Action – Write a comment on the administration’s manipulation of the Consumer Price Index to hurt vulnerable populations.
To improve poverty stats in time for his campaign trail, the Trump administration has decided to pretend that we have fewer poor people. “Instead of actually doing anything to cut poverty in America, Trump is trying to fudge the numbers to artificially ‘reduce’ the U.S. poverty rate,” said Rebecca Vallas, vice president of the Poverty to Prosperity Program at the Center for American Progress. “It’s mathematical gaslighting.” And it’s more than just words – they’re going to do it by weaponizing inflation. If you already understand the economic shenanigans involved here, go ahead and comment. If your eyes just glazed over a little, would you be more interested if we told you that he’s taking money from you too?
Weaponizing Inflation – Think of this as a war game.
The Trump administration’s favorite activity is vacuuming up money from the lower and middle classes into their own pockets, by either misdirecting our attention with well-timed presidential tantrums, or worse, making us co-conspirators.
The object of today’s game is obstensibly to punish the poor, a group that is both ignored and shamed in GOP America. What many of us reluctant players didn’t realize was when the 2017 #TaxScam passed, a bigger game had already started. The middle class, women and the elderly had just joined the poor on the losing side. By structuring this rule request around both a scapegoat class and using dry economic formulas and unfamiliar economic terms as weapons, they are discouraging us from playing. The GOP then scoops the money from the field, all the while saying, “But we told you what we were doing.”
How what you don’t know about can actually hurt you.
Let’s dive in, like an online language course, with some explanatory pictures and get into details later. All you need to know right now is that the rate of inflation helps determine all lot of things, including the poverty line and tax brackets. And that at least one of those items may already be screwing you.
On the left side, a RED line designates the current “Official Poverty Measure”(OPM). Its position is determined by a poverty formula combined with an inflation factor (in yellow) from the Consumer Price Index – Urban (CPI-U). If you and your family fall under the RED line, you are eligible for the anti-poverty measures listed on the illustration.
On the right side, all the people are still in the same position, but the RED line is now lower. This is because the GOP is proposing to use a different type of Consumer Price Index, called the “Chained CPI-U” (C-CPI-U), which makes inflation appear to rise more slowly. Now, some of the people in the diagram are no longer under the OPM and will lose benefits, even though nothing else about their lives has changed. Trump will get points and be able to say he’s reduced poverty.
(Notice, what people believe constitutes ACTUAL POVERTY, is floating above both examples’ Official Poverty Measures, a vestigial calculation from 1963. Only 12.3 percent of people in the U.S. as classified as “poor” (two adults and one child with an income less than $20,212 per year), however more than 4 in 10 adults would struggle to come up with $400 in an emergency and 70 percent of voters have confronted a serious financial hardship in the last year, 1 million school kids were homeless in the 2016-2017 school year, and 15 million households had trouble affording food in 2017 )
“You were mentioning above that a price index might be messing with me now…”
OK. You’re not under the poverty line, so how does this effect you? Because the GOP snuck the C-CPI-U into the #2017 TaxScam and they are encouraged to strike further afield. Sooner or later, either you or someone you love will be affected by these shifts.
On the left side, we show what tax season was like before the 2017 #TaxScam. The inflation factor from Consumer Price Index – Urban (CPI-U) was factored into tax brackets for middle and lower class tax payers so we weren’t penalized for inflation’s effects on our wages.
On the right side, all the people are still in the same positions, but the lower rate of inflation from Chained CPI-U (C-CPI-U) has lowered tax brackets around them, leaving people stranded in the next higher bracket.
As it says in the illustration, the C-CPI-U will aid the GOP is vacuuming $125 BILLION from our wallets and under our couch cushions over the next ten years, and they will extract nearly $500 BILLION from us in the next decade, if we don’t get this fixed.
