Compromises

The chained consumer price index, as a measure of inflation, makes a certain amount of sense.  It certainly is true that consumers will substitute cheaper goods for more expensive goods when prices increase.  Old people like me, whose Social Security payments are not the greatest part of our income, can cut back from shell steak to pork tenderloin; or from 85% lean chopped meat to 70% lean chopped meat; or from fresh asparagus to canned string beans.

The substitution effect makes sense, up to a point.  If you're already eating cat food as your primary source of protein, what in hell do you substitute?  People actually trying to live on Social Security cannot survive a chained consumer price index.

If Social Security were means tested, I could survive it — but if it were means tested, Social Security would be eroded down to nothing.  Nobody really gives a shit about the people who depend on it for their survival.  The most important thing about Social Security is that everybody gets it, so even rich people get it (and generally more than poor people do.)

So, if a "grand bargain" comes about, and it includes a chained consumer price index, you should be aware that Obama has sold you out to the fucking plutocrats.  Okay, he's looking for a deal.  I don't care.  We don't need a grand bargain.  We need justice.

The Inaugural Address

There is no doubt that Barack Obama said all the right things yesterday.  Maybe he's ready to become a real progressive in his second term.  Of course, as your mother told you, actions speak louder than words.  We'll have to wait and see.

Oddly enough, I suspect the item on his progressive agenda most likely to succeed is gay rights.  "Seneca Falls, Selma, and Stonewall" not only was a great piece of alliterative speechifying, but a wonderful way of linking the three main branches of the equal rights movement, and raising the LGBT community to a kind of equality it has not enjoyed before.

His reference to Social Security, Medicare, and Medicaid without using the denigrating term "entitlements" was encouraging, but I'm waiting for him to back up from his offer to accept a chained consumer price index (discussed in an earlier post) for determining increases in Social Security payments, veteran's benefits, and such like.  His expressed determination to move forward to address global climate change by using executive orders made it sound like he might actually do something this term, albeit an article in today's Science Times suggests it might be a bit too late.

(It was nice to see Mitch McConnell and Paul Ryan all riled up on TV, but I really was hoping for a chance to see Louie Gohmert (R-TX), who may be the most moronic member of the House, stick his foot in his mouth.  I'd think he might be the stupidest man in Texas, except for those people who keep reelecting him.)

Note: they sure do a lot of religious pandering at inaugurations!  I suspect we'll get our first openly gay president before we get our first openly atheist president.  Personally, I find the whole charade offensive.

The Case for (and against) Chained Inflation

Obama is compromising again, and among his latest offers is acceptance of computation of inflation using the "chained" consumer price index.  In truth, the "chained" computation makes a lot of sense, because it accounts for something we all (ought to have) learned in basic economics — the substitution effect.  If the brand name product's price goes up, we buy the store brand.  If beef gets too expensive, we buy pork.  Chained computation of inflation really does reflect the actual cost of living — for most people.  The cost of inflation really does have less impact — on most people — than the current computation of CPI indicates.

For the elderly, though, chained computation does not work.  People getting by on Social Security payments already are substituting the pork (or the cat food) for the beef, and some of their largest expenses are not part of the CPI "market basket" — health care costs.

Most of the people who re-elected Obama (including the elderly) do not have a clue what the new measure of inflation means, which probably is why Obama put it on the table.  Maybe Our President will look more liberal in his second term, but he's still the guy whose economic team's godfather is Robert Rubin.

Who will Obama select to replace Timmy Geithner?  (I think we can assume it won't be Joseph Stiglitz.)

As for Timmy, he has not yet been CEO of Citi, but there still is plenty of time.  Wall Street über alles.