Benefits on the Line

Seth Wenig/AP Photo

Pastora Spraus organizes her pocketbook after paying for groceries with an EBT card in West New York, New Jersey. 

This article appears in the Summer 2019 issue of The American Prospect magazine. Subscribe here

Detroit resident Walter Travier-EL just got out of prison after serving 48 years. He wants a job, but the state is having issues helping him secure a state ID and a new Social Security card—his old one is long lost. For now, Travier-EL survives on Supplemental Security Income (SSI), the Supplemental Nutrition Assistance Program (SNAP, commonly called food stamps), and Medicare. But it’s not enough.

Travier-EL wants a chance to improve himself: some savings to put away for a house one day, or some money to help him secure a car, to get to the jobs he’s been offered but so far can’t accept. At the very least, he wants independence. “I was looking for the standard of living, so I can be a taxpayer and not [reliant] on the state,” he tells me. “If you’re going to give me a chance, give me the standard of living.”

Those living on the edge can testify to the inadequacy of public benefits and the stinginess of the so-called welfare state for millions of Americans. The poverty line decides who is poor and who is not, and earning just $1 over the eligibility limit could mean losing food benefits or child care. Regional differences are not accounted for—it doesn’t matter that the average annual cost of car insurance is $5,414 in Detroit, almost four times the national average.

The Trump administration may be planning to reduce benefits even more, utilizing something called the Chained Consumer Price Index for All Urban Consumers (chained CPI) to calculate the inflation rate and adjust program benefits accordingly. This simple change could reverberate across the lives of the poor, making them even poorer and putting the health of seniors and people with disabilities at risk. Though the difference would initially be slight, it won’t seem small for the affected population. “We’re talking about people using pennies to scrape by,” says Danielle Atkinson, director of Mothering Justice, an advocacy group in metro Detroit. After several years, millions would be affected and the erosion of benefits would be much more severe.

If chained CPI sounds wonky and boring, that’s because it is—it’s the perfect stealth way to cut public-assistance programs while both bypassing Congress and pulling the wool over the eyes of anyone who isn’t an economist. It could even bleed into the largest benefit program—Social Security. And most confounding of all, it used to have liberal support.

 

THE POVERTY LINE'S origins date back to a research project by Social Security Administration economist Mollie Orshansky in the 1960s, and it doesn’t keep up with a current standard of living. No administration wants to alter the poverty threshold to more accurately reveal the extent of poverty in America, because then they’d be tagged with making poverty worse. But the Trump administration wants to move things in the opposite direction.

As part of its sustained attack on anti-poverty programs, the administrationin early May opened a “request for comment” on how the poverty line is determined each year. By asking for public comment, the administration is paving the way to use regulatory, and not legislative, authority to make this change. While that may not be within their capacity, statutory ambiguity has not deterred the Trump administration before.

Currently, the poverty threshold is adjusted for inflation via the Consumer Price Index for All Urban Consumers (CPI-U). The administration is considering a variety of other inflation measures. The one to pay closest attention to is chained CPI, which has often been proposed by conservatives as a way to reel in Social Security funding, but not necessarily for the poverty thresholds.

Chained CPI, first introduced in 2002, assumes that consumers will substitute across categorieswhen prices changeIf prices are too high for a vacation, then you’ll spend money on something else for your personal leisure, like a flat-screen TV. Or if the price of muffins is too high, you’ll buy breakfast cereal. If consumers are choosing different purchases to counteract rising prices, the theory goes, inflation in practice rises more slowly than under other measures. (Note that the CPI-U also takes substitution into account, just not to the fullest extent.)

Many economists claim that chained CPI’s full recognition of substitution makes this measure more accurate. But chained CPI only works well for economists, who think of people as abstract “rational consumers”—widgets in a theory class. When real people come into the equation—specifically low-income people, seniors on fixed incomes, the homeless, and people with disabilities—things get tricky.

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?”

You may think that simply adjusting the way inflation is measured would not have much impact. But Aviva Aron-Dine, vice president for health policy at the Center on Budget and Policy Priorities (CBPP), explains that the effect on the poverty level compounds quickly, and “continue[s] to grow over time in perpetuity.”

