By: Donald L. Foley
If you have had any involvement with compensation contracts, then you know that cost of living adjustment (COLA) clauses never result in real economic advancement for the recipient of the adjustments. These adjustments, generally based on the consumer price index (CPI), give the person receiving them some percentage of the full rise in the cost of living as an upward adjustment in wages or salary or other compensation. They never fully keep up, much less advance the individual’s economic status. And they always come after-the-fact – that is, they are calculated on cost of living increases that have already taken a toll and they are applied in subsequent payments of income. Certainly, they are a worthwhile benefit to the recipient but that person will continue to slide just a little further behind economically in spite of receiving them.
Now comes more “shared sacrifice” from the Obama administration with, apparently, bipartisan support from members of Congress. This is the proposal to change the method of computing the CPI for the purpose of applying COLAs, changing to something called the Chained Consumer Price Index (reported by Stephen Ohlemacher, Associated Press). Allegedly this would “save” the federal budget almost twelve and a half billion dollars over the next decade. And we all know how important it is for all of us to share in the sacrifices necessary to get the federal budget out of the red.
Using this chained CPI, they say, is more realistic because for one thing it takes into account the fact that as prices go up people just naturally learn to live more poorly – and, consequently, don’t really have to spend more to live. In other words, becoming poorer does not have to be measured as becoming poorer. One of the real effects of changing to the use of the chained CPI will decrease COLAs for Social Security recipients on a regressive scale – by which, as one gets older and older, one loses more and more. It would also reduce federal military and civilian pensions by $112 billion over the next decade. And it would result in an effective tax increase on the poor far greater than any increase on the rich. By the end of the coming decade, taxpayers in the $10,000 to $20,000 income range will pay about 14.5% higher federal taxes, while taxpayers with more than $1 million income would see a tax increase of just 0.1%. And fewer people would become eligible for federal benefits as they slip deeper and deeper down the economic ladder, because they would take longer to fall below “poverty” level thresholds.
However, as I said, this idea has bipartisan support and was introduced to the debt debate by the White House. It is one of those sleight-of-hand maneuvers politicians are so good at; it involves some rather arcane mathematics and bookkeeping rules; and it is fairly obscure in its basic statement – just change to a “more realistic” CPI. Certainly, to slip through a change like this might go generally unnoticed and would not generate a large public outcry. It is not an overt increase in taxes, so the Republicans have plausible deniability; and the Democrats can claim they have not cut Social Security. How perfect could you get?
Perfect, indeed. Yet another perfect tactical thrust in the class warfare prosecuted for the past forty years so successfully by the ruling class against the working class.