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.

By Bruce Kennedy Dec 20, 2012 9:21AM

Image: Social Security cards on clothes line -- Mike Kemp/Tetra images/Getty ImagesIt 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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Dec 21, 2012 11:03AM

cut goverment employes  and goverment over-spending would be a better idea ... than cutting social security lol

Dec 21, 2012 10:59AM

Why doesn't Boehmer and his GOP Hawks (all politicians for that matter) give up their FREEBIES  for the rest of their life to continue to enrich themselves; self-serving  have no problem taking our earned social security benefits away while they have nothing to worry about.  Jees ...


Perfectly spoken by this unknown author below and I'm sure all will agree on this post:  American People -  SCREAM LOUD & CLEAR - Boehmer and his gang of GOP thugs now want to steal your "entitlements" AKA our "Earned Income Benefits". 


..."Social  Security Now Called 'Federal Benefit  Payment'/Entitlement !??


Are you kidding me!?


Social Security is earned income rather than an entitlement, sorry.  Is this the new GOP’s decision to call it entitlements (as they so often say about our earned benefits, yet their benefit entitlements are a given (or free)! Their new way to take our earned benefits, call it an entitlement and then steal from us!?  Give us a break!


I have noticed Social Security checks are now referred as a "Federal Benefit  Payment"?


I researched and found this new discovery and it touches a nerve in me, and I hope it will in  others as I forward this on to as many Americans that I know and on from there.


Yes, the government  is now referring to our Social Security checks as a “Federal Benefit  Payment.”;


NO, this isn’t a benefit – its earned income!  Not only do  we all contribute to Social Security but our employers contribute an equal amount too.


It totaled 15% of our income before  taxes.  If you  averaged $30K per year over your working life, that's close to $180,000 invested  in Social Security.  I make $33,000/yr.


If you  calculate the future value of your monthly investment in social security  ($375/month, including both

you and your employer’s contributions) at a meager 1% interest rate compounded  monthly, after 40 years of

working, you'd  have more than $1.3+ million dollars saved! This would be your personal  investment.


 Upon  retirement, if you took out only 3% per year, you'd receive $39,318 per year, or  $3,277 per month.


That’s almost three times more than today’s average Social Security benefit of $1,230 per month, according to  the Social  Security Administration ( Google it - it’s a  fact).


And your  retirement fund would last more than 33 years (until you're 98 if you retire at  age 65)!


I can only  imagine how much better most average-income people could live in retirement if  our government had just invested  our money in low-risk interest-earning accounts.


No, instead, the  folks in Washington pulled off a bigger Ponzi scheme than Bernie Madoff ever did.


They took our  money and used it elsewhere.  They “forgot” that it was OUR money they were  taking.


They didn’t have a referendum to ask us if we wanted to lend the money  to them.  And they didn’t pay interest on the debt they  assumed! And recently, they’ve told us that the money won’t support us for  very much longer – are these fools for real??!  And worse the government tells us “it’s our  fault they misused our investments”?!


And now, to  add insult to injury, they’re calling it a “benefit,” as if we never worked to  earn every penny of it.

Just because  they “borrowed” the money, doesn't mean that our investments were a charity !




We have earned  our right to Social Security and Medicare . Demand that  our legislators bring some sense into our government; if that’s possible with the GOP obstructionist.


 Find a way to  keep Social Security and Medicare going, for the sake of that 92%  of our population who need it and have earned it!!  Then call it  what it really is:  Our Earned  Retirement Income!!"



Dec 21, 2012 10:58AM
Public servants have made themselves masters over us; and we are powerless to do anything about it, because we are ignorant and divided by greed, envy. hate, pride, self-righteousness, and hypocrisy. President Truman didn't receive any pension at all when he left office; now just seventy years later the lowest level public employees receive benefits on top of social security. There is a scripture: I've seen servants riding on horses as princes; and princes walking the earth as servants: And again; Those who oppress the poor to increase their wealth; and give to the rich shall surely come to want.

cut the presidents pay in 1/2 and the damn polititions they are all use less trash,


