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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 17, 2012 5:15PM
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this is a insurance program that we all pay into (forced) at one point in time it is one of the only social programs that have worked . there was no cost of living increases during the bush years none. in the early 90's they were talking about eliminating ss income for well to do recipients should we go there i'd bet they think not but to denie cost of living increases to those whom "need" to buy food and property taxes based on a insurance program we all bought into is wrong ... lets go back to the 80's then and denie social security to any one with a net worth over 1 million ...... why not ???? they didnt lose back then maybee they should now .... let****ome one while thier down and property taxes and food and gas and every thing just goes up and up and up.. how long till they start finding little old ladies and men homeless and or starved to death in thier house.../////  
Dec 17, 2012 5:15PM
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CPI would have us eating sawdust with their meager increases.....cost of living doesn't keep up with inflation now.....You  stole all the money that you took from us and now you have to pay the piper........Pay up or get voted out...
Dec 17, 2012 5:14PM
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Senators and Congressman don't care about us hard working people they all for them selves they all being bought of by these cooperation's so they would do anything to hurt our nation,We are not free we have no rights of anything, So if Social Security isn't an entitlement why the government still collecting Social Security and where is my money they collect for the pass 18 years stop collecting if you can't repay us back it just a bunch of crap.
Dec 17, 2012 5:14PM
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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//

Dec 17, 2012 5:09PM
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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___?

Dec 17, 2012 5:08PM
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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!

Dec 17, 2012 5:08PM
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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!!!

 

Dec 17, 2012 5:07PM
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Bush funded the Iraq war with our ss money, he took a blank check and never paid it back!
Dec 17, 2012 5:06PM
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I wish people would get this point: members of Congress PAY INTO Social Security and have done so since 1984.  This idea that they don't is bandied about by some anonymous writer as a scare tactic.  They have different health care insurance just as millions of Americans have different programs also; there is an enormous variety of health care options for people.  They PAY into a retirement program after a number of years of service; one term members get nothing.  Scott Brown gets nothing. The Republican proposal makes sense, and it will reduce SS costs over time.
Dec 17, 2012 5:05PM
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them idiots called gov of the people have to take it from ss,they spent everything else,impeach the bums,put them in the poor house,get some real americans in there,color is no matter as long as they were born here,and wages need to be voted nationaly...as pensions also.or better yet lets take americas vote and give all government a pay cut,and pension cut.I vote yes
Dec 17, 2012 5:05PM
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Social security was never meant to be a retirement benefit especially for COLA.  Many private pensioners do not even receive a Cola.  Everyone has to contibute to the debt. I am a senior on social security and I know a lot of my friends who are well off (own their home free and clear, 2 autos and boat) yet they don't even file Federal income tax returns.  They don't think they should have to pay taxes cause they are old.  Excuse me - I'm old and I pay taxes.  These people are the ones that are making it hard on all of us.  If you know of these people report them to the IRS.  Don't think anything will be done though.
Dec 17, 2012 5:01PM
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Thank Al Gore for this.  He cast the deciding vote that put SS into the general fund.  Now the greedy politicians can control it.  I have kept track of what I have paid into SS the last 46 years.  Take a guess?  $212,398.21 counting employeer match.  With interest as posted on the SS website = $696,870.09.  Please let me know when this country says they will not pay me back this (Entitlement) so I know when to stop paying taxes. 
Dec 17, 2012 4:59PM
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This is all such a joke and an embarrassment to our country.  Can we please get some elected officials that have a clue and will do the heavy lifting to get things done in a substantive way instead of these games that are being played between Obama and Boehner.

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!!

Dec 17, 2012 4:59PM
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Gee; If the  2.6% S.S. inflation value is too high, why did my medicere monthly premium go up over 5 %???   And,,, did the senate and house and all public employees also restrict their COLAs to the "chained CPI?  I doubt that. Oh,,, I also know that Medicere has a surcharge of $1/month to support the democrats main program, taxpayers paid abortions (about a million slaughtered per year). Oh-baa-ma.
Dec 17, 2012 4:53PM
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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. 

Dec 17, 2012 4:51PM
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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!

Dec 17, 2012 4:51PM
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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...

 

Just saying...

 

Sincerely,

 

A dis-satisfied customer and voter...

 

Dec 17, 2012 4:51PM
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GOP members must realize that cutting SS amounts to premeditated murder for many seniors. Millionaire seniors don't need SS or Medicare and, likely, won't mind it if they are "means-tested." It's unbelievable that so many Republicans, including preachers, ignore the Good Book full of scriptures that urge helping the less-fortunate. Prov. 16:22 says those giving to the rich will become poor. There's got to be a special place in Hell for those being brainwashed by Fox News anchors, Carl Rove, Eric Cantor, Paul Ryan, Grover Norquist. At least Ann Coulter got the election message. Only God can cause the others to confess and repent. I pray He does.
Dec 17, 2012 4:50PM
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Bottom line everyone should remember from this...Democrats want to fix the budget by having those who have the most do more....Republicans want to fix the budget by having those who have the least do more....makes the choice of which party I support pretty simple. 

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