Y’all remember that Trojan horse story, right…
They got the chained CPI into their #taxscam. They’re trying to slip it into poverty threshold programs. We know that their next stop is the vulnerable population dependent on Social Security. In 2013, the AARP estimated that using a “chained CPI” would hurt seniors and veterans already living on tight budgets stretched by rising utility costs, grocery bills, mortgages and health care with in a combined $146 BILLION cut in 2013 dollars. Here’s some nifty graphics to share from the AARP to talk about that. (These are actually from the Obama era, when he thought he could dangle C-CPI-U as a bargaining chip with the GOP. It was too toxic for them then, but it’s not now…)
OK, so now we can see that the choice of this mysterious “Consumer Price Index” has consequences. So what the heck is it?
Well, it involves a “market basket”. (No, not exactly like this hilarious pic of our president, seeing a can of food for possibly the first time…)Embed from Getty Images
The Bureau of Labor Statistics (BLS) uses a “fixed basket of goods and services” based on a survey of 7,000 American families known as the Consumer Expenditures Survey . The survey determines what goods and services go in the “basket” and how much weight each should get in calculating the overall change in prices. For example, most people spend more money on cell phones than they do on landline phones, so changes in prices in the former are weighted more heavily. The market basket on which the primary CPI is based is updated every two years. (Extra credit for watching this Khan Academy presentation on the CPI-U. It’s actually very interesting.)
CPI-U vs. chained cousin C-CPI-U
Right now, the poverty thresholds are adjusted annually by the CPI-U, or Consumer Price Index for Urban Consumers, which measures inflation by tracking the change in prices for a set group of consumer goods over time, across a range of geographic areas. The CPI-U only accounts for substitutions within categories, such as picking a Granny Smith apple over a more expensive Red Delicious. It, like all the indices, is targeted at the “average” American, not poor or elderly populations.
The administration is proposing to switch to a different measure of inflation, twice mentioning the possibility of using the “chained CPI” (or the C-CPI-U) as an alternative to the CPI-U to “help” determine the poverty line. The chained CPI, which is now depressing our tax brackets, differs from the CPI-U in that it allows for a far greater range in substitutions to deal with price increases, chicken for beef, for example, or a flat screen TV instead of a vacation. This creates a slower rate of inflation by about .3 percent a year.
That means that every year, chained CPI will redraw the thresholds lower than the CPI-U would have, in a way that compounds over time.
Example: CPI-U increases by 2.4 percent a year over the next decade. That means that 2018’s $20,212 poverty threshold for two adults and one child of today would be $25,021 in 2027 (in 2018 dollars).
Example: Chained C-CPI-U increases but is 0.25 percentage points less each year that the CPI-U. The poverty threshold for this family would be about $544 lower at $24,447. By 2037 the difference would grow to $1,439 less.
Because each year’s CPI is based off the previous year’s number, compounding even a small change can create a huge difference in the final number 10 or 20 years down the road. Switching from regular to chained at an estimated 0.3-percent difference each year would cut more than $200 BILLION in inflation-mandated spending over the next decade.
Economists need to do better for the poor. Fans of the chained CPI, mostly conservatives and economists who don’t hang out with poor people, (or angry middle-class people who jumped tax brackets unexpectedly this year), state that the chained index is far more “accurate” than the regular version, due to the 4x a year reporting and the more extensive switching between products. However, they have failed to put forward any evidence that the chained CPI itself accurately captures changes in the cost of living for low-income households. In fact, they don’t seem to know how poor people shop or that studies have shown that inflation rises faster for household with income below $20,000 (33%) than for households with incomes above $100,000 (25%)
“A person who receives SNAP has a limited food budget, and for them, the price of all food might be too high. In addition, chained CPI might not be as accurate for populations who cannot substitute, because they spend most of their income on necessities without comparable substitutes—medicine, transportation, housing. As Nancy Altman, president of Social Security Works, asks, “What do you substitute if your insulin is too expensive?”
