Issue 54 President Obama and CPI April 12,2013

The President has proposed a new budget (again). And he has put out an olive branch to the Republicans that even they have not considered, reforming how inflation is measured so that it is more accurate.

Inflation: This term is used to describe when money loses value. It occurs when there is more money in the system, or other special circumstances occur to cause this financial hardship. Why does inflation occur you ask? Well, the value of money works on the same principles as supply and demand, the more money you have equals less demand and thus less value. The less money there is equals more demand and thus a higher value. Governments typically prefer higher inflation as people get more money even though it is worth less than it really is which in turn allows them to pay off debt easier. However, the negative of this is that the prices of all goods and services skyrocket.

CPI: CPI stands for Consumer Price Index. It is one of many ways to measure for inflation. In this case, CPI is used by the federal government of the United States to determine, based on inflation, how much welfare money is given out, how much government assistance you get with health care and other services, and even how much a senior gets in Social Security and Medicare. Depending on how it is adjusted it can decrease or even increase benefits for those individuals who need aid. For the case of President Obama, he wants the CPI to measure inflation more accurately and thus causing benefits to increase for mostly poorer individuals, and decrease benefits for richer individuals. There for it is a step in the right direction for reforming welfare and other handouts, while saving the government lots of money.

Opposition Response: Republicans were astonished by this olive branch. Every interview I saw had them wondering what the President was thinking. Prior to the Presidents proposal the Republicans supported the Ryan Budget that also changed CPI, but not for anyone over the age of 50. Thus in their budget, only my generation would actually be affected. Republicans only wanted my generation affected out of concern seniors could not cushion themselves from the change in payments as many seniors today need to work even in their 80s to make ends meat.

Political risk: President Obama is putting himself out on a limb politically here. Then again, he does not need to be re-elected, but his fellow Democrats do as well as Republicans. Let’s face it; America’s senior citizens vote the most.

I applaud President Obama for this, even if I do not care for the rest of his budget as it increases taxes again, and even places America in more debt. But it does show he wants a legacy to be remembered. So in this case, I hope he actually does work with Republicans rather than demeaning his opposition into place. However, this proposal still might go no where as the Republicans and Democrats must still agree to the rest of the budget, though I think that is unlikely. Perhaps some actual smart person in D.C. will propose to do one-for-one trades the President getting Republicans and Democrats to reduce tax credits and deductions for the rich in exchange for an altered and more accurate CPI. Republicans will never give on raising taxes, but would be willing to lower them if it is for the middle class and lower. There is wriggle room; it’s just that both sides have to find it first.