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Now that Christmas is over, President Obama and Speaker Boehner will soon resume talks to cut Social Security as part of a deal to avert the fiscal cliff. Here are ten reasons why the chained CPI–the Social Security cut they are considering–is terrible policy.
I spoke about this with David Shuster on last Saturday’s Take Action News. Check out the video of our discussion here. Then, subscribe to Take Action News TV on YouTube. It’s free.
1. Chained CPI is a significant benefit cut that compounds over time, hitting late old-age beneficiaries and the long-time disabled hardest. For a worker with average earnings retiring at age 65 in 2015, chained CPI would cut benefits $653 a year (3.7%) at age 75, $1,139 a year (6.5%) at age 85 and $1,611 a year (9.2%) at age 95.
2. Chained CPI hits current beneficiaries. Even Paul Ryan tried to hold people ages 55 and older harmless from his plan to privatize Medicare (and Social Security before that). Seriously. Check out page 52 of his 2013 budget, and every speech he ever gave on the topic. The theory is, if you’re gonna burn people, give them some time to adopt a Spartan lifestyle for several years so they can make up for the lost pension money in time for retirement.
3. Chained CPI cuts benefits for veterans. At least 771,000 veterans receive both Social Security and VA disability benefits. Under chained CPI, both would be cut. A fully disabled veteran claiming benefits at age 30 in 2012 would see a cut in VA benefits alone of $1,425 a year (4.3%) at age 45, $2,341 a year (7%) at age 55, and $3,231 a year (9.7%) at age 65.
4. Chained CPI cuts benefits for the indigent elderly and disabled on Supplemental Security Income (SSI). Do I need to add detail here? These are the poorest of the poor.
5. Chained CPI is less accurate for seniors and people with disabilities. Chained CPI assumes people can substitute cheaper products as prices go up, but this is not true of seniors and people with disabilities for whom health care makes up a larger share of expenses. In 2009, health care made up 12.9% of expenses for people 65 or older, but 5.3% of spending for people ages 25-64.
6. A more accurate CPI for Social Security is the CPI-E, not the chained CPI. The CPI-E, or experimental Consumer Price Index for the Elderly, weights health care and housing costs more heavily to simulate the basket of goods consumed by seniors. On average, it increased 0.2 percentage-points more annually than the current CPI.
7. Social Security benefits are already declining due to increases in the retirement age and Medicare premiums. After Medicare premiums, Social Security replaced 37 percent of the pre-retirement earnings of a typical worker retiring at 65 in 2010, and is projected to replace 32 percent of the same worker’s earnings in 2030.
8. Social Security does not contribute to the deficit. Social Security is self-funded, it is off budget, and it cannot borrow to pay benefits. Therefore it cannot contribute to the deficit. Just take President Reagan’s word for it. There is no good reason to include it in fiscal cliff negotiations. In fact, it has never been included in budget negotiations. The famous Reagan-O’Neill Social Security compromise of 1983? They did it through a Commission devoted solely to Social Security–not the general budget deficit.
9. Giving away a benefit cut for no additional Social Security revenue is foolish. Yes, Chained CPI generates additional income tax revenue (albeit in a regressive way). But it gives Social Security no new revenue. Even Simpson-Bowles tried to do that.
10. “Birthday bump” and other sweeteners are inadequate. The chained CPI’s apologists say they will hold the poor and people in late old age harmless through a “birthday bump” in the 20th year of benefits eligibility. As the graphs here and here show, however, this only offsets the benefit cut significantly if you live past 90, and even then doesn’t make up for the chained CPI.
41 Comments
Thanks for this!
Okay I hate to be a nag, but one of the more critical points that I never see any “experts” make about the proposed cuts to Social Security is the fact that Social Security recipients add to the economy.
They are spending the money they get. It benefits the overall economy.
I run a small publishing house. The books my spouse and I sell go to a customer base in China, and also to people in the USA who are on pensions and on Social Security. Take away those older people’s monies, and there will be a dip in the economy.
People I know on Social Security lend their grand kids money for College. They lend their children who are no longer working money for rent or mortgage payments. And they buy many things on
impulse – tickets to the theater production, the occasional vacation, the money to the local pound to save a dog or cat.