Poor consumers are often stuck buying from stores within walking distance, buying only as much as they need or can carry, or being forced to buy products at higher prices because they lack the resources to buy in bulk or wait for sales. Even if these households have the option to buy groceries in bulk, it is meaningless if they lack a refrigerator, kitchen, or flexible schedule that allows time to prepare food. Plus, membership fees at places like Costco and Sam’s Club can be insurmountable barriers to entry, even if membership would pay for itself over time in saved costs.
This isn’t even touching on how expensive it is to be a low-income individual when it comes to banking, transportation, and housing. An analysis of the top hundred U.S. metros have “housing costs growing more quickly for those in the bottom half of the income distribution than for those in the top half.” Further, the disparity continues not only between the rich and the poor but for renters and homeowners, too.
Some Poverty FAQ’s
- The poverty thresholds the Census publishes are the basis of the poverty guidelines issued by HHS. And HHS’s poverty guidelines are the basis of eligibility for a whole range of programs that help people meet their basic needs. Making this change would have long-term echo effects, chipping away at eligibility over the years.
- School kids qualify for free meals and milk if they are at less than 130 percent of the federal poverty guidelines, and for reduced-price meals and milk if they are at less than 185 percent of the guidelines.
- Children up to age 5 can are eligible to attend Head Start or Early Head Start if they are poor (as defined by the guidelines).
- Low-income taxpayers can receive assistance resolving disputes with the IRS if they are at or under 250 percent of the poverty guidelines.
- Who would be affected by a change to a chained CP!: By the tenth year of using “Chained” Indexing…
- More than 250,000 low-income seniors and people with disabilities would lose or receive less help from Medicare’s Part D Low-Income Subsidy Program, meaning they would pay higher premiums for drug coverage and/or pay more out of pocket for prescription drugs.
- More than 150,000 low-income seniors and people with disabilities would lose eligibility for a program that covers their Medicare Part B premium, meaning they would have to pay premiums of over $1,500 per year to maintain Medicare coverage for physician and other outpatient care.
- More than 300,000 children would lose comprehensive coverage through Medicaid or the Children’s Health Insurance Program (CHIP), as would some pregnant women.
- More than 250,000 adults would lose coverage through the Affordable Care Act’s (ACA) Medicaid expansion, and some very low-income parents covered through Medicaid in states that haven’t adopted the expansion would lose coverage as well.
- Millions of ACA marketplace consumers would receive lower premium tax credits, meaning they would pay higher premiums, and more than 150,000 would get less help with cost sharing, meaning their deductibles would increase.
- Nearly 200,000 people would lose food benefits through the Supplemental Nutrition Assistance Program (SNAP).
- More than 100,000 students would become ineligible for free or reduced-price lunch, and more than 100,000 would lose free meals but remain eligible for reduced-price lunch.
- About 40,000 infants and young children would lose access to care such as breastfeeding support and healthy food through the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC).
CPI-W vs. Chained C-CPI-U vs. CPI-E = A war on our elders
(Note: This video is from 2012. However, the point is the same. Chained CPI would be bad for seniors, and this is where the administration is going to head after they “disappear” poor people.)
Social Security benefits are based on a Consumer Price Index called the CPI-W. The latest Cost of Living (COLA) base on its formula gave seniors an average of an extra $4 a month. The CPI-W is based on the expenditures of wage and clerical households in urban areas, an employed population with needs very unlike most retired Social Security beneficiaries, and whose consumer spending are reflective of people who work. It tracks fairly similarly to the regular CPI-U. Concerns in 1987 that the “market basket” was not accurate for an elderly population, instigated what is now a long term “experiment” called the Experimental CPI for Americans 62 Years of Age and Older (CPI-E). Seniors 65 and older spend more than twice as much on health care, and those 75 and older spend nearly three times more on health care than younger consumers. Not only do health care expenditures steadily increase with age but health care costs have also consistently risen much faster than other market basket categories. Seniors spend a significant portion of their income on out-of-pocket health care expenses not covered by Medicare. As time goes by, more and more of their Social Security benefit checks will be eaten up by rising health care costs. According to the Medicare Trustees, 33 percent of the average senior’s Social Security check will be consumed by Medicare out-of-pocket costs by 2091, compared with 25 percent today. The CPI-E, or experimental Consumer Price Index for the Elderly, weights health care and housing costs more heavily to simulate the basket of goods consumed by seniors. On average, it increased 0.2 percentage-points more annually than the current CPI.
