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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cut goverment employes and goverment over-spending would be a better idea ... than cutting social security lol
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 !
LET’S TAKE A STAND.
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!!"
cut the presidents pay in 1/2 and the damn polititions they are all use less trash,
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,
and LEAVE SOCIAL SECURITY ALONE.
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
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.
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!!!!
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?
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A basic income policy can actually ensure a decent standard of living for everyone.
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