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."
More from Money Now
It really bothers me when they talk about social security as some kind of government handout, It certainly is not. It's not tax money or welfare or anything that would give the impression that the government is giving us a handout. All of that money was collected over many years from our pay checks and put in a fund that we could draw on when we retired. There was no government contribution, on the contrary the government has helped themselves to our fund (or IRA) several times, it's about time they put that money back in. Because of the changing life expectancy of people, adjustments will probably have to be made, but just don't equate them with anything else.
Social Security is not effecting the economy or anything else, these morons in Washington have so screwed up. When they talk about social security don't talk about anything else, it's not related to anything else.
Here is what I'm in favor of doing first we cut the presidents and congress pay and benefits.
Then we get out of foreign land where we don't belong... Unless we must be there.
I'm tired of the government balancing the budget on the old, young children, and the poor and disabled. The government allowed business to create the mess to begin with, the housing bubble, the off-shoring of jobs, and so on.
If we can give billions and yet more billions to other nations, but we can't look out for Americans who do most of the living, working and dying to make this nation great, then what kind of democracy is this country.
will be put out of office, real soon now.
Their day of reckoning is already here.
social security is very simple. you must put more money in or take less out
you can put more in by raising the cap. one idea i like is do away with the cap all together and lower the rate by 2%. brings in much more money and costs almost all business's 2% less in match and 95% of tax payers would pay the same or less than now
other way just simpley raise the rate
take less out equals cuts in benefits. the cpi is one way that reaps huge gains but it's on the backs of those who paid for the program to begin with.
a easier way is allow 62 year olds to buy into medicare thus meaning more would retire at 62 saving huge money. most people continue to work because of insurance. the more people who retire at 62 the less is paid out and it creates jobs by lower the numbers in the work force
ALL OF OUR MONEY GOES OVERSEAS. LET SOME COUNTRY ASK AND THE GOOD OLD USA WILL SEND. I AM A MILITARY RETIREE AND IN MY TRAVELS HAVE LANDED IN 16 DIFFERENT COUNTRIES. NO ONE OF THEM DO YOU FEEL WELCOME YET FOR THE LARGE IT IS YOUR TAX MONEY THAT KEEPS THEM AFLOAT. LETS KEEP HOME AND SUPPORT OUR PEOPLE WHO NEED IT. SO NOW OUR GOVERNMENT(SIC) WANTS TO SAY IF YOU EAT STEAK YOU ARE TAKEN MONEY AWAY FROM THE AID PROGRAMS SO TO CORRECT THIS WE ARE GOING TO MAKE YOU EAT, CHICKEN/,HOT DOGS,/SPAM OR WHATEVER. WE WILL NOT CUT OUR AID PROGRAMS OR THERE PEOPLE WOULD HAVE TO START EATING THE CHICKEN. WE CANNOT TAKE THE STEAK FROM THEM. MY AND MOST OF US ONLY HAVE ONE WAY TO GIVE OUR OPINION AND THAT'S BY THE VOTE. tHIS I PLEDGE TO YOU. I WILL NOT VOTE FOR ANY OF OUR PRESENT LEADERS AS THEY ARE A JOKE. I BELIEVE THAT GIVEN ANY SENIOR HIGH STUDENTS THESE PROBLEMS THEY COULD WORK THEM OUR IN A MATTER OF WEEKS. OUR LEADERS OR NOT DUMB AS A DUMB PERSON COULD COME UP WITH BETTER PROGRAMS THAT WOULD NOT PUT ANY SENIOR AT RISK.. BILL GATES HAS AROUND 58 BILLION DOLLARS WHY CAN'T HE PAY 15 MILLION A YEAR TAXES., IF HE NEVER MADE ANOTHER DOLLAR HE STILL WOULD LEAVE BILLIONS TO HIS FAMILY WHEN HE LEAVES. BY THE WAY, IF HE APPLIED, HE TO IS ELIGIBLE FOR SOCIAL SECURITY. IT'S NOT WHAT YOU HAVE IT WHAT YOU CAN GET AND OUR GOVERNMENT OFFICIALS GET A LOT AND GIVE AWAY A LOT JUST NOT TO THEIR OWN PEOPLE. OUR SEC OF STATE DOES NOT GET ON AN AIRPLANE TO GO OVERSEA WITHOUT A 50 MILLION DOLLAR CHECK IN HER POCKET. JUST IN CASE SOMEONE ASK.
As stated by Sen Sanders:
" there is enough money in the Soc Sec Fund
to pay all soc security recipients 'full benefits' for 25 YEARS!!!"
Screw all the REPUBLICANS and DEMOCRATS who would voted for such s#$&*!*............
Reduce their benefits and see what happen. I say get rid of the whole bunch. Better yet keep blaming the President since he get all the blame for whatever happens in the USA and world over. Could it be a resentment on the R E P U B L I C ANS part because of the outcome on the ELECTION?
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
While incompetent bosses like Michael Scott and Andy Bernard typically can’t survive in the workplace, office romances are a very real part of corporate culture.
- Southwest Airlines turns less legroom into $773M
- 'American Idol' gets sorry ratings for season finale
- Powerball's wacky sense of humor
- Millions of Facebook's users are actually pets
- Can crowd funding rescue the LA Times?
- Domino's debuts a DVD that smells like pizza
- Average US retirement age climbs to 61
- McDonald's aims to slim down its 145-item menu
- Bathroom reading goes digital with iPad TP stand
[BRIEFING.COM] The S&P 500 ended this week with a bang, roaring to a new all-time high on the back of stronger-than-expected economic data, influential leadership, and an ongoing appreciation for the Fed's monetary policy support.
The bullish bias was evident in premarket action as the S&P futures pointed to a higher start without the benefit of any definitive news catalyst. Stocks indeed benefited from a blast of buying interest at the opening bell on this ... More
More Market News
All hail the bull market, which ended the week with a big rally. But it also is starting to look a little like 1987, which suffered an epic blow-out.