That we’re even having this discussion, especially with the regulation site’s questions tilting towards a chained C-CPI-U, means that the GOP has got the current inflation index that controls Social Security squarely in their sights. They got away with their #TaxScam without our notice. Now they want a double play and a chance to cut Social Security.
So let’s not play their game. Tell them that the market basket and inflation figures of the chained C-CPI-U has no relation to the spending habits of the elderly, and although the current CPI-W is marginally better, it’s time that a more appropriately focused index – the CPI-E, was applied. The federal government needs to provide the resources for Bureau of Labor Statistics to finish its research and to expand the sample size of individuals age 62 and older to match the other BLS indices, to conclude its analysis, and adopt a more accurate consumer price index for the elderly.
CPI vs. PCEPI – People vs. Corporations
There are two broad indexes of consumer prices: the consumer price index, or CPI, what households are buying, and the PCEPI, the personal consumption expenditure price index, which is based on what businesses are selling.
(Federal Reserve Bank of Cleveland) Both indexes calculate the price level by pricing a basket of goods. If the price of the basket goes up, the price index goes up. But the baskets aren’t the same.
The first difference is sometimes called the weight effect. People spend more on some items than others, so they are a larger part of the basket and thus get more weight in the index. For example, spending is affected more if the price of gasoline rises than if the price of limes goes up. The two indexes have different estimates of the appropriate basket.
The second difference is coverage or scope. The CPI only covers out-of-pocket expenditures on goods and services purchased. It excludes other expenditures that are not paid for directly, for example, medical care paid for by employer-provided insurance, Medicare, and Medicaid that included in the PCE.
The third difference is how spending changes in their respective baskets. The PCE tries to account for substitution between goods when one good gets more expensive. Thus, if the price of bread goes up, people buy less bread. The PCE uses a new basket of goods that accounts for people buying less bread.
The Fed likes this system, but once again, as you can see from the graph above, it’s creates a much lower rate of inflation.
The OMB needs to rethink this whole deal…
(chn.org) “OMB has said it is not seeking comment on the impact of changing the HHS poverty guidelines. However, if OMB is considering going forward with a change to the poverty thresholds that would affect the guidelines, it should certainly not be undertaken without in-depth research and analysis, and should solicit public comments regarding impacts such as the number of individuals losing assistance and a demographic profile of those individuals and families, how service providers would be affected, and how the impacts would change over time. The onus should be on the federal government to conduct these kinds of extensive analyses before suggesting a policy change that would harm large numbers of people.
It has long been understood that the Official Poverty Measure is incomplete and outdated. It was first set during the Johnson Administration after research showed that low-income families at the time spent about one-third of their income on food. Since then, it has basically been increased for inflation, but without a serious revision based on current spending patterns.Today’s families with children, for example, spend a high percentage of their income on housing and child care. Similarly, not all income sources are included in the Official Poverty Measure (also known as the Poverty Threshold).
Changing one small aspect of the poverty measure (the annual inflation adjustment) is certain to result in further inaccuracies. Any change should build on existing research that suggests the official poverty measure is too low for most types of households, and that shrinking the inflation adjustment will make it less accurate, not more. The Bureau of the Census has begun this kind of research, developing the Supplemental Poverty Measure, which does count income sources such as SNAP and refundable tax credits, as well as taking into account more accurately expenditures such as housing, child care, and out of pocket medical expenses. The Supplemental Poverty Measure shows a somewhat higher poverty level and rate for most types of households, as compared to the official measure.
