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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:



Dec 18, 2012 5:46PM
i have been calling all republican cut throats in congress and asking when will they take a cut. you lead by example here you republican rich people lovers. leave our social security medicare and medicade alone. i think they should not receive pensions they should have also been paying into the system we all have had to. oh and by the way i have asked republican members of congress why hasn't our social security been invested in safe guaranteed bonds. that's right we would have more to look forward to if they did that. it couldn't be invested in a savings account with a bank because then the fed would have to monitor the banks and we cant do that because the banks and wall street own our rotten congress. watch out people the next thing is our republican friends will do is sell off our fresh water lakes to the koch brothers and wall street and we can start to pay 3 to 4 dollars a gallon for water.
Dec 18, 2012 5:35PM
I think it's about time to cut the benefits offer to  our elected officials. If we can eat cheaper, so can they!!!!!!!!
Dec 18, 2012 5:24PM

Then let Congress take a pay cut too. As senior citizens they now expect us to be paupers and tell us what to buy and eat. Horse Hockey!!! I paid in to FICA all my working life. I earned my Social Security, unlike those illegals that are getting it and health insurance for free. I say take away Congress' retirement and make them go with Social Security just like everyone else. No perks, no free medical....

they live like the rest of us do.  


It's time every freeloading politician in Congress gets the boot. And yes... they can be impeached too.  

Dec 18, 2012 5:18PM
As I have said before; let's start with the congress and senators retirement and benefits.  We might need to readjust the current salaraies as well.  They only really work part-time so they should not be getting any health care benefits.  Let's take their retirement from the federal system and just let them have a 401K that they can control.  After a year or two we will see how that goes and then we can discuss mine.  I worked 50-60 hours per week for my social security.  They don't work 50-60 hours a month.  I paid in and earned mine; they did not.
Dec 18, 2012 5:14PM

I agree that the Social Security Cost of living adjustments are too high. 

How greedy they are to lavish on their 1.7% increase this year.  Why

should we worry that they miss a few meals.  They are going to die

sooner or later.  That money  rightfully belongs to our beloved  leaders

of our government and should be given to our hard working congress

people who only get a 15% increase in their salary annually. 

Just think of all the people who have to choose between getting a job

or staying on  unemployment .  We should give them a 15% increase

in their unemployment so they can buy a new couch, the and one is

wearing out.  We should not forget about our new visitors from the

south.  They come into America tired, wet and eager to take a bite

out of the American dream.  We need to keep them supplied with

food stamps, rent vouchers, free  health care, and what ever else

they need to keep voting for the left. 

Dec 18, 2012 4:56PM

Dumbest event we have ever seen...what planet does Boehner and Obama live on ? These two guys and a bunch of other Republicans are trying to balance the  Federal budget by cutting the few pennies that seniors on Social Security receive as a  cost of living increase each year ,which HAS  ALMOST BEEN A DYING BREED 2 OF THE LAST 4 YEARS when we received a big flat ZERO as a cost of living increase.


Here are the increases for the last 7 years...

2013   1.7%

2012   3.6% thanks President Obama

2011   0.0%

2011   0.0%

2009   5.8% thanks President George Bush

2008   2.3%

2007   3.3%


This year my wife and I will get ,under the present COLA, (cost of living increase formula) a great big $22.00 dollars....big deal and you people in Washington are going to cut this down with your new formula called chained consumer priced index  ....NONSENSE


Go after other spending increases that you give Billionaires and millionaires and leave my little yearly cost of increase alone....all $22 dollars of it....which you call GENEROUS...


How sad !

Dec 18, 2012 4:48PM
Here's what Alice Rivlin, Bill Clinton's former budget director, and apparently a sensible liberal (if there is such a thing??), had to say about the budget problems:  " We can start, Rivlin says, by trimming outmoded federal programs and increasing revenue over the long term by raising the retirement age for Social Security and means-testing Medicare benefits. "We can't get out of this problem without doing both spending cuts, especially slowing the growth of entitlement, and tax increases."  So Barry, your move.........
Dec 18, 2012 4:43PM

Whether you support Noblaba or not, think about this.


As unemployment WILL rise, reguardless of whether or not we go over the "cliff", that means LESS "revenue" for the gov't, therefore, less for SS and other social programs.  If this trend should continue, say over the next  4 years, ss and other programs will be strained to the point they may collapse, no matter how much the RICH and SUPERICH are taxed.  People are living longer (some into their 90's), and this puts a bigger burden on the already exhausted ss system. 


COLA, (as it's called), WILL have to be revised, if the attempt to save ss is implemented.  The regular "cost of living" increases that happen now, will be scaled back more and more.  No matter dem or rep, red or blue, rich or poor, everyone WILL feel the pain, unless GOV'T, the "rich and superich", and WE, the amercian taxpayer come together, and try to save what we can. 


And speaking of "trying to save what we can". A word of advice to all of you on BOTH sides of the political aisle.  Maybe if you tried saving ON YOUR OWN, INSTEAD OF RELYING ON BIG BROTHER NOBLABA OR "W", you would have NO problem to start with...


A perfectly good safe you can buy for less than 50.00...That's a start...


Just saying...




A dis-satisfied customer and voter...



Dec 18, 2012 4:37PM

I believe all measures to decrease spending should be implemented. Per the Social Securitey recommendation it should be applied to all retirment paid by the US Government ( Congress and Military).


I also would place a moratorium on all salary increases to Congress until there is a Balanced Budget.



Dec 18, 2012 4:28PM

You all do realize they (congress) has been spending OUR Social Security funds like Monopoly Money for the past - how many years ... they dont care and no one is holding them accountable ... IT IS TIME.

