How Obama's budget trims Social Security checks
The president's plan involves a controversial inflation index that would save $230 billion by shrinking annual payment hikes.
Social Security might be viewed as one of working Americans' unassailable rights, but President Barack Obama's new proposal is taking aim at how those payments are doled out.
Under his budget proposal, released Wednesday, Social Security benefits would shrink by having their annual cost-of-living adjustments linked to the chained CPI, a version of the consumer price index that's used as a way to keep federal benefits on track with inflation.
But the chained CPI grows more slowly than the calculation that's currently used, according to AARP.
In effect, the change to a chained-CPI adjustment would serve as "a stealth tax on the middle class and a cut in benefits for Grandma," according to Business Insider.
So how does it work? The chained CPI is calculated under the assumption that workers will switch to cheaper alternatives when prices rise. So if that pound of Starbucks (SBUX) coffee is too expensive, you'll drink generic supermarket-brand soda instead. Want beef for dinner? If it's too expensive, the index assumes you'll buy a cheaper meat, like chicken.
Chained CPI grows at a rate that's 0.25% to 0.3% slower than the ordinary consumer price index, notes CNNMoney. That might not seem like a lot, but over a period of years, seniors will effectively see payments cut by hundreds if not thousands of dollars.
The benefit for the budget will be a savings of $230 billion, which was mentioned in a single line near the bottom of Obama's budget overview.
"For a lot of elderly people, Social Security is virtually their only source of income," Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities, told CNNMoney. "A decrease of almost $600 a year . . . for people in that situation is very significant."
AARP is urging its members to protest the proposal, asking supporters to send a message to their members of Congress that reads, "One proposal, chained CPI, would change the cost-of-living adjustment (COLA) for Social Security benefits and cut your benefits by over $2,000 over the next 10 years alone."
Given the range of the cuts, it's no surprise that AARP says more than two-thirds of older voters oppose switching to chained CPI.
Granted, it's just a proposal, but it's likely to receive vigorous debate on both sides as the U.S. grapples with the deficit. For the elderly, though, the outcome will strike close to home: CNNMoney notes that a typical elderly single woman would see a reduction equal to a week's spending on food each month.
Follow Aimee Picchi on Twitter at @aimeepicchi.
WHY DOESN'T THE GOVERNMENT STOP SENDING BILLIONS OF DOLLARS A YEAR OVER TO SAUDI ARABIA, IRAQ AND A LOT MORE COUNTRY'S AND STOP TAKING MONEY OUT OF SOCIAL SECURITY MONEY THAT WE THE PEOPLE PUT IN THEIR FOR RETIREMENT? IM DISGUSTED
What a piece of work. How about cutting welfare, Medicaid, food stamps, etc. also. Opps, can't cut the freebees --- need those votes.
How about Obama cutting back on taxpayer-paid luxury vacations for his family and entourage, on lavish parties and White House performances by and for his Hollywood friends and big money donors, on golf outings with Tiger Woods - all paid by the U.S. taxpayers. Obama has the gall of nickel and diming the seniors and he and his clan are living on the high hog at taxpayers' expense. How can half of the American people be so stupid not to see this guy for what he is: An imposter, pathological liar, crook, wanna-be dictator and
traitor. God help us all!
When the Federal Govt learns to live on SS and Medicare,
is when they can ask the same of all the rest of us serfs and peons.
Until then its THEY who are the "entitled" ones and deserve all the
rebuke we can thrust their way, including letters and promises
to vote them out (for real) next term.
We did not have a revolution so that we could evolve yet another
upper caste of royalty, intent on plundering the 'little people' all
over again with all manner of economic suppressions.
Are you listening, CONgress and Presdt Obama?
Seems a bit ridiculous to cut SS benefits when members of Congress get $175,000 per year plus benefits to do NOTHING!!!
At least those collecting SS did SOMETHING - called WORK. Congress has become the largest entitlement program in US history.
And yes Unclemike7, I forgot Medicare, but he cut that by 3/4 of a Trillion Dollars when he signed Obamacare. I should have said the only remaining entitlement we have paid for that he hasn't already cut.
Sure, cut senior's social security, while the Obamas party it up in the White House during their "Memphis Soul" party last night. Amazing!
And we taxpayers are footing the bill..........
At my local VA Hospital there hangs a quote from George Washington saying, " The soldiers will not fight until the death for their country if they think the country will not care for them if they fall on the battlefield".
There are better ways than going after these two groups of dues payers.
Our Great President chose to punish the weakest political group, the ones who worked the hardest, the frail, the weak
He does not care for this group, they are an easy target
There would be no Social Security trust fund deficit if the economy was operating at anywhere near full employment and wages were modestly rising. Congress and the President need to start a jobs program to get the 20 million unemployed including many seniors and near-retirement age people a chance to work and at the same time pay SS taxes. With a fulltime job paying well, many seniors would probably delay getting SS till age 66 or higher, also cutting SS expenditures. The other hidden problem is high rates of SS disability retirement of unemployed people--again full employment and rising wages would induce people to keep working.
It is wrong and misguided to punish SS retirees. If more revenue is needed, raise the maximum salary level from current around $100,000 a year to $1 million.
I don't agree with using the chained CPI but while Obama proposed it in his budget, the idea has appears to have Republican leadership support, too. (Although the Republicans may now distance themselves from the chained CPI.) Read this from today's Washington Post.
"Another bluff was that Obama would never actually agree to cut Medicare and Social Security — that he was as intransigent on spending as the GOP is on taxes. When the Wall Street Journal Mitch McConnell what he’d need to move on taxes, he said “higher Medicare premiums for the wealthy, an increase in the Medicare eligibility age and slowing cost-of-living increases for Social Security.” For the first time, two of those three are in the president’s budget." ( Ezra Klein and Evan Soltas)
It's all politics.
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