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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WTF would vote any GOP member to Congress or the Senate, other than the 2%?????
I'll tell you who, its the **** middle income ahole who buys the crap that Fox News is selling!
The ones who would put their family last and their guns first!
They are being overly generous to a lot of people with social security. The work credit requirement is a joke. People who have barely contributed at all get way more than they have earned and deserve. How about all the fraudulent disability claims? A whole bunch of these folks have not earned a fraction of the benefits they will receive. They need to do away with the per child and spouse add on benefits for disability. Take away some of the motivation to defraud the system. Washington is giving away the store when it comes to social security! People buy private life insurance and they can buy disability insurance as well! People need to stop looking to the government for their total well being.
Plan and prepare folks! Don't live your life as if you may never get old or disabled
As I recall, years ago when SSI was just new to the nation, congress decided to take the funds that had accumulated an finance one of their fantacies. they of course were gping to replace what they took. LIES, LIES, LIES
This is terrific, The Political Class is screwing all the citizens of this county. The mentality of the Political Class is the true definition of entitlement. There is not one elected official that has bet his career on getting cost out of government. The cuts these bozos are talking about are not cuts at all, but reductions in the planned increases of spending. If you have grandchildren, they will be living in relative poverty because of the Political Class. These people are uniquely unqualified to manage a checking account, not to mention a federal budget. We need to freeze all federal spending now. We need to cut all federal budgets by 10% now. Even a midlevel manager at any commercial company could do that without meaningful changes in performance. We need to establish priorities and budget to those. Simpson Bowles did this years ago and no action has occurred. The President appoints a new commission. What a joke
Why is it that when we how have worked to get what we paid in to is the first thing that gets the cuts? It's a shame that the people in this world can afford most anything they want can't pay their fair share of taxes. If this country could get some training for people to get good paying jobs maybe those people would pay taxes. If there are NO JOBS there is no taxes PAID. I am very ashamed of how this country does not give any incentives for people to work. Why does the middle class have to carry most of the load. Just keep privitizing and sending companies out of this country. Could that be why we are falling apart. I pray for our country everyday because when you took God and prayer out of everything this is what we get.
I'm so sorry for you people who don't believe in Our Lord Jesus. You all should get on your knees and pray for what we have become.
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