But if they are required to watch Congress and “Pres. Betrayal” clip back some of those Social Security payments, the older people won’t have that money to spend. And the local economies will contract that much more.
Why is this even being considered?
I have felt for years that the leadership of both parties is all set to destroy, quite deliberately, America’s middle class.
From the outsourcing of jobs to the continual expensive and Mexican cartel supporting “War on Some Drugs,” and now this attack on Social Security, I see no evidence that destroying our middle class society is not one of their top goals.
Story in The Guardian here.
So why not just put em out on the ice? Bye bye grandma. Can’t afford it you know.
Chained CPI may be only the beginning. It will shortly be like the story above. We can’t afford to give away money to the elderly, no matter what they put in. It just adds too much to our deficit. /s
Did you know that IBM is or was trying to get a patent on a how to manual to move jobs to India and China? They have been very successful at it.
Not to quibble, but this should be number 1.
SS is not adding to the deficit and has no effect on the “fiscal cliff.”
The only reason it is being thrown into the deal is Wall Street demands a human sacrifice to ensure the rains come…
or something.
remember the story of Alexander the Great and the Gordian Knot? remove the cap. progressives should tout this as a wedge against Chained CPI.
god Obama is a goddam menace. A cruel, vicious, lame duck who doesn’t care if this decision Destroys the Democratic Party and reduces the elderly and veterans to a geometric increase to poverty
he is a focking crypto Republican
x 2
Hey elisemattu ,the flaw in your reasoning is the assumption that our ruling monopolists are desirous of economic health as opposed to austerity and placing privatized claims on the existing and in-coming taxpayer revenue streams for social insurance .If our interests weren’t conflictual with royalist interests ,we would all be on the same Keynesian page,using the trillions in no-cost Treasury inflows for massive job creation stimuli via infrastructure programs to expand revenue bases and hence remove deficit/debt shortfalls .
This is class warfare ,and our corporate owned governance is not paid to defend the public interests .
I would quibble with it. There is no lock box for SS. All the money paid in has been spent, some of it in the trillion dollar deficits these past four years. The government doesn’t “save” anything. That is the reality and that is why the smart people want to cut SS (bc it adds to the deficit.) If the gov accounted for the money differently the deficits would be even higher. But it would still be gone. But, hey, I can carry the fiction along a little longer too.
And that class warfare battle has been on going for forty years. Guess who’s winning.
Ya think? Read about the Germans above. The europeans are no different. They all subscribe to the same faulty economic bull shit.
Because Obama is an arrogant, f***ing idiot.
“Social Security does not contribute to the deficit.” This is true. BUT, cuts to Social Security (and increases in payroll taxes) are able to CUT the deficit! Isn’t that amazing? We all pat Clinton on the back for balancing the budget, but how’d he do it? Cuts to COLA and raising the cap on payroll taxes for the middle class! It seems like it should be a two way street, but it only goes one way. This project has been ongoing since the 70′s. It’s a scam. First you raise payroll tax rates, then you use that “surplus” for the Carter/Reagan tax cuts. Then you raise taxes and cut benefits in ’83, and use that surplus to cut taxes for the rich in 1987′s tax “reform.” Then you raise the retirement age, cut COLAs, and radically increase the cap on Social Security taxes. Then you use THAT surplus for the Bush tax cuts. And now here we are, we will bring in a chained CPI, probably raise the payroll tax cap even more (but exempt the .1% who make their money from dividends)and we will use THAT surplus for Obama’s tax reform that will close loopholes (just like Reagan) and lower tax rates for the rich even further (just like Reagan). And lo and behold we will wake up in the 2016 campaign season with even bigger deficits and even MORE spending cuts ahead, and new loopholes, and more benefit cuts, and a proposed payroll tax hike, and Social Security privatization where you get to decide who to have invest your money, Goldman Sachs or Citibank (all legal thanks to the Supreme Court’s ruling on Obamacare). And Social Security’s surplus will go up and up and the CRISIS will need to be averted forever and ever. Unless we, yknow, stop it.
Can’t we stop it? Isn’t 35 years of this ENOUGH??
Please?
Ummm. no. Sorry. Carry on.
dang
You answered your own question, my friend.