We know that households just above the official poverty line report higher than average rates of food insecurity and difficulty paying rent and utilities. They are more likely to be uninsured. These facts suggest that shrinking the annual rate of increase in the Official Poverty Measure will artificially push people over the poverty line even though they struggle to make ends meet. Such a change would be unsupported by the evidence, and would have unfortunate impact of increasing hardships for people who work at low and volatile wages, and for retirees whose earnings were never high and who were unable to build adequate savings.
OMB should not ignore all the evidence of low-income worker and retiree spending and income patterns and simply shrink the annual inflation adjustment for the poverty measure. Far from making the annual assessment more accurate, it will make the current flaws worse. People who would be most adversely affected by this unsupported change include children, single mothers, people of color, people with disabilities, and low-income retirees.”
Alternate measures of poverty.
ALICE:As an alternate measure of households’ ability to meet basic needs, the United Way of Northern New Jersey has developed the Asset Limited, Income Constrained, Employed standard (ALICE). This is a new way of defining and understanding the struggles of households that earn above the Federal Poverty Level, but don’t make enough to afford a bare-bones household budget. The ALICE research team develops a Household Survival Budget that estimates a county’s total cost of all household essentials, plus taxes and a ten percent contingency. The team then develops a threshold minimum income level that covers this basic household budget. An income assessment then measures the income households need to reach the threshold, the income a household actually earns, the amount of public and nonprofit assistance provided, and develops an “unfilled gap” that estimates the shortfall between the threshold and the combined value of a household income and public and nonprofit assistance provided. [CA doesn’t have a report yet, but other 18 other states do.]
Self-Sufficiency Standard: Another alternate measure of poverty is the Center for Women’s Welfare Self-Sufficiency Standard. This standard, developed by Dr. Diana Pearce, is another budget-based measure of the real cost of living for a household. The Self-Sufficiency Standard determines the income required for a working family to meet basic needs (including taxes), taking into account family composition, ages of children, and geographic differences in costs. The Self Sufficiency Standard shows that it takes income well beyond the poverty line to meet basic needs. The standard aims to be as consistent and accurate as possible while accounting for differences among family types and cost of living in different regions. Costs are calculated for over 700 family types, including one adult with no children, one adult with one infant, one adult with one preschooler, and so forth up to three-adult families with six teenagers. There are special weighted standards for families with seven to children or four to ten adults. So far, this measure has been calculated for 41 states. List of all states with standards. CA standard.
So, what do they want us to talk about…
The OMB is seeking comment from the public on:
(1) The strengths and weaknesses of the indexes for different applications or uses;
(2) the strengths and weaknesses of the use of the CPI-U to make annual adjustments to the OPM, as established in OMB’s Statistical Policy Directive #14, and discussion of potential alternative indexes;
(3) the strengths and weaknesses of the different indexes for making annual adjustments to the historical income figures produced by the Census Bureau;
(4) the need for and feasibility of guidance from OMB or other Federal source explaining the differences between indexes and best practices for their use;
(5) recommendations for the use of the PCEPI and C-CPI-U for the production of official statistics, considering that both measures are revised after initial release.
Trump wants to make this change…can he do it?
It’s not clear whether, legally, the Trump administration can make this change on its own. As attorney and liberal welfare policy expert Shawn Fremstad notes, there are several statutes instructing the Secretary of Health and Human Services to update the poverty line in accordance with the CPI — not the chained CPI.
But the use of a “request for comment” suggests the administration might try to do this through regulation anyway, and fight it out in court later.
Georgetown law professor David Super noted in an email, “To the best of my knowledge, previous discussions have almost always assumed that legislation is required.” He thinks it would most likely be required to make this change too.
But don’t wait for the courts to save you, your family or those you love. Wade on in and make a comment, even if it’s just to say you’re going to help vote out everyone who had a hand in this “game”.