Dec 21, 2012 10:57AM
so my big 3 dollars a month is breaking he freaking gov! what a joke
Dec 21, 2012 10:53AM
  Oh my gosh I have ask that question so many times and yet to get any response from ANYONE that has ANYTHING to do with congress !!!! Damn it is just not right !!! And it's just so sad ..... the old people now depend on their children to help to help them now !!! I did not vote for what's to come and those of you that did I hope you enjoy what you reap !!!!!!!!!
Dec 21, 2012 10:50AM
Why all the fuss about social security. It does not impact the deficit; it is a separate trust fund that is funded from FICA; not general revenues from income taxes. Also, for the boomers, we all paid in a greater amount under the Reagan changes designed to ensure our benefits would be available when we become eligible. How can the Government now renege on that now that we are eligible and have paid for our benefits over our working career? This is gross mismanagement of the general operating funds and the social security. It appears the Feds want to dip into the social security trust fund to shore up the deficit they created. Its not their money; its the social security beneficiaries money.
Dec 21, 2012 10:47AM
Believe it is time to bring not only congress but also the supreme court up on charges of conspiracy to commit treason. We will use their voting records to see if they represented the American majority or some other agenda., or the constitution as the case may be.
Dec 21, 2012 10:38AM
I can't hardly wait till the 2nd week in Jan. when all you liberals' receive your first pay check with less money especially my neighbor he & she are whiners to begin with.
Dec 21, 2012 10:30AM
Will the same formula be used to evaluate lawmakers & government workers cost of living increase?   They receive raises yearly and extra perks...I don't think they need raises this year any more than the cost of living increase that Soc. Sec. gave to seniors & disability citizens.  The free Medical program they get from the Government should be paid for monthly just like the rest of us pay for it.  But, the most important thing to save the is the generous amount paid to them as a retirement check they get for the rest  their life for serving only 1 term in office (even if they are not re-elected).  How many of us get a life time retirement check if we work less than 40 hrs. per week, get expense account, free medical, and show up to vote & argue about how we should run our country for 2 years. ONLY 2 years & then a check forever,  you don't have to even be good at your job....WOW !  I would like to have that job...I just wish I could be a hypocrite 
Dec 21, 2012 10:26AM

cut CONGRESS PAY  and insurance.  Leave social security alone.


check all the PORK and fraud going on.  Leave social security alone.


Look at all the countries that we are giving billions to that hate us. CUT HERE!.

Leave social social security alone


Go after the rich that are hiding money out of our country and not paying taxes,


Dec 21, 2012 10:26AM
Answer to all future deficit problems.   Do not do away with social security/medicare.  Do away with those that receive it!   Make it mandatory that all people at age 75, receive a free shot on their 75th birthday.  AS IN AN OLD MOVE YEARS AGO, ALL WILL BE PUT TO DEATH AT AGE 75.  It would eliminate all the medicare care required by older people and eliminate social security payments at 75.  WHAT GOOD ARE OLDER PEOPLE ANYWAY.   ONLY A BURDEN ON FAMILIES AND SOCIETY~ (OF COURSE THIS IS A SARCASTIC SOLUTION TO THE PROBLEMS.   CONGRESS IS DUMB ENOUGH TO CONSIDER IT.
Dec 21, 2012 10:24AM

Permit me to explain this in simple terms:


if the price of pork and beans rises while the price of Alpo does not, then the senior on Social Security can switch to Alpo and not need any additional $ each month to make up the difference



Dec 21, 2012 10:23AM
Be nice if Congress would get paid on how much legislation they actually pass. I guess then this year it would be almost nothing. The real issue is that Democrat's want spending as usual and Republican's want tax breaks as usual. Trouble is, they both are wrong. Too bad both sides cannot see the other sides point of view. I would like to have Social Security be around when I retire. I do not expect it to provide me with a total retirement package. But I expect to receive what I am entilted too. Just as I would any entitlement program. The trouble is, we need as a Country to fix problems on a long term outlook and not just on a crisis management basis. I have no doubt the real effective fix is to go over that fiscal cliff. Increase revenue and decrease spending. That's what should happen. If Congress thinks those cut's and revenue increases are too painful. Then fix it! The President needs to lead, Congress needs to compromise and government needs to govern.
Dec 21, 2012 10:18AM

What about adjusting Social Security benefits for just those who accumulated enough wealth that they really don't even need it?  I'm not saying, take it away, just reduce it   For those who

depend on it, leave it alone.

Dec 21, 2012 10:13AM

This year Pres O's daughter and friends went to Mexico for spring break. Cost taxpayers over 170K for her vacation. That would have paid my Mom's SS for over 15 years!!!!

Dec 21, 2012 10:10AM

why dont they start cutting there own benefits,and why dont they take a reduction in pay

and where does the $$ go from the people who pass etc before they get to collect?


Dec 21, 2012 10:08AM
If the democrats go along with this, it will be a cold day in hell before they ever win the White House again. Do they even know how many seniors there are and will be ?
Dec 21, 2012 9:58AM
I think what the Government is trying to do is kill off the old people and the disabled, so they can pocket the savings. What do they get if and when they can't work? They already get full benefits including health, protection, places to stay, prescriptions. Things we old folks have to pay for and then get taxed on and now even less coming in for our income. "Thank You Mr. Obama for the .63 cents a day increase on my SSDI that I get in 2013. Let Congress and the White House try to live like we do for just 1 month and see if they could do it!!  10 to 1 they would cry wolf in less than 1 week.  Lastly--Why are they taking my money, that I earned and paid for, to pay for their mistakes on running the country. I didn't charge 16 Trillion in bills, our Government did! Charge/And tax the Rich, which include Government. Leave Social Security alone. Put people in Government who CARE about the American People.
Dec 21, 2012 9:56AM
How about we take these politicians out on the front lawn and skin every one of these crooks.
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