THE “CHAINED CPI” is a good idea, despite its obscure, vaguely scary name. “CPI” stands for “consumer price index,” and “chained” refers not to some sort of punishment but to the fact that, for technical reasons, it is more closely linked to people’s buying habits than the version of the CPI the government usually uses to adjust various key program benchmarks for annual inflation.
Even good ideas can have bad applications, though, and so it is with the announcement Tuesday that the White House is considering a new rule that would require using the chained CPI to inflation-adjust the official poverty line, currently $25,750 for a family of four. This is crucial because a family’s receipt of subsidized housing, food-buying assistance and Medicaid can be determined by whether its income puts it below or above the poverty line, and by how much. In general, the lower the poverty line, the fewer people are defined as sufficiently poor to qualify for means-tested federal programs. And chained CPI would leave the poverty line 2.4 percent lower 10 years from now than it would otherwise be, according to calculations by Louise Sheiner of the Brookings Institution; 20 years hence, the difference would be 4.8 percent.
In short, the White House proposal, which must still survive a public-comment period before taking effect, looks very much like an effort to cut spending on programs for the poor that the Trump administration would be unable to reduce through legislation.
We repeat: There is a case to be made, on grounds of both accuracy and consistency, for adopting the chained CPI across all government programs. We backed President Barack Obama’s (failed) 2013 proposal to apply chained CPI to Social Security benefits, with appropriate protections for extremely low-income elderly people, as a means of assuring long-term solvency for that key program. What’s more, the most fiscally responsible feature of the $1.5 trillion 2017 tax bill — otherwise a deficit-funded Christmas present for upper-income individuals and businesses — was its application of the chained CPI to tax brackets. Those thresholds will now increase more slowly than they would have under previous law, thus pushing more people into higher tax brackets, and yielding $134 billion over 10 years, according to the congressional Joint Committee on Taxation.
What there is no case for is the Trump administration’s proposed selective application of the chained CPI to the poverty line, taking advantage of a legal loophole that makes that key statistic subject to administrative rather than legislative change. Rather, the whole concept of the poverty line, still mostly unmodified since bureaucrats developed it more than half a century ago, is due for an overhaul. It should more accurately reflect the true benefits (including government aid) as well as costs (including work-related child care and transportation) that today’s frequently female-headed poor families face. Only after that has occurred would it make sense, economically and morally, for policymakers to discuss more accurate ways of adjusting it for inflation.
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