How GOP offer would trim Social Security
Some say the cost-of-living adjustments to Social Security are too generous and should be reduced.
This post comes from Matthew Heimer at partner site MarketWatch.
In the latest round of fiscal cliff give and take, House Speaker John Boehner has made the most recent big move -- agreeing to accept an increase in tax rates on millionaires. In return, he's looking for a commitment to at least $1 trillion in spending cuts, including reductions in big entitlement programs.
And to help get there, according to The Wall Street Journal, he and other Republican leaders are putting a new emphasis on "a proposal to slow the growth of Social Security benefits by deploying a new formula for cost-of-living increases."
That formula is known among economists as the "chained consumer price index," or chained CPI, and it actually isn't especially new: Boehner and President Barack Obama were kicking it around during the 2011 budget talks as well, and it has support on both sides of the aisle.
Advocates of using chained CPI argue that the measures the government currently uses to measure inflation, and to set Social Security cost-of-living adjustments or COLAs, are actually too generous.
As Ed O'Keefe explains in The Washington Post today, "Policymakers generally make the assumption that when prices rise, people will turn to a less expensive product. They'll buy chicken instead of more expensive beef, iceberg lettuce instead of arugula, store-brand instead of name-brand cereal."
Traditional inflation measures don't catch this change in behavior, some economists think, but a chained CPI would. And using that measure, COLAs would be smaller by what the Congressional Budget Office estimates to be 0.3% each year.
Over time, that would add up: O'Keefe calculates that the average person who retired in 2000 at age 65 would be getting about 5% less than he's currently receiving if chained CPI had been in effect the entire time. But the sting of those cuts would be lessened, advocates say, because they'd be so gradual -- and, of course, because the current formula is too generous anyway.
To this line of thinking, the retort of most retiree advocacy groups (including AARP) is: Our raises are already too small. The average Social Security recipient just got a benefit increase of $19 a month for 2013 -- a "diet COLA," to use a favorite pejorative -- so retirees aren't exactly feeling flush.
But the real problem is that no inflation measure is keeping up with the biggest cost pressure that most retirees face -- rising health care costs. Medicare premiums are rising far faster than Social Security benefits, and they now eat up twice as big a share of the average retiree's benefits as they did in 2000, according to the Kaiser Family Foundation.
As Encore's Catey Hill reported when chained CPI first started making the rounds last summer, some advocacy group lobbied for the government to use a special "CPI-E" --where "E" stands for elderly -- that takes soaring medical bills into account.
Bottom line: Just about nobody reacts to medical inflation by saying, "That's OK, I'll just shop for a cheaper angioplasty." Until some kind of reform starts to flatten out that medical cost curve, changes to Social Security COLAs will probably remain a tough sell.
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I don't see why the government should punish the seniors of this country. We've all paid our dues into the social security system. Why doesn't the government consider deleting foreign aid. Don't see that on the table. How about deleting stupid study funding in all categories. Who cares why worms eat dirt, or what comes out of the south end of a northbound dung beetle. Really, my dear friends in congress, you can eliminate a huge part of the fiscal deficit by just eliminating stupid spending and "pork barreling". Do you really think our 1.3% COLA upgrade really keeps us in pace with the real cost of living? You obviously haven't bought gas, food, clothing or paid state and local taxes (which by the way are also a part of the cost of living). It is estimated that every penny we earn from January 1 to May 30th, goes exclusively to paying our taxes.... What a Country!
WHAT INCREASE,THEY GIVE IT WITH ONE AND TAKE IT AWAY WITH THE OTHER
LET THESE DO NOTHING SOBs TRY LIVING ON 1622 a MONTH
KEEP YOUR HANDS OFF OUR SS
The recent increase of 1.7% in SS payments is more than offset by an increase in other premiums, i.e., Medicare. Both of these programs have been called "entitlements" by Republicans and Democrats. If either is an entitlement, then what have I been paying for over the past 45 years? Were the deductions for SS not meant for me to collect when I reached the age where I could collect? Were the Medicare premiums I paid in from each paycheck not meant to provide health care coverage as intended? Is the government now in the business of back pedaling on the commitment made decades ago because they cannot manage their own affairs?
And they want to run our healthcare system and promise efficiency and savings over the years to come? I really fear for the future of our children and grandchildren.
We would save more money by limiting state workers, federal workers and elected officials pensions and health care. Make them live with the same rules they make us live by. If we can't do that then we really are a two class system.
With what we see coming out of Washington they don't earn a dime!
They (politicians) have forgotten who they work for. They need a wake up call next election and the following election in 4 years. This, YOUR FIRED they can relate to. Put them on our program and the problem would be fixed, until then business as usual. As for further comments everyone has pretty much covered it, no need to comment further. Happy hollidays to all..
Dammit, my Social Security IS NOT an "entitlement." I paid into the fund for 50 years! It is already our [Seniors] money! All government employees get a hefty cost of living increase every year. Why are they any more deserving than us Seniors?? I say put them on the SAME COLA as us. Hell, they work for us.
Obama: Put the half-billion dollars back into OUR SS fund. You stole it from us. It belongs to me and my fellow retirees! You will just shove it down a rat-hole, like you have the rest of Americans' money.
For next year we got a whopping 1.7% raise. My net raise is $26 dollars! The basterds added $10 dollars to our SS premium. And Obamacare is going to cost us more in co-pays, etc. A .03% COLA raise will actually cost us more! We will actually get a smaller check every year! Good grief!
Is the dude drunk again,does he not have the intellengence to understand,that SOCIAL SECURITY is NOT the problem and NO CUT'S are gonna be made! The ONLY thing that needs to be done to SOCIAL SECURITY is the cap needs to be raised to $1,000,000.00 and it will be solvent FOREVER!
The only ENTITLEMENT programs that need to be CUT are the ones that congress enjoy's on my dime,free healthcare,one hell of a retirement program,their salray needs to be cut and brought inline with the amount of work the lazy suckers do!Medicare,Medicaid, Affordable Healthcare Act, all need to be combined into one Agency,takes care of that problem! Now Bonehead,use your head for something other than a hat rack! The American People Have Spoken,if you and your republican counterparts didn't hear the message then you need to purchase a hearing aid,with your own money,not mine!
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