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.
More on MarketWatch and MSN Money:
- How to protect your retirement in 2013
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- When should you tap your IRAs?
I planned for my retirement, if SS is still around it will be used for beer money.
Fact; Most people will take out many times over what they might have paid into SS, if they paid at all.
ObamaCare will kill off most of the SS beneficiaries anyway.
What the American people forget is that President Johnson stole the Social Security Fund in 1968 and put the funds in the Federal Budget and used the funds to support his Great Sociry program. The Social Security Funds has a large excess and would keep the SS bebefits for many generations. Johnson put SS on a pay as you go basis meaning they only paid out the amount that they took in. For 45 years I made over maximum dedauction amout and would have much more than II am now getting.
Something else that is crazy.
We have inmates in County, State & Federal Facilities that are receiving SSI/SSD checks every Month.
They ARE NOT entitled to these payments according to Federal Law. They gave them up when incarcerated. Yet there is NO system to cross check/notify the Social Security Admin that these people are incarcerated and that they have LOST their rights to these benefits. How many MILLIONS of dollars are going to this cash cow?? Or should I say to the garbage disposal of drugs & power within our incarceration Facilities? I could be wrong, but I don't think so. Not from what I see at a Tax desk. I've had people try to claim the incarcerated as "dependent's" on their Tax returns. It's time the people make the Federal & State Governments act in accordance with the law. Every incarcerated inmate whether for 30 days or 30 years, should be identified to the Social Security Admin (SSA) upon booking for more than thirty days (30). They forfeit those benefits. After their time served, they can re-apply, like anyone else. I'm betting that less than 40% would be approved , IF the SSA enforced their own rules, regulations and requirements. It might even be higher, who can say. However - it needs TO CHANGE. Think about it. It's your tax dollar at work. However, without the public condemnation and outcry, it won't stop. Do you really want to be providing some sexual predator or murderer on death row/life sentence with benefits until they die, or unfortunately, as slow as the SSA system is, for several months AFTER they die???
If your intelligent and want to know, look into it. IF I'm wrong, say so. I will apologize. However, I've researched this for 11 years. Go for it. I'd like to say I was wrong.
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