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How GOP offer would trim Social Security

Some say the cost-of-living adjustments to Social Security are too generous and should be reduced.

By MSN Money Partner Dec 17, 2012 2:50PM

This post comes from Matthew Heimer at partner site MarketWatch.

 

MarketWatch logoIn 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.

 

Elderly Woman Looking Out a Window © Keith Brofsky, Photodisc, Getty ImagesAnd 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.

 

More on MarketWatch and MSN Money:

 

 

570Comments
Dec 18, 2012 8:44AM
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Just take it and send it over seas your enemy's will love you for it. The government stole it and we want it back with interest. so pay up
Dec 18, 2012 8:32AM
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It sickens me that people that are grossly overpaid and over-benefitted, get to make decisions about Social Security recipients cost of living increases(which do not keep up with actual COLA increases now). Why don't we start looking at their costs to the taxpayers. I think Congressional salaries and benefits should be rolled back by at least ten percent with health insurance contributions of at least thirty percent, and no lifetime benefits. We need to start trimming the cost of a do-nothing Congress and make these blowhards realize who works for whom.
Who do these guys think they are anyway? Social Security should be declared off limits to Congress and finalize that position once and for all. We paid for it. Done deal.
If Congress needs to finance Medicare and Social Security I would suggest doing two things: raise the amount of corporate taxes actually paid by the top Corporations(approximately 9% for 2011) and remove the cap for SS contributions. Problems solved. Over $800 billion dollars was avoided in corporate taxes by the major companies last year which would more than solve the Medicare problem and Social Security would be totally  financed if the cap were removed. As it should be.

Dec 18, 2012 8:25AM
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Beware Washington. I still have a brain and will vote all of you out next election!
Dec 18, 2012 8:24AM
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what about gov. employees and congress  who don't have social security are they taking a cut as well what's good for the goose is good for the gander
Dec 18, 2012 7:52AM
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They need to hit the congress retirement plan and their medical plan
Dec 18, 2012 7:51AM
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Just give back all the money I've paid in for Social Security and Medicare over the last 40 years and we'll call it even.
Dec 18, 2012 7:47AM
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Gee- why didn't I think of that- when beef becomes too expensive I will switch to chicken.  And when chicken is too expensive I can switch to dog food.  Wow, all that money they took out of my paycheck for the last 42 years has really paid off.  
Dec 18, 2012 7:46AM
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When famous bank robber Willie Sutton was asked why he robbed banks he replied, "Because thats where the money is".
When the Republican party needs money, they always target Social Security. Why???
BECAUSE THATS WHERE THE MONEY IS!!!!
Hundreds of billions of dollars gets paid into S.S. every year.
Soon they will start talking again about privatizing S.S. so that they can enrich their buddies on wall street, and fill their own pockets as well.
Btw, privatization of S.S. is not a good option. There are so many crooks on wall street that will steal that money and leave millions of people with nothing during their retirement years.
Both parties are crooks, but the Republican party is nothing but a modern day bank robber.
Just remember...... BECAUSE THATS WHERE THE MONEY IS!!!
Dec 18, 2012 7:38AM
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If the arrogant, self-serving SOB's in our government who have elevated themselves above what is owed to "the commoners" hadn't stolen all the money out of the social security system to spend on an assortment of miscellaneous BS items this discussion wouldn't even be taking place!!  A very short but accurate summary would be that the Republicans SUK, the democrats SUK, the government SUKS and they are so far from the path that the founding fathers set this country off on originally that they don't even know that there is a path any longer. The message from the American people is loud and clear...get your "sh_t" together people and get to work!! If any of these looney tune characters was in anything but a government position they wouldn't make it to lunchtime!!
Dec 18, 2012 7:16AM
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As a retiree (disabled) I know that my expenses exceed any raise we receive. Couple of years ago we went 2 or 3 years with no raise although bills continued to climb because Uncle Sam claimed 1st quarter was flat. This year we get 1.9% raise. My rent went up 4% last August so I am paying $26 more per month (and get a $22 raise in benefits). Gas is over $3 a gallon. Utilities (gas and electric) keep climbing. Groceries continue to climb and even eating store brand don't help when most are now the same price as premium was 5 years ago. I am not a Vegan, I like to have some sort of meat once a day at least and hamburger is over $3 a pound (for 80%).  Medical bills also continue to rise. I was in the hospital last July and owe over $4000 for a 3 day stay after insurance. Last January my co-pay on prescriptions more than doubled. They went up from $1.10 for generics to $3 and from $3 to $6 for name brands (of course only if covered). My wife and I spend over $100 a month on prescriptions. I've gotten to a point where my $1121 leaves me less than $200 a month to buy food for my wife and I, put gas in our car, and buy other necessities like toilet paper and soap and heaven help us if our car breaks down or either of us end up in the hospital.
Why don't they fix the problem rather than causing additional headaches.

