Switching to a stingier method of adjusting Social Security benefits is supposed to be OK because we can just “substitute” an equivalent good for one that’s become too costly. But what if that substitution becomes permanent? The chained CPI is perhaps the first—at least the most blatant—attempt to write the acceptance of downward mobility into the rules of economic management.

A lot has already been written about President Obama’s proposal to switch to the chained CPI for annual adjustments to Social Security (and many other) benefits. I hope you haven’t reached your limit on the subject, because I want to urge to read just one more, from last month. It’s FDL blogger Masaccio’s vital and bluntly titled piece, “Chained CPI Means You Can’t Have Nice Things.”

Masaccio, who’s been writing valuable economic commentary for years that all us non-professionals can easily understand, starts with a closer examination of the “substitution” concept behind the chained CPI, and then makes some provocative suggestions about what this all means—specifically, the end of the consumer-driven economy and the managing-down of the American standard of living.

Let’s start with the first point. As has been noted endlessly, proponents of the chained CPI assert that the standard Consumer Price Index has been getting it wrong all these years because Continue reading →