How to comment
- First of all, don’t let these bandits intimidate you from making a comment because you’re not an economist or involved with a government agency.
- Remember – this is not a benign “just looking for information” fishing expedition. These people actively want to both hurt vulnerable populations and grab more tax dollars from us. They’re annoyed that they have to do it in the open, but also hoping we’re too stupid to understand what they’re doing, or too lazy to do anything about it.
- Choose one or more of their numbered points to discuss. Pick a program or population that’s dear to you. There’s plenty of information in the post above to comment on any one of their questions.
- You can submit as many comments as you want. They can be a couple of sentences, a paragraph or two, or a full on attached letter.
- DO NOT COPY OTHER PEOPLE’S WRITING. ALL COPIES WILL BE ELIMINATED!
- Comments are critical to show the Trump Administration that we’re watching them…this issue isn’t just going to slip through the cracks like their back-alley switch to the chained CPI for our tax brackets.
- In fact, feel free to mention that. Those who supported the insertion of the chained C-CPI-U inflation index into our tax system should be on notice for their role in that attack on us before the next election.
- Express that there is wide-spread concern with how changing the poverty line could hurt millions of people.
- The OMB’s notice specifies that it is not “seeking comment” on how its proposal would affect the poverty guidelines that HHS develops and that govern the eligibility limits in programs like Medicaid. You can “respect” this or not. Answer one of their points and say what you want about the immorality of this whole thing.
- Add a comment on how the Administration presented no research on how low-income families’ costs for basic necessities has changed over time
- Add a comment on the adequacy of the poverty line itself as compared to the cost of basic necessities
- Add a comment on the implications of changing the poverty line for individuals’ and families’ access to needed assistance.
- Add a comment on presenting a proposal on changing indices that can hurt so many without research or data is disrespectful to commenters.
- Publicize the impact on people: loss of health, nutrition or other assistance. Comments can show who would be denied assistance, such as children, minorities, seniors, or people with disabilities.
- Question the validity of proposed changes to the inflation index: The Trump Administration has highlighted a specific alternative inflation adjustment, called the Chained Consumer Price Index for Urban Consumers (C-CPI-U). It rises about three-quarters of a percentage point more slowly than the measure now used to adjust the annual poverty measure. You’ll see more details about this below, but research has indicated that the Chained CPI may not be valid for people who are poor or near-poor.
- Point out that any attempt to measure poverty accurately needs far more than a change in the inflation adjustment; it should take into account current estimates of income and expenditures. It should also take into account the evidence that people with incomes now defined as above the poverty threshold suffer considerable hardship (food insecurity, little or no savings, falling behind in rent or other bills, etc.)
- Raise questions that can be influential either with important policy-makers or with courts: Key members of Congress may weigh in with the Trump Administration to persuade them of the harm of such a change or work to prevent it via legislation. If there is litigation around changing the inflation adjustment, comments may guide court decisions.
- You can begin with information about who you are and why you are commenting: for example, if you’re an expert in the field, or someone who would be affected by a change in how poverty is measured.
- If you/your organization work with any of these programs, or work with people who utilize them, you can make important comments about how these programs benefit people and the danger of gradually reducing the number of needy people who would qualify for them. It is not necessary to estimate how many people would lose assistance in order to make these comments.
- Use the table of contents in this link to find the program areas that matter to you or your community most. Feel free to elaborate based on your own experience or provide your own evidence.
- Copy and paste sample text about the inflation measures as well as points about better measures of poverty as well. They’ve provided specific papers full of great grab and paste statistics here.
- Read this awesome comment by the Center on Budget and Policy Priorities for inspiration – It’s a monster letter. A couple of sentences or a paragraph is great too.
- Once your comment is submitted, we recommend contacting your elected representatives in Congress as well. Let them know you have left a comment on this issue, and that they ought to oppose any change to the way poverty is calculated that would harm people who depend on benefits.