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That’s what President Obama’s aides keep saying. They generally don’t put in those terms, probably because they assume that everyone already knows, but the cut to the typical senior’s Social Security benefit from the adoption of the chained CPI would be a larger hit to their income in retirement than the increase in income taxes put in place at the start of the year is the typical affluent taxpayer.
The arithmetic on the chained CPI is straightforward. It reduces benefits by an amount that increases 0.3 percentage points each year a person is retired. This means that after 10 years the reduction in the annual benefit would be 3.0 percent, after 20 years the reduction would be 6.0 percent, and after 30 years the reduction would be 9 percent. If we assume that a typical beneficiary lives long enough to collect benefits for 20 years, their hit from the chained CPI would on average be 3.0 percent over this period.
For the typical retiree, Social Security benefits are close to two-thirds of their income. This means that the use of the chained CPI would amount to a hit to their income of approximately 2.0 percent (two-thirds of 3.0 percent).
By contrast, if we assume that a couple earning $500,000 a year is the typical household affected by the tax increase, then their additional tax burden will be 4.6 percent of their income over $450,000 or $2,300. If we assume that this couple had not unusual exemptions (or even usual ones), then their after-tax income before the tax increase would have been around $350,000. This means that the Obama tax increase would reduce their after tax income by a bit less than 0.7 percent. This means that the hit to Social Security beneficiaries from the chained CPI will be around three times as large as the hit to the typical affluent taxpayer from the Obama tax increase.
Reduction in Income:
Chained CPI and Obama Tax Increases
38 Comments
Obama is an evil man. Dean I would love to see debate with you, Bill Black, and Chris Hedges on one side vs any right winger from team Obama/GOP on the other.
Short, accurate, to the point, and completely unreported by the corporate media.
Of course, it’s simple math, which is beyond their comprehension. Recc’d.
I think you’re being much too charitable in assuming it’s beyond their comprehension.
I truly don’t understand his obsession with cutting SS. It is irrational. Unless he wants to hurt old poor people.
Is Barry messing with us again?
I can’t imagine Hillary Clinton even proposing this.
If you look at it logically, it makes no sense. My conclusion is that Obama is as cruel as the Mitt and Paul Show.
It’s an inside player’s game and we’re the Patsies. Hillary warmongered like a Kissinger. What makes you think she’d be any different?
Perhaps a politically astute move for Hillary would be to call bullshit on this charade. Social Security has nothing to do with the deficit. It’s fuly funded 20 years into the future. All it needs is the cap raised so the rich can pay more into it.
Any time now would be Grand.
Hillary?…
Bueller?…
The former Mal-Wart lawyer and Senator from Wall Street?
The arithmetic on the chained CPI is straightforward. It reduces benefits by an amount that increases 0.3 percentage points each year a person is retired.
AND, it reduces the starting benefit by an amount that grows every year from its year of enactment. So a 35 year old person who will retire in 30 years has a 10% LESS STARTING BENEFIT (because the starting benefits which grow every year also will be growing based on the cheapo chained CPI). AND THEN, his benefit will continue to be lessened in growth after he retires. So while the hit today is around 9%, for today’s 35 year olds it will be 19% in all, for todays 25 year olds around 23% (compounding).
This clever little trick should be widely publicized. THE YOUNGER YOU ARE THE MORE THIS WILL HURT YOU IN RETIREMENT.
Obama does hate the middle class, my mama told me so!!!
His obsession is pathological and borderline bizarre. Everything he does always come back to this “debt deal”. This is the only thing he seems to care about.
He is one of the most visionless, narrow minded people to ever sit in the White House.
And Obama wonders why his approval rating is going south, especially with independents. Guess cutting Social Security is still a political loser, and always will be.
Obama really wants to be a political loser.
Of course the 1% via their Marionette Bamz want to rip off the working & middle classes by gutting & cutting Soc Sec & Medicare. It is to drive us all further into poverty. Someone who is hungry weak sick will: a) die faster, b) be grateful for any crumb tossed to them, c) be willing to work for squat.
Welcome to the New World Order. Ever been to a third world country? Coming soon to your own back yard….
Meanwhile my Obamabot friends STILL worship at his feet. He is the 2d Coming in their eyes & no pesky facts need get in the way of their worshipful obesecience.
Obama neither wonders or cares about his approval ratings. Why would he be bothered with such piffling trifles? Seriously. Obama’s a kazillionaire & is not running for office. Why should he give a shit about some polls??
I’m quite suprised that so many people here don’t understand why Obama and his handlers are determined to “Strengthen Social Security”.
Doesn’t anyone remember Al Gore and his Lock Box, an idea he pilfered from Paul Ryan. The US gov has been spending the surplus from the SS Trust Fund for many years now and that money will have to be payed back some day in the future.
By that time the Vampire Squid will have finished sucking the last drop of wealth from the Losers in our Capitalist game, namely the people, guess who will have to pay the piper? The only ones with the wealth to pay that bill will be the rich and corporations and they will do whatever they can to reduce that debt without paying for it.
Obama is simply carring out his corporate mandate to lighten their future load and only a More Effective Evil Democrat could get the job done.
I can. Cutting “entitlements” has been a goal of the DLC/Third Way types for years and she was a co-founder of the DLC.