Dec 18, 2012 7:06AM
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Ok, so if we go from beef to chicken, Cheerios to generic Oatios, etc, etc, we eventually get to the point that we are eating dog food?  Where do we go from there, when they decide we can just keep on downsizing?   And yes, I have to cut my meds in half because I cannot afford to take the prescribed dose.  This is pure B.S. 
Dec 18, 2012 6:36AM
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I've never heard of anything so rediculous in my life. Yeah, sure I buy all the name brands!?! We already buy the cheapest there is. Even with today's COLA's we're always a year behind the actual cost of living increases, NOW they want to reduce it further? They should exhaust every other alternative before they start screwing with SS benefits. Making ALL of a workers income during the year subject to SS withholding would be a much better alternative. Even raising the full retirement age, gradually for those under 55 would be a better solution. Seniors rely on every penny of that SS income to survive and barely stay even. If you're going to take any money away do it to the people with big pensions and big investment income. They don't even need it! I can't believe they would do this to the people who really need every penny of that income, every year! It IS an entitlement, which means we are entitled to the money we put in. Thanks to Reagan it's taxed and that should have been declared illegal. I guess that's how Republicans stay rich, they steal all the money from the poor and elderly! Now even the Democrats want to steal from the elderly.
Dec 18, 2012 6:20AM
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I see people talking like the elderly, that spent a lifetime paying into Social Security, don't deserve this entitlement.  When they paid into it, they were paying an amount that would have covered their expenses plus. If health care hadn't gone out of control, SS would still have a positive growth like it did back in the 60's & 70's.  Don't blame the seniors for the cost of living flying through the roof. Congress acts as if the money is coming out of their pockets.

None of this takes into account the cost of gas over the past ten years.  We are finally seeing gas come down recently.  This is due 100% to the oil companies opening up some spare refineries they had laying around.(from past closings for profit gain).  Now all we need are the Pharmaceuticals to surrender their profits for the benefits of the elderly.  Jeez, just take the money that Mitt & Obama spent on this last campaign, and that would have put a huge dent in the cost.
Dec 18, 2012 5:18AM
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Entitlements? I hate the goverrnment use of that word, I paid into social security for 38 years. that's my money! I'm of retirement age now and I WANT MY MONEY! Don't be giving it to the illegals who have never work and paid into the system. Cola this year is $1.7%  that's a falsehood you'll notice the government uses the figures from the end of the third quarter to calculate the COLA, because that is the lowest quarter all year and they they lie again stating that there is no or low inflation. I wonder when was they last time any of them took a trip to the grocery store. One of the BIGGEST MISTAKES they made was moving the Social Security fund to the general fund so they can spend as they please.    
Dec 18, 2012 5:12AM
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how about saving by doing away with politicians perks such as the best health care they can afford to buy there own insurance surely. When they leave office for whatever reason they would not draw a check for life sounds like political welfare to me and anything they make serving the country except their normal pay for books and speeches be donated to charity maybe they would work at their job than they do now great pay for part time work THEY ARE SO FULL OF IT
Dec 18, 2012 4:40AM
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well there at it again I just don't get it they act like school yard bullies if you take my expensive toy from my stockpile of expensive toys ill take your only stick toy, so there, I wonder if any of the people holding public office anywhere in the vicinity of Washington have a brain among them. Talk about greed and selfishness. They are so convinced of their own intelligence that they are not aware they have absolutely no common sense. In this pool of baffling brilliance

none of them have come up with a solution to clean up there own mess. How dare they say we can eat chicken, who can afford chicken? Lets just start by cutting some of the wasteful spending in the whitehouse , Congress, and Senate. Oh and when a trip to Hawaii is in order don't spend our tax dollars on high priced fuel for Air Force One or use our military personal

for personal drivers. And that generous $19. dollars a month WOW I challenge Mr. President

to take that same $19. to the grocery store ( while his cupboards are bare, and without his army of overpaid secret service men) and try to plan a weeks worth of food on that. 

Why don't you try to come up with a tax that works for everyone including the civil servants

and by the way, it is an honor and a priviledge to serve this country and you should be paying us for the right to do so, not bilking it for every penny.

you don't seem to remember the seniors are the ones that paid the money in to SS in the first

place, what gives you the right now to take it away?

Dec 18, 2012 4:24AM
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damn I think i have the answer to gun control , you should have to sign in on a computor to several different posts , email ,passwords , verification of email  and double that on the password , wait three days for verification hope you rember passwords , why hell you would lose interest after going thru all that ****
Dec 18, 2012 4:20AM
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as always republican answer to everything rich keep eating steak while the middle class eats hamburger
Dec 18, 2012 3:45AM
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Boehner wants to cut social security for seniors thinking the democrats will accept that and he'll agree to a tax increase on the millionaires. If this happens then shame on all of them. To use seniors and the poor who rely upon social security and medicare to survive as pawns in his game of this for that......a common replubican move......is a shame. If the democrats and Obama agree to this then it will be checkmate on seniors and poor. Game over. We have to get all these idiots out of Congress. They have their retirement and insurance assured to them but have been exempted from the game.....so for them it doesnt matter who wins or loses. They are like spectators at a tennis match...sitting there with their heads just turning from side to side. 
Dec 18, 2012 3:37AM
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Stop government employees from double dipping ,getting ss and pensionstoo.
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