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 am 62 and getting ready to retire---I know that SS is not an entitlement but my thinking is that if I give a
little on the cola front they won't have to come back for awhile and maybe employment will turn around
and more people will be contributing to SS-------If that doesn't happen they will come back and want a
bigger chunk of cuts from everyone and it will probably hurt alot more ///////////Just a thought//
Wow! I want to know where to sign up to get that $19!!! I just got my SS info and I get a whole $2.08 a month for 2013.
I haven't bought chewing gum in so long; I'm not sure I could even afford it with such a generous increase in my benefit.
I find it fascinating that a corporation can shrink a product by 2/3, raise the price by 1/3 and have the gall to make sure that their CEO's get their bonus $$$$. How stupid do they think we are? This crap (pardon the pun) started with, of all things, toilet paper way back in the early '90's. What is it gonna' take for people to wake up and smell the S___?
i hope theey also include the traditional cost of living increases to civil servants as well!
talk about ENTITLEMENT programs! civil servant salary and benifit programs are a serious opportunity to trim some fat from the budget!
Washington is extending and pretending with every problem. Nothing gets fixed including Social Security, Medicare, the fiscal cliff, the credit default swaps, the insolvent banks, the deficits, etc. The banks have shifted 15 trillion in credit default swaps off their balance sheets and on to the treasury's balance sheet. Now the banks continue to get billions of dollars from the Fed. at no cost, they just adjust the banks account with the Fed with a few key strokes on a computer. Creating money out of thin air to continue doing the same old thing and expecting a different result is an extending and pretending policy. In stead of the huge banks being broken up because they went insolvent, the government decided to make every citizen accountable and therefore insolvent. A multi-trillion dollar problem being hidden from the American people that hangs over us like a destructive storm cloud nobody wants to look at!!!
If any company ran their affairs in this manner of kicking the can down the road at the expense of the unborn, they would be out of business yesterday. Only difference is that a real company doesn't have unlimited resources (taxpayer burden) and the ability to print money that makes everything those that work and have worked worth less and less by the day.
What a disgraceful sham this whole thing truly is.................but then again a vast number of Americans don't have a clue and worse yet could care less!!
The Social Security Funding issue would be solved by removing the annual cap in earnings...While the well off those earning above the current SS cap of $110,000 aproximately for 2012 would gripe they might want to consider it Social Stability. Because if Our Government tries to starve Granny she will come to DC and whap the politicians soundly with her bumpershoot.
Let us take the current and future Government raises and use them for paying back the money they have taken from the SS Fund.
The corrupt Republican corporate MONARCHY'S INFILTRATED, "HAND-PICKED" political puppets hard at work! They STOLE OUR GUARANTEED PENSIONS and gave us THEIR INSURANCE POLICY 401k, that CLEARLY STATES THAT IF THEY FAIL, SO DO WE!!!
Now they want to PLAY WITH OUR SOCIAL SECURITY! That's OUR F**KING MONEY! KEEP YOUR DAMN HANDS OFF IT! And, that goes for MEDICARE TOO!
They have STOLEN our American way of life, now they want to take what little bit we have left!!!!
What they REALLY WANT is an American Revolution, peaceful or otherwise! Let them take their pick!
Social Security is BANKRUPT people. Face facts. We as a country are past the point of "fixing" it. With more and more people living now up to 90 and beyond, thanks to medical and technical advances over the past 20 years, the status quo of ss deductions is inadequate. More and more baby boomers and future generations, disabled, etc are getting onto ss, and eventually, even the CURRENT payers of ss will no longer be able to keep up. And with more people losing their jobs these days, how can the remaining working class, and even RICH and SUPER RICH keep making up the difference with lost revenues?
Entitlement cuts, WOULD work, but ONLY with MASSIVE spikes in taxes for BOTH the "rich", as well as "middle class". Everyone WILL have to share in this pain, for the reform to REALLY work.
....Only thing is, NOBODY is willing to do what's necessary...
A dis-satisfied customer and voter...
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