Her husband did it to welfare and she thinks it was a great President.
If anything, Hillary is to the right of Obama.
Didn’t Chelsea work on Wall Street? And isn’t Chelsea’s husband an investment banker?
Working class people have been conditioned since at least the early 1930s to think Republicans are their only enemy and Democrats are their only friends.
However true or false that may actually have been almost a century ago, the paradigm has changed now; and change is hard. It’s also much easier to sit around and take cheap shots at Republicans than try to figure out how people with almost no power and little money fight both major political parties at once.
Thank you Mr. Baker, rec’d.
It’s called “shared sacrifice”. Our share is just a “little” bigger.
Until recently ours was the only sacrifice. And somehow along the way a bargain was made that didn’t let the estate tax and capital gains tax return to their previous levels without gaining anything of real value to the public. Like the end of these discussions – period. You want those tax cuts back. This wrangling over the budget tying up the government is over. The sequester is called off and the debt ceiling limit is increased by 20 trillion. But we couldn’t have that, because then we wouldn’t have the excuse for this raping of the American working class. And that is what it is.
And yes, we should make the point that this IS the true theft from our grandchildren, unlike Social Security.
Not just in making seniors more dependent on their children, but in reducing their benefits to begin with .
Chained CPI is a scheme that was invented by Alan Simpson–yes this is the Republican a-hole that Obama appointed to head up his so-call “Deficit Commission” a couple of years ago along with Erskine Bowles, a pseudo Democrat like Obama. BOTH Simpson and Bowles are rabid anti-social security, although of course they have been on the government dole most of their lives. So you can rest-assured that any financial mumbo-jumbo invented by these two is not anything that will benefit those who live on a fixed income. ’Nuff said–right?
As for Obama, if people, especially Seniors, don’t know by now that Obama is on the side of the investor class, they never will.
It’s alwasys good to know who your friends ain’t.
Here’s a LINK to a post on how the chained cpi hits women and those with the least SS benefits, the hardest. The chained cpi is bad policy because it hurts the poor and the elderly.
Women’s Social Security benefits are on average much lower than men’s.
Bill wanted the same thing, but he was too busy chasing skirts to make the deal.
Hurts women, the poor, and the elderly??? w00t! That’s a three-fer for these shitheads. They can’t wait to trample these “selfish Seniors” (direct quote from creepy Alan Simpson). It’s what they *deserve* for having the temerity to live too long.
The subtitle of the Catfood Commission is: Die faster, you lousy scum.
Yeah, that’s the main reason why the Thugs wanted to Impeach the Big Dawg. He got too distracted by Monica to finish the deal on Soc Sec & Medicare…
http://www.hillary-rodham-clinton.org/education.html
Hillary was president of College Republicans, and a self described Goldwater Republican turned “New Democrat”.
Now it’s time for some Demo-Snark to say “Faaaart..”
He wears very well tailored sheep’s clothing, but Obama is very much more of the same.
TomThumb, I have meant to thank you several times for the good links and information you provide. You are the go-to guy on Social Security. Much appreciated.
I can. She is not the Hillary Clinton you would like to think she is. Neither is Obama the Obama we liked to think he was. Same team.
Thank you, Dean Baker. I like it very much that the descriptive tag is chained CPI. This is very much a civil rights issue, and the reminder of slavery is apt. This government intends to tax you while you work and return you less than fair value for those taxes which supposedly support retirement security. If this passes muster, less and less security will be available to us as we age, so seniors, think carefully before you vote again for either of these corporate hogtrains.
Correct on both counts, not to mention the “dirt farming Arkies” dropping a cool million dollars on the Chelsea shindig.
Yes, this.
A thousand times this…
A million times this………
Someone needs to a diary and highlight this because this is easy for people to overlook.
Please do one if you can. If you can’t I’ll see if I can, but someone should.
Provide real numbers. Show their effect.
Hi OmAli!
This just in: A study compares the impact of cuts to Social Security for two workers. The first worker is a home healthcare aide. The Second worker is a CEO who is working for Fix-The-Debt trying to reduce SS and Medicare and Medicaid.
Link Here.
Thanks for this. This is Obama’s idea of “shared sacrifice.” If he sees this study he’ll probably add a CEO exemption to his plans.
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IOKIYAAD is Obama doing Bush/Cheney with O/D zealots letting Obama do and keep doing it … but lets blame it on the GOPs … that’s the ticket…
…so it’s not “Obama Wants To Cut SS/MC!! Stop This Dishonest D POTUS Obama!! — Stop ObamaBushCheney!!”
…instead it is ” Oh Noes!! Kitty Chow Komission Wants SS/MC Cuts!!” POTUS Obama? Not mentioned much/ at all…D Hacks like it this way — it points USians to look at Simpson/Bowles.
Bad Simpson and Bowles Making Obama Do it!! Obama Is A D — So Must Shield Obama The Good D!! Go Team D!! IOKIYAAD!! D Hacks doing this and being quite dishonest while doing so — it is time to ditch the Ds and the D Hacks who push / sell D Junk.
O/D zealots got coming what Obama wants to do and does to them.
Oh — you could / should blame the D Hacks — they keep pushing D/Obama/Clinton junk.
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as always great work Tom T..