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.

By Aimee Picchi Apr 10, 2013 11:35AM

Image: Social Security Card (© Comstock)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

More on moneyNOW

Apr 10, 2013 12:57PM



Apr 10, 2013 11:52AM
I guess we can switch to cheaper gas, cheaper healthcare, cheaper home taxes, cheaper income taxes, cheaper heating oil, cheaper natural gas, cheaper water, cheaper cars (or maybe Obama will give us a ride in AF One to the grocery store), cheaper medicine, etc. etc. etc.

 What a piece of work.  How about cutting welfare, Medicaid, food stamps,  etc. also.  Opps, can't cut the freebees --- need those votes.

Apr 10, 2013 12:28PM

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!

Apr 10, 2013 12:13PM
Of all the places that cuts could be made he picked Social Security ?  Absolutely shameful !
Apr 10, 2013 11:54AM
Just a general comment.

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?

Apr 10, 2013 2:12PM

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.

Apr 10, 2013 12:01PM
Leave it to Obama to propose reductions to the only 'entitlement' program that beneficiaries actually paid for.  I'm not opposed to this reduction but how bout cutting entitlements that no one but the tax payer funds?  Obama loves to pontificate on his 'balanced approach' but in reality he is simply a champion of wealth redistribution and a shameless buyer of votes using the taxpayer's money.

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.
Apr 10, 2013 12:21PM
But who voted for this jerK? The young and poor people who are feeding off the government for every free benefit they can get!!! Plus, what do the young people care about Social Security?  But the drawback is this, the less social security the more the older people will keep their jobs and work.  Which means less jobs for the younger people!!!  HA HA!!!!!!!!!  Plus, when are we going to see the politicians giving up their huge pensions and fringe benefits that they get?  Plus all the ex-presidents getting 200K plus pensions every year!!!  We should hang Obama up by his toes and let people throw tomatoes at him!!!!!!!!!!!!!!
Apr 10, 2013 1:50PM

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..........

Apr 10, 2013 12:43PM
The fundamental principles of a country are judged by how it treats its children and its elderly. Obama has caused me to shudder in shame as he has brought the "Ugly American" to America.

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.

Apr 10, 2013 1:41PM
Obuma and his leftist elite have a plan,,,to kill off the elderly population in the name of budget cuts.  Those of us who have paid into SS for more than 45 years should be organizing the revolt.  If the Friggin government had left the fund alone instead of using it for whatever they wanted, it would still be the largest fund known to man. 
Apr 10, 2013 1:24PM

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


Apr 10, 2013 1:08PM
It is shameful that any spending cuts seem to concentrate on our elderly population (via SS, Medicare), the military pay for soldiers (do you know that a soldier with a family qualifies for food stamps?).  What about the outsized salaries and benefits to our representatives in Congress(both parties)?  What about finding and eliminating duplicate government programs?  How about finding the waste and fraud in our entitlement and welfare programs and eliminating that?  Do all the Czars Obama has hired actually do anything?  "Shrimp on a treadmill" and all the other weird and wacky programs out there?  And the Affordable Care Act  (we'll see what's in it after we pass it!!??)  Not working out so well, is it?  The list goes on and on with the standard answers:  cut entitlements like SS and Medicare and raise taxes.  At least they reinstated the educational benefits to the Military.  These soldiers deserve a whole lot more than they get...they are putting their lives on the line.  Can the same be said for our representatives and senators in Congress?  AND, let's not forget, all the billions of dollars sent to countries that hate us!   Shameful... 
Apr 10, 2013 1:41PM
What an idiot !  Who the hell voted for Obama anyway ?  Jerks.
Apr 10, 2013 12:57PM
It makes no difference to me.  I will apply in 3 years at age 62, receiving less payout(total less than $1,000  per month), but that is o.k. as I saved over the years as did my wife.  I refuse to work until I have one foot left in the grave, ESPECIALLY to prop up the liar in chief's class warfare struggle.  I don't know about the rest of you.
Apr 10, 2013 12:45PM
The lying cheating dems strike again. Every Republican proposal ever put forward, was a cut to future benefits or extension of the retirement age. Only obo and his cronies are going after current retirees.
Apr 10, 2013 1:15PM

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.

Apr 10, 2013 1:11PM
Dear conservmorons ,agreed it's a bit stupid(the proposed suggestion) but it would have to be to appeal to republicant's who are holding a line that has not worked in a century!Think it out republicants the total in cuts comes to $2.00 per week on future increases/not existing S.S.payments.Want to see piggies squeal?Propose the house and senate take 20% paycut,pay 50% of their health care and eliminate one half of their numerous perks.I'd pay money  to see that-----it would be even better if it was put to public vote!
Apr 10, 2013 12:19PM

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.

Apr 10, 2013 2:16PM
Message to President Obama and those other 535 slackers on Capitol Hill: "Keep your filthy, grimy, grubby hands off our EARNED BENEFITS such as Social Security and Medicare. They are OFF the table".
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