Hey bluedot@11 ,I assume you were informing the thread via my comment ,because I know you realize nobody at FDL has been singing the class warfare hymn longer or more fervently than I .We in Seattle and the Nader movement were likely railing against the WTO , NAFTA and the deindustrialization while you were supporting Clinton .our corporate globalization nemesis . Regardless of whom you voted for ,if you were at that time inculpating the root of globalization to class warfare ,then I apologize in advance .
Huffpo is saying Boehner and Cantor are out ,which could soon force Obama to negotiate with his most vicious and cruel adversary ,himself .Nothing should be dreaded more than another douche-bag deal from Obama’s notorious self-nogatiated capitulations to phantom austerity meanies as a means of serving Wall St.
Thanks, the rest of this malarkey is a non story, your comment is the only anwser, and we’ll never get it under the present system.
But I fully agree with yas.
Why do I get the feeling that O’numnuts and the rest of the clowns in Washington are acting in concert with the rest of the world on so many economic fronts, with the bottom line being ever-increasing austerity, squeezing more blood from the have-nots, never-ending non criminal prosecution of first-class banksters? In short, keeping the 1 percent healthy at the expense of everyone else? So much of what’s going on here is also happening in England and Germany.
In England for example, a CPI adjustment is also being planned:
http://www.telegraph.co.uk/finance/personalfinance/pensions/9766641/Pensioners-are-about-to-be-robbed-yet-again.html
A frightening picture.
Meanwhile, we’ve spent nearly the last 2 months fretting over this fiscal cliff diversion (to be followed by the coming debt ceiling debacle and drawn-out gun control debate) while secret drone missions are being carried out and more crime and devious plotting are undoubtedly being committed on Wall Street, the NDAA passes without an amendment to give some protection to protesters from being rounded up by the military and being detained indefinitely, and a countless number of innocent people being spied upon.
Chained CPI also increases the income tax. Chained CPI reduces the Social Security salary cap. Chained CPI is a bad idea in every way, which is probably the reason Obama, Pelosi and all the other Republicans (Obama and Pelosi are DINOs) like it. Hopefully Reid stands by his commitment to not cut Social Security.
Forty years?
There has been class warfare since Plymouth Rock.
Forty-four years since the resounding defeat of McGovern enabled conservative white Southern males, mostly Southern (apologies to Hillary and Lieberman), to strengthen their hold on the Democratic Party.
Thirty two years since Democrats in Congress received a memo asking them to try to get the corporate campaign donations that the Republicans had been getting. Same thirty two years during which the number of lobbyists in D.C. increased exponentially. Probably not a coincidence.
Twenty eight years since Reagan’s massive re-election victory enabled the Southern white males (for the most part) referred to above to complete takeover of the Democratic Party.
Somewhere around this same time period, the Koch Brothers started founding think tanks–soon after they made a nice contribution to the newly formally organized Democratic Leadership Council
Huh?
Obama is doing what he has always wanted to do, getting waited on hand and foot, and getting richer by the month. And wait until his post-Presidency! He will do even better than Bubba Clinton! How is that stupid?
Voters, on the other hand….
The world, or Europe?
Maybe this helps:
http://en.wikipedia.org/wiki/Al_From
If you suddenly went from earning a salary to being permanently disabled and living on around $1000 per month, more or less, I’m guessing you’ve already done the switching to the cheaper brand trick.
Does anyone imagine that anyone whose only income is OASDI is buying premium brands?
How about this for one reason, and only one:
*raises hand and waves it frantically*
Oooo. Oooo. I have a second reason. How about
Fuck DLC Democrats. Twice.
Technically, it’s been “spent” on the same things as what the Chinese, pension funds, the Fed, and what everybody else has “spent” their money on though.
The trust fund has the same bonds as everyone else that has “invested” in the US government.
The only reason we are even having this discussion to begin with is a chained CPI means that the rate that the fund would start turning in those bonds so that retirees could get the return on the money they paid into retirement would slow down dramatically.
The only other alternative would be to force the rich to pay their fair share to cover the endless wars they appear to profit from or the millions of other ways we, the taxpayers support corporate welfare.
