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CBB -- Thanks for sharing your input. You've covered several points and I agree with most of them; however, let me elaborate a little more.
Regarding the Chained CPI, like all the other CPI indices (CPI-U and CPI-W), it is based on a basket of consumers goods and services assumed to be purchased by a consumer each month. Many of the complaints by seniors focus on the item/weights in that basket...some say it should put more weight on medical expenses as that tends to hit seniors more. I won't go into all that here.
I have, however, spent time looking at the Chained CPI, and as a senior, I believe it is more accurate of the way we spend money. We are generally frugal, and we shop carefully, taking in sales and substituting other products when a particular product is priced too high. That's what the substitution part of the Chained CPI covers. In effect it's sort of a price-demand consideration on top of the other formula for assumed monthly purchases.
To illustrate the point, both the CPI-U and the CPI-W have a fixed basket of products and services, and if the price of product X triples then the respective CPI's that include Product X also go up accordingly, depending on how much weight they assign to that product. However, if the tripling of the price pushes most consumers to Product Y, which is priced at half that of Product X, are those consumers really being hit in the pocket book by that inflationary increase in Product X? No...not as long as they have a choice. That's what the Chained CPI does...it assumes substitution although the way they handle it mathematically is mind boggling.
Anther point I should make about CPI-W as it is used for SS COLA. Although the Bureau of Statistics calculates the number monthly, the Social Security Administration only uses a three month period (July, August, September) to calculate the changes in prices from year to year. Why these particular three months? I don't know...maybe it's a carryover from the days when we used calculators instead of computers, but they've been doing it that way for a long time. So what is unique about these three months? Well for one thing, food prices tend to be lower in these late summer months because farmers are harvesting their crops. Any spike in food prices in say January will not be reflected in these numbers. And home heating oil? Does anyone really believe that these three warm months are representative of the year as a whole? On the other hand, it's also hurricane season and gasoline prices can also be volatile in this three month period if the gulf coast infrastructure for oil and gas is threatened or shutdown. I could cite more examples, but will leave it at that.
The Chained CPI for SS COLA not only assumes substitution when a product's price goes too high, it also covers 12 months of the year instead of only three. It is more accurate than the other indices that apply fixed weights of buying no matter the price...for just those three months of the year.
Yes, I agree that the calculation of the more recent Chained CPI monthly numbers are subject to revisions (much like the unemployment numbers), but these revisions are relatively small, can go up or down, and can easily be rolled into the next year's COLA calculation if necessary.
The bottom line is that I don't think that my welfare as a senior would be affected by the adoption of the Chained CPI. But as long as Republicans think it's the holy grail for liberals, let's use it as a bargaining chip.
On your other point about further reductions in spending via Sequestration, yes these are really worrisome. I don't fully understand the effect of demand leakages and other factors like QE, but I am pretty sure that there are very smart people that want to make our economy falter for no other reason than to make Obama's presidency an economic failure. They will never approve a Jobs Act or any other measure that might improve the economy while President Obama is in power. The Tea Party members of government that want to STOP government, answer to their "sugar daddies" and not the American people.
They rely on the ignorance of the American people.