Jul 31, 2011

The budget deal will include a hidden Social Security benefit decrease

[Update Note 8-3-2011:  This provision was not included in the Budget Agreement of 8-1-2011.  It may come up again in the further cuts implied by the agreement.]

I'm not against the benefit decrease that I'm about to explain.  It's relatively minor.  But, it's emblematic of the snookering job our pols give  us through legislative deals that are too arcane for us to understand.   When the Pols tell you they haven't touched Social Security or government pensions with the deal now in the making, you can say, "sure, buddy,...just keep passin' the kool-aid so's I can drink."
My trip to Wegmans yesterday to buy raw frozen shrimp for a casserole will explain all, if you stay through the arcania of the next paragraph or so. 
In a nutshell, the budget deal will change the basis for the annual COLA update from the current Consumer price index (CPI) to a Chained Consumer Price Index (C-CPI).  I've heard several experts, including democratic pundits (see NPR program),  say that this is a "more accurate" way of measuring the update than is the standard CPI.  I say "Hooey".
The government calculates the CPI each month by using a careful sample of a defined "market basket" of goods and services that consumers buy to keep themselves going. This market basket is set every 5 years or so.  It includes our purchases, ranging from toothpaste and broccoli to automobiles and housing.  The price of each component in the market basket is measured each month, and the overall CPI index value is based on the price today as a ratio of the price in a base year (say 1983) for each item.  Every item in the sample is weighted by its percentage of spending in a "weighting year," which is different from the base year.  Though the weighting years change from time to time, years can go by before new products are added into the market basket and new weights are calculated.
The weighted average in a particular base year (say, 1983)  is given an index value of 100, and today's value is calculated as the current weighted average of prices divided by the weighted average of prices on that base date.  The CPI for 2010 was 218 (compared with 100 in 1983).  That means that prices more than doubled in the 28 years from 1983 to 2010.  (See The Economic Report of the President 2010 for a table of CPI over the years.)
The chained CPI plays with the weights in a way that lowers the measured CPI.   Here's how.  Whereas the regular CPI uses  weights for some prior year -- say, 5 years ago -- which reflect the choices consumers made among all these items back then, the C-CPI keeps changing the weights to reflect the current distribution of expenditures across items.  So... let's say that the price of one item goes up radically while the prices of all other items increase only slightly.  What usually happens is that people stop buying so much of that item and its weight in the index declines while others go up.  Best example is steak vs hot dogs.  Let's say the price of beef is going up faster than other things  (due to all those Chinese rich people who suddenly want to get fat on steaks).  Now, instead of our tasty filets every Saturday night, we have a nice hot dog with kraut and ketchup.  We aren't thrilled, but we adjusted, right?  And we lived within our budget.  Our quality of life has gone down, at least by a smidgen.  And lots of us do this, so that the value of steaks in our market basket today is now lower than it was last month.  So, the government "rewards" us by reducing the weight placed on the price increases for steaks and increasing the weight on all other items, including hot dogs, which haven't increased so much.
One expert, Dean Baker, says that this switch to the chained CPI will likely reduce social security and other pension benefits with COLAs (e.g., federal employees) by about 0.3% a year, or roughly 3% over 10 years.  That's not very much, and it's the result of our resilience as Americans in learning to cope with adversity.  But, IT IS A REDUCTION IN BENEFITS!  So, don't let anyone -- Dem or Republican or TeaParty -- tell you that you haven't already given. 
Now to Wegmans and my shrimp.  I have a very good recipe for Sullivan Island Shrimp, which needs a pound of raw shrimp.  So, I went to Wegmans, found a bag of frozen raw shrimp, couldn't find the price, and finally with help learned that 2 pounds would cost me 29 bucks.  I couldn't believe it.  Rechecked.  Sure enough.  Well, just six months ago, I could get 2 pounds for about 16 bucks.  After much back and forth -- I put it in my cart twice before finally putting it back -- I decided that the nice chicken pot pie in my freezer would do just fine.  "Wow!," I thought.  "I've reached that point -- can't (or don't want to) afford my signature shrimp dish.  Oh, well, I'm coping."  And, of course, I'm helping the government reduce my social security payment in the coming year.

Jul 12, 2011

Vitamin D and Diabetes: New evidence

It appears that vitamin D supplementation may help with pre-diabetic conditions.  See the news item from the National Library of Medicine's Medline Report.