It’s either a) figure out a way to extend the terms of the loan given from the most vulnerable among us b)raise funding by increasing taxes and slashing spending or c) forget this ridiculous idea that it’s even intelligent to be worrying about our deficit when the problem is already starting to take care of itself and if you were to have maximum employment with jobs that exceed poverty level wages that require excess government support it’d likely disappear entirely.
Frankly, if we have to cut I think we ought to take the 3 trillion out of the Defense Department. It’s bloated to the point that the thing can’t even be audited adequately(they have a target of 2017 for their first independant audit attempt, previous ones have been impossible) and we outspend the Chinese (the second largest spender)by more than that. There is absolutely no reason to penalize the most vulnerable among us because Congress is profligerate spenders and none of the corporations that Congress supports wants to take one for the team.
It’s even more ignorant and mean spirited when you look at the number of elderly that skip medication, avoid seeing the doctor or go out of their way to keep the costs of their health care low. In other words, they are already “substituting.”
http://www.seniorjournal.com/NEWS/Eldercare/2011/20110801-SenCitSkipDrugs.htm
And this administration KNOWS that 1 in 10 seniors is struggling without the cuts they want. They know the Social Security program keeps 1 in 5 seniors from poverty. They just don’t care.
They think it is more feasible to make the elderly and poor suffer than it would be to have Congress turn on their corporate puppetmasters.
…X 2 … this seems to go and get to the middle as to why ObamaBush wants to meddle with/damage SS while doing nonsense based USG budget hocus pocus and mixing SS up with USG taxes and non SS USG money pools…
…political simpletons who still don’t/won’t clue up on/get/admit that Obama is The MEE at this point got coming what ObamaBush is sending …
THE POOR AND MIDDLE CLASS NEED A NADAR TYPE PERSON TO LEAD A MASSIVE MOVEMENT TO GET MONEY OUT OF POLITICS AND SET TERM LIMITS.
MINUS THIS I SEE NO HOPE FOR THE BOTTOM 70%. WE DO NOT HAVE A SEAT AT THE TABLE. OUR VOTE MEANS NOTHING. EXAMPLE: HAD ROMNEY WON THE DEMS WOULD NOT HAVE ALLOWED SOCIAL SECURITY CUTS.
OUR DEMS/REPUGS ARE OWNED BY CORPORATION/BANKSTERS AND THEY ARE GETTING FILTHY RICH.
At the risk of giving what you say too much of a response:
BULLSHIT.
Thanks for this-calling out the standard bullshit interference some people like to run for the dims because…because…because the democrats…uh…actually, they seem to do it for no reason other than: GO TEAM!
This is very true, cwaltz and an excellent point to emphasize. Those of us on the lower end of Social Security – and I don’t believe I am the only one – take care of our health as best we may because the $100 to get to the first rung of medicare is too steep a monthly cost to pay – it comes right out of the food and shelter necessities. We don’t go out to fancy restaurants, already. We don’t go to movies, already. We don’t go to the opera or plays or any other entertainments that cost money. Food and shelter, that’s it.
We watch our health. We eat as well as we can and we exercise – and if we are fortunate, it works.
Are you emo-progs whining about not getting your ponies again? Over the fiscal cliff we go – into Bushs’ fourth term.
If there’s no lock box for Social Security, there is no lock box for other holders of federal debt.
Good point about the money already being spent, but that doesn’t mean that the intragovernmental securities held by the Social Security Trust Fund are worthless.
Here’s the issue. Social Security like most insurance-type plans takes in more in a year than it spends out in most years. That money has to be deposited somewhere. It is in fact deposited in government securities no different from the T-bills on the market. The Social Security Trust Fund holds $3 trillion of those, much as folks hold T-bills or mutual funds that invest in T-bills in their retirement accounts because they are considered the most secure investment.
What is the alternative to holding government securities? Pete Peterson has a plan–put it into private funds with diverse securities. Alternatively you could split the cash up and deposit it in many banks, with less interest that the government security delivers. Any other alternatives?
The current budget no longer offsets the deficit by the amount in the trust funds.
Hear! Hear!
The Medicare deductibles and co-pays make it a cruel joke on seniors. And some physicians only accept Medicare for partial payment and bill the difference to the patient.