Altman and Kingson Respond to CBPP’s Support For Social Security Cuts

10:05 am in Uncategorized by Nancy Altman and Eric Kingson

Nancy Altman and Eric Kingson will be joining us at 7pm ET tonight for an emergency FDL member Town Hall on the looming threat to Social Security and Medicare.  Today they respond to the statement issued by Bob Greenstein of the CBPP in support of cuts to Social Security benefits.

Nancy Altman

Nancy Altman

This Friday, Bob Greenstein, the founder and President of the Center on Budget and Policy Priorities and someone we hold in high regard, issued an unfortunate statement. He explains why he supports a technical change in the Social Security/SSI COLA which, if enacted, would cut benefits for today’s and tomorrow’s beneficiaries. He acknowledges that the current COLA understates the impact of inflation on older American’s benefits. He doesn’t seem to think that the Gang of Six’s and President Obama’s proposed COLA cut really is a good way to index benefits, but he is willing to support the change if several things fall in place.

Specifically, Bob states:

Adoption of the chained CPI would raise some issues for elderly people, because a larger share of their consumption than of the average person’s consumption consists of out-of-pocket health care costs. Since health care costs rise faster than the overall inflation rate, the fact that older people have larger health care cost burdens modestly raises the level of inflation they experience. As a result, both the regular and the chained CPI somewhat understate inflation for the elderly population as a whole.

On the other hand, policymakers will agree to switch from use of the conventional CPI to the chained CPI only if they make this change government-wide — in benefit programs and the tax code alike. And doing so would produce substantial deficit reduction over time, and also would somewhat narrow Social Security’s long-term financing shortfall. We have long favored this policy change, provided that policymakers couple it with measures to soften the impact on the very old and people who have been disabled for an extended period of time (since the effects of moving to the chained CPI mount with the number of years that an individual receives benefits).

Eric Kingson

Eric Kingson

Like many of us who have examined the impact of the proposed chained CPI on older Americans, Bob does not accept the proposition that it provides a more accurate way of measuring the impact of inflation on older Americans who receive OASDI and/or SSI benefits (and probably not on persons with disabilities, either). In fact, his statement implies that the Bureau of Labor Statistics’ Experimental CPI for Americans 62 Years and Older” (CPI-E) provides a more accurate measure than either the chained CPI or the current measure, the CPI-W.

Even so, he is making a judgment that it is okay to compromise the idea that OASDI and SSI benefits should maintain their purchasing power no matter how long someone lives, in exchange for some revenues that help to reduce the long-term deficit. He is willing to make this trade even though two-thirds of the savings would come from the benefit, not the tax, side. (That one- third from taxes assumes that taxes are not lowered elsewhere to offset the increased revenue. Perhaps, most serious, the revenue raised disproportionately hits low and middle income taxpayers. Read the rest of this entry →