The Social Security proposal you need to know about
Lawmakers have suggested a switch to 'chained CPI' to reduce deficits. That could affect how the government calculates Social Security benefits in the future.
It sounds about as exciting as skim milk, but the phrase "chained CPI" could play a role in fiscal cliff negotiations -- and it could impact your Social Security payments.
Republicans are reportedly suggesting a shift to chained CPI as one way of dealing with the deficit, and President Obama appears open to the move. That could impact the way Social Security benefits are calculated in the future.
To understand chained CPI, it's important to get a refresher on the standard CPI, or the Consumer Price Index. This index tracks price changes of goods and services in some 200 categories. The Bureau of Labor Statistics defines the index as "a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services."
The government uses the CPI as one basis for adjusting dollar values on Social Security payments. During times of inflation, for example, the index rises and Social Security payments get cost-of-living adjustments, or COLAs.
"Chained CPI" doesn't just look at the prices of goods and services. It goes deeper into consumer choices and relative price changes. For an example, says the BLS, consider differences in the costs of pork and beef.
If the price of pork goes up while the price of beef doesn't, shoppers might shift away from pork to beef, the Bureau notes. Chained CPI accounts for this type of consumer substitution, while the standard CPI does not.
And here's the important part: In this example, chained CPI would rise, but not by as much as the standard CPI. In fact, the Congressional Budget Office says the chained CPI has grown at a slower rate than the traditional CPI, by an average of 0.3 percentage points annually over the past 10 years.
So what does that mean to you, the taxpaying consumer? Switching to a chained CPI will reduce spending on Social Security and federal pensions while increasing revenue for the government. The differences between the CPI and chained CPI may seem small, but they can add up. As the Columbia Journalism Review points out, the chained CPI "cuts spending and raises revenue, the twin strategies for reducing the federal deficit."
There are estimates the chained CPI could bring in hundreds of billions of dollars in savings for the government while generating billions more in revenue. The unanswered question, though, is at what cost.
In a recent letter to Congress, the National Committee to Preserve Social Security and Medicare urged lawmakers to oppose any deficit reductions plans that would involve the chained CPI.
"This cut would reduce projected benefits for the oldest and most vulnerable Americans who would be least able to afford it," says the letter, which also notes that Social Security Administration officials estimate the chained CPI would bring about a 0.3 percentage drop compared to current cost-of-living adjustments.
"This reduced COLA would result in a decrease of about $130 per year (0.9%) in Social Security benefits for a typical 65 year old," The letter continues. "By the time that senior reaches age 95, the annual benefit cut will be almost $1,400, a 9.2% reduction from currently scheduled benefits. Remarkably, this is a benefit reduction that slightly exceeds the one month’s benefit for the average retiree."
The Christian Science Monitor says supporters of the chained CPI believe it’s a better way to measure inflation and reduce the deficit -- especially as a growing number of Baby Boomers retire and go on Social Security.
But there's also a middle ground in the debate, according to the Monitor: those who argue that the change "should be cushioned by supplementing benefits for older retirees."
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This was a good article on the Social Security so called Trust Fund =
CONGRESS, start by leading by example ! Cut your pay, pensions, perks and take the poison pill first. Otherwise, you all owe US a Refund for the last 2 years of doing Nothing, and yes, we will take it with Interest. After all, fair should be Fair.
Perhaps Social Security Benefits should be what the name implies. Receipt of benefits should be predicated on the income of the retiree. Granted some will scream not fair but the original concept seemed to be a payout for those who never made enough to save for retirement or those who lost all their savings.
All our retirement money went to pay medical bills and prescription drugs, without social security I have zero income. My sister's entire 401K was lost by the assigned financial manager (of a STATE employees fund) who invested in risky investments. People working their entire work lives making less that $50K a year have difficulty saving for retirement. The government even LIMITS the amount that can be saved tax free in an IRA.
How about limiting Social Security pay outs to people that receive less than $50K from every other source? People with incomes over $200K should pay the entire Medicare premium, not just the subsidized amount.
The system was never intended to be a bonus for those with enough income, but it is supposed to be a safety net to keep the elderly/disabled/helpless out of a life of destitution.
How they voted:
Below are the actual voting records of various Arabic/Islamic States which are recorded in both the US State Department and United Nations records:
* Kuwait votes against the United States 67% of the time
* Qatar votes against the United States 67% of the time
* Morocco votes against the United States 70% of the time
* United Arab Emirates votes against the U. S. 70% of the time.
* Jordan votes against the United States 71% of the time.
* Tunisia votes against the United States 71% of the time.
* Saudi Arabia votes against the United States 73% of the time.
* Yemen votes against the United States 74% of the time.
* Algeria votes against the United States 74% of the time.
* Oman votes against the United States 74% of the time.
* Sudan votes against the United States 75% of the time.
* Pakistan votes against the United States 75% of the time.
* Libya votes against the United States 76% of the time.
* Egypt votes against the United States 79% of the time.
* Lebanon votes against the United States 80% of the time.
* India votes against the United States 81% of the time.
* Syria votes against the United States 84% of the time.
* Mauritania votes against the United States 87% of the time.
US Foreign Aid to those that hate us:
* Egypt, for example, after voting 79% of the time against the United States, still receives $2 billion annually in US Foreign Aid.
* Jordan votes 71% against the United States and receives $192,814,000 annually in US Foreign Aid.
* Pakistan votes 75% against the United States and receives $6,721,000 annually in US Foreign Aid.
* India votes 81% against the United States and receives $143,699,000 annually.
WHY IN HELL ARE WE SUPPORTING OUR ENEMIES ???
WHO IN THE HELL STARTED THIS WELFARE PROGRAM AND WHY ???
WITH THESE COUNTRIES AS “FRIENDS”, WE DON’T NEED MORE ENEMIES !!!!
It definitely is time to get out of the UN and give the tax savings back to the American workers who are having to skimp and sacrifice to pay taxes (and to buy food and gasoline).
Are we THAT Stupid?
YES, FOR LETTING THOSE IN THE U.S. CONGRESS GET AWAY WITH LETTING THIS HAPPENING YEAR AFTER YEAR!!!!!
Disgusting isn’t it?
Verify all this outrage at
We should have taken Social Security out of congressional control and turned it over to Warren Buffet years ago. It would not only be solvent but we could all look forward to a great retirement.
When will we learn that our elected officials are not in the least bit financially capable?
They are only interested in what is good for them, and keep blaming anyone but themselves for the mess we are in that they have created.
If the Federal Government were a private corporation, they would all be given pink slips.
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You don't have to sign up for Medicare. The catch? If you don't enroll when you're first eligible, you could pay some serious financial penalties later in life.
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