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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 12:14AM
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So with the new chained CPI when the prices rise, especially for groceries, I get to drop down and buy the less desirable and less tasting store or inferior brands. Groceries which make up a large portion of monthly bills for the retired increase constantly. The quantity in the package or bag also is reduced. As gas goes up the cost of the item goes up to the retailer, and thus to the consumer.
Dec 18, 2012 12:14AM
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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.

Dec 18, 2012 12:12AM
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Dont blame it on Lyndon Johnson, Republicans suck , its that simple, especially Boehner
Dec 18, 2012 12:04AM
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If the Johnson administration hadn't made it okay to rob SS there would be plenty of money for years to come but, can't pay those who invested in the government fraud with IOU's.  Stop all the waste in government, term limits, no retirement for elected officals, live with the health care you write for others.  Get rid of the govenment union's including teachers.  That money was a investment not a benefit as some believe.
Dec 17, 2012 11:26PM
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My thoughts exactly.  Since when is Social Security an "ENTITLEMENT"?  If this is the best that these yahoo's can do then it is definitely time to fire every one of them.  We, the ordinary people paid into this program, not the Government.  But when Johnson was President, they saw all the excess money that the Social Security system had and got Johnson to sign the bill allowing them to "borrow the excess funds".  The bad part is the fact that not one dime has been repaid and now they want to cut a measly 1.6% COLA to less?  

I have a better idea, lets borrow the money from all these Senators and Congressmen and women's retirement fund.  Fair is fair, they stole ours and now its time for the payback.  Only these people vote for a raise for themselves and its usually in the 16 to 18% range.  This is not common sense people.  I urge everyone to let your Senators and Congress men and women know how you feel .   Write them and tell them not to mess with SSN.  

If any of these officials are reading these blogs, take notice that even you can be replaced.
Dec 17, 2012 11:24PM
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Here's an idea for fixing social security and medicare, have the government put back all the money they have stolen from it over the years. Want to cut the deficit? ABOLISH THE FULL PAY PENSION FOR CONGRESSMEN/WOMEN! Also put them on the same obamacare programs that seem to be ok for everyone else, instead of their premium healthcare. Hey, if it's good enough for us, it's good enough for them.
Dec 17, 2012 11:22PM
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At Smith Barney we make our money the old fashioned way ,  " We earn it "   I hate to be the bearer of bad new but if your not rich you cannot earn money, no matter how hard or smart you work its called an entitelment, remember only rich people earn their paychecks.
Dec 17, 2012 11:17PM
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well,its back to 'canned dogfood' again like was late 70s.oh,but 'they' fixed it back then,forgot.
Dec 17, 2012 11:16PM
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We have the big Republican majority in the house and the crippling Republican minority in the senate because we voted them in.  The solution should be simple.
Dec 17, 2012 11:09PM
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Among my retirement income is a SS oncome and this year we got a 1.7% increase and for the last two years zero. So how much less will we get if this works out? A better way would be to take the cap off of when you stop paying in or index it for all income. Now you stop paying at around 100 k which was established way back when 50 k was middle class. Medicare goes up every year few years back it was around 60 bucks now its 110 and after the cola kicked in and the medicare went up I got a 20 buck a month rate increase. I paid into SS for 46 years and it is not an entitlement I invested in the program and yet Republicans think if you get SS you are one of the 47% they call free loaders after they have spent the trust fund for SS which now the government owes over two trillion dollars.
Dec 17, 2012 10:59PM
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They always seem to aim their pistols in the wrong direction...there are some other places to look such as "the 100,000 plus extra fed. workers hired in the last 4 years we probably didn't need, the yearly 1.4 billion  on the president's trips for self, family, & entorouge...shall we go on....hey, if we get more working taxpayers, it will close deficit gaps.
Dec 17, 2012 10:56PM
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All of you are complaining about the people in congress, the senate and the house. They keep lying to you and you keep putting back into office. They are not there for the interest of the people, they are there for all the perks they can get before you figure out you've been had!
Dec 17, 2012 10:49PM
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To generous on cost of living raise ?I am getting a 1.7 % increase for 2013. That's about $12.00 a month and they call that generous !I work myself nearly to death, pay my taxes, then when it's time to draw they act like you still owe them something and they call themselves generous.It's time for reform for we the people.We shouldn't have to fight for what is ours !And they need to keep their hands out of the pot it is not for there personal use it is for everyone who has worked and earned it !!! 
Dec 17, 2012 10:45PM
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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.

Dec 17, 2012 10:42PM
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Not sure if creating a new way to figure SS would be any thing different than the  way the Government figures out SS now.  Has it is now, the cost of medical care, energy, and food prices have been eliminated to the formula for calculating SS. Thus those items now are not figured into inflation. We all know that all those items have rose dramatically in the past years. SS payments have only risen slightly in the past 4 years and have not kept up with the rising costs of those items.  It seems to me that if we just cut military spending in half would be a great start in reducing the  debt.  How about cutting pensions' and medical programs for all of congress?      
Dec 17, 2012 10:20PM
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I think it's time to cut Mr. Boner's entitlements.....like his salary, free medical care (which we all pay for) and they even come to their office or home, their retirement and every other benefits WE are paying for him. Social Security fund has been "dipped" into.....robbing Peter to pay Paul garbage for years by congress and hasn't been put back into the general fund. Actually, our monies has been stolen by all of congress and all should be in jail. Right? Tell me, why is Social Security and Medicare all of a sudden having to be cut in order to save the U.S. economy and jobs? Who's screwing who?
Dec 17, 2012 10:20PM
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Taxman99

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.

                                                                    

Dec 17, 2012 10:20PM
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I don't know what the answer is, but I sure have a lot of ideas.
Dec 17, 2012 10:10PM
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How about charge SS tax on every dollar earned and not cap it.  Besides payroll, also run it on dividend income.   I am sure that SS would easily pay for itself for the next 75 years without republicans dipping into the fund.
Dec 17, 2012 10:07PM
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I would suggest to this congress and the President just try to even live on this money we recieve. The price of everything goes higher, we recieve 1.7 increase and they take it right back in medicare, medicare goes up, drugs go up, there is no win in an increase for us. These so called smart guys do not know crap about what it takes for someone to even exist on social security and medicare and part D RX. The goood folks that worked hard all their lives helped build this country are the ones you knuckle heads want to bear the burden. The greedy corrupt rich need to take a long look at their life and  do their part to keep this countries economy alive. Boys and girls when this country fals the whole world falls with us and then comes anarchy, rich you like us will have no where to hide.
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