in the CPI include state and local sales taxes, child care, and education. Furthermore, food and clothing purchases are taxed at approximately 8% in most locales in the United States. These are regressive taxes, which have increased over the past 30 years while income taxes have decreased. Due to a shrinking (and already shrunk) tax base, the elderly in low income, distressed, inner-city neighborhoods pay a much higher property tax than their peers in affluent, suburban neighborhoods.
For instance, in Jackson County Missouri – the county in which a government-abandoned-neglected, African-American ghetto is located – the assessed valuation of a home is 19% of market value while it is only 11% in Johnson County Kanas – one of the most affluent suburbs in the United States. The mill levy is 40 mills in Johnson County, Kansas and 80 mills in Jackson County, Missouri. If this isn’t bad enough, the equity of many home owners in Jackson County has been practically wiped out due to the subprime fiasco, foreclosures, flipping of houses, absentee owners, and neglect by city, state, and county government.
Cost of living is not a matter of old and young. Rather it is a matter of poor and rich and everything in between. The poorer you are, the more unfair the current methodology treats you. Except for the brouhaha over the current chained-CPI gimmick proposed by the President and misguided congresspersons, the CPI is not a subject of much interest to the public. Given the major impact of official measures of price fluctuations on the masses, this is rather unfortunate. Goods and services reflecting the largest price increases constitute a major share of budgets for middle and low income households while they hardly impact an upper-income household.
*For example, the aggregated May 2012 – May 2013 CPI-U percent change increase was 1.4%. The increase in water-sewer-trash collection services was 5.2%; intracity bus transportation was 3.4%; health insurance was 4.3%; tuition, other school fees, and child care was 3.6%. No major category such as food in the aggregate (1.4%) and energy (2.4%), or shelter (2.3%) was less than the overall aggregated CPI of 1.4%.