According to a report by Aron-Dine and Matt Broaddus, senior research analyst at CBPP, chained CPI would after ten years lower the poverty line by 2 percent and cause millions of low-income people, seniors, and people with disabilities to either become ineligible for benefits or receive less assistance. Hundreds of thousands of seniors would lose or have reduced assistance from Medicare Part D, which helps cover the costs of prescription drugs. More than 300,000 children would lose Medicaid and Children’s Health Insurance Program coverage. Many seniors would be forced to pay higher premiums through Medicare, while many adults would lose their Medicaid altogether. And millions of people would see the amount of premium assistance through the Affordable Care Act fall.

A slew of other programs within the federal safety net would also be affected. Larger programs like SNAP would be impacted, alongside smaller programs like public legal aid, Head Start, and the Low Income Home Energy Assistance Program (LIHEAP), which helps families with heating costs. According to a 2018 report from the Congressional Budget Office, switching to chained CPI government-wide would reduce spending on federal programs by $37.5 billion over ten years.

The Trump administration knows that chained CPI would affect eligibility for public-assistance programs, but in its request for comment the Office of Management and Budget explicitly states that it “is not currently seeking comment on the poverty guidelines [used to determine eligibility] or their application.” To them, loss of benefits may be a feature, not a bug.

The change would increase material hardship while also artificially making it appear that the government is achieving progress at fighting poverty. “It would hurt people who are so close to getting help,” says Tracey Gronniger, directing attorney for economic security at Justice in Aging, an advocacy group for low-income seniors. “All of sudden, you have hundreds of thousands of people who are told, ‘Now you’re not poor anymore.’”

 

ALREADY, THE TRUMP administration has instituted chained CPI in how it adjusts tax brackets for inflation, as a part of the 2017 tax reform. Attaching chained CPI to the tax code planted the seed to use it in public-benefit programs, and perhaps others.

A shift in how Social Security benefits are adjusted for inflation would require legislative approval, but if chained CPI becomes the new standard, Republicans could simply say that they’re making the administrative state more uniform, by tying chained CPI to Social Security. Altman certainly believes so, calling the move just “a step toward getting at the largest program that’s indexed [by inflation], and that’s Social Security.”

Tying chained CPI to Social Security might sound familiar. Back in 2012, President Obama proposed it as part of his “grand bargain” to reduce the deficit. (In fairness, Obama explicitly excluded means-tested programs from his proposal.) Then–Senate Minority Leader Mitch McConnell jumped all over the concept, stating that “the President seems prepared to finally concede this time that at least something needs to be done to save entitlements from their inevitable slide toward bankruptcy.”

Chained CPI would have had the same gradual impact on seniors’ Social Security payments as it will on public benefits. Over a ten-year period, chained CPI would have cut Social Security benefits by more than $107 billion. The average worker retiring at 65 would have seen a $650 reduction in benefits by age 75, and then $1,130 by age 85, according to Dean Baker, senior economist at the Center for Economic and Policy Research.

Some left-leaning organizations like CBPP and the Center for American Progress were open to the change. Other Democrats signed on too: Then–House Minority Leader Nancy Pelosi saidthe proposal amounted to “a strengthening of Social Security.” But it also received sizable progressive backlash. Senator Bernie Sanders of Vermont called chained CPI “a devious and underhanded way to wage class warfare against working families.”

Republicans ultimately didn’t bite on the compromise, recoiling from the prospect of raising taxes in the bargain. Some Republicans used Obama’s olive branch to stir up the public, claiming that he, not they, wanted to cut benefits. Altman remembers seniors calling Republican representatives to express concern over chained CPI, and getting the response that it was a Democratic proposal. In 2013, then–National Republican Congressional Committee Chair Greg Walden called Obama’s chained CPI proposal “a shocking attack on seniors.”

Obama reversed course when crafting the 2015 budget and endorsed expanding Social Security, which is now the official platform of the Democratic Party. But it seems likely that under pressure, Republicans today could point to chained CPI as a policy once pushed by a Democratic president. “They can [ask Democrats],” Altman warns, “Why are you against a Democrat’s proposal?”

For all the talk of indices and inflation, it’s difficult to remember thatthe economic stability and securityof millions of people is at risk. Indeed, this is likely by design: The complexities of the administrative state and economic system make understanding the impact burdensome. And that burden, like the burden of switching the poverty line’s inflation measure to chained CPI, falls most heavily on the most marginalized.

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