Dec 18, 2012 4:25PM
Dear Mr. President and Mr. Bohner - You DO realize that ANYTHING you do must be done to members of congress as well as the Executive staff do you not?   For if not - the services of you all (including your cohorts) will no longer be necessary .... YOU'RE FIRED.
Dec 18, 2012 4:24PM
Yep! You've all been suckered! Anybody with 2 brain cells to rub together should be smart enough to realize "You aint rich enough to be a republican"...But somehow the bible thumpn,gun nuts,people haters vote republican!   The republicans were against social security over 70 years ago! The republicans were against medicare over 50 years ago!  Will it take a 2x4 up side the head for 98% of the sheeple to wake up!    Mitt Robme was born on third base and thought he hit a triple! He almost had the popular vote!    This is UNBELIEVABLE!   WOW! DUH!
Dec 18, 2012 4:13PM
A Lot of pissed of seniors here.  I suppose you want your entitlement because you've earned it. but at what cost to the hard working families who can't make ends meet because the tax burden is killing us to pay for Social secuity and medicare.  Sorry Grandparents but your programs are killing the working people.  There needs to be reforms and reductions in expenditures.  You can't have hip replacements and expensive medicines for free and unlimited proceedures and expect the working people to contribute enough tax dollars to fund it all. Its math people and their aint enough money.  Work longer until 70 and stop being so dam selfish.  You paid yes but if you've collected over 7 years worth youve already got your money and the employeer contribution back! Sorry but the money wasn't invested and no interest was earned. It was and is a giant Ponzi scheme.  .
Dec 18, 2012 4:10PM
SS is not an entitlement program. It is an insurance program. Food stamps welfare etc. are entitlements.
Dec 18, 2012 4:08PM

No matter what side you're on, we as a society should be moving ahead, not backwards..There is no reason any future generations should accept anything less than thier parents had recieved. If we do then we are moving backwards.  We should not fall for the crap about people are living longer so we can raise the age..bla bla bla.  That argument just means things are staying the same, not moving forward for the better.  Both parties need to cut the other spending and leave us little people alone.  My God, we need a third party.

Dec 18, 2012 4:04PM

I think the time has come to discuss impeachment for all of those in Washing who are refusing to represent the majority that elected themand the totality of their constituency and solely represent a two percent portion of the citizenship at the expense of the rest of the entire office.  And they are DEFYING the will of the people.





Dec 18, 2012 3:59PM

Our government is broke and while it's true you paid into social security the money you receive far exceeds what you and your employer have paid into it over the years. The break even point is about 5 years according to my social security statement. check yours and do the math 5-7 years is typical.  Unfortunately the money wasn't invested but rather was used by the treasury for other programs thus no income was generated.  The sad fact is social security is a transgenerational ponzi scheme and is unsustainable at the present rate of withdrawal. The so called social security trust fund is a house of cards funded by treasure notes being paid back with borrowed money.  Its all adding to the deficit and  if entitlement expenditures are not drastically reduced we will no longer be able to pay them.   Sure we could cut other programs even eliminate the defense budget but it isn't enough to pay expenditures.

     We could fix some of the issue by eliminating early retirement at 62 and raising it to 65 or  67 which ever retirement age applies.  Additionally the number of disabled workers has rising dramatically over the past couple years and I'm sure there is  a  large percentage who are scamming the system just like they do for welfare and other government programs.  Put a cap on the number of people eligible each year to limit the growth of SSI payments and do more thorough investigations.   Also you could means test it. If for example you have assets over a certain amount maybe two million or so you shouldn't probably be getting it. 

     Again I'll reiterate it. The United States of America is on the verge of financial collapse.  Yes you have contributed to social security it is not a constitutionally protected right, like speech or property if necessary for the preservation of the Union it can be reduced or in some cases eliminated.      

Dec 18, 2012 3:58PM

That kind of cut that is LESS than the inflation rate has the same net effect as no cost of living increase at all!

That is, it decreases the standard of living of the defenseless by not allowing them to maintain the already low standard of living and sapping their livelihood more and more as each year passes.


The rich just slapping a different color paint on their demand to maintain their super incomes at the expense of the poorest.

Dec 18, 2012 3:46PM

You did not pay enough in to SS to cover the years of your retirement, SS is and never was meant to be a sole means of retirement income, If you did not prepare for your future then why should someone else have to pay for you.

You will suck more out of SS in the first 8 -10 years you start collecting than you have paid in over 40-50 years.

Dec 18, 2012 3:37PM

To Congress and the President,  It must be so easy and simple for you to destroy the Senior Citizens and all those who have worked so very hard all their lives and have put monies in the SSI, Medicare and Medical systems counting that it would be there when they retired because they earned it, paid for it as required by the government. But some of you borrowed from it and never repaid it; and then you all got a bright idea and took your selves out of SSI and into a type of 401k, and give your selves and your families many perks and benefits. And you give yourselves raises, without us voting on it; or was that paper clipped on the back of something you new would pass? Most all of you should be ashamed of hoe Congress is operated and most of you don't, because you are convinced you are doing the right thing, when you are not. This Country is in a big mess and all you do is help shovel us deeper and deeper. You need to come have dinner at my house, lets just see how many nights you could eat the way I do. And I have a job, and I work all the hours I can and sometimes work other jobs; and it is still not enough. And sometime this next year I will need to give-up my home, because I cannot afford to live in it any longer. Why don't you get down to real business and resolve the issues! The cost of living is to high. Millions of Americans are out of work and homeless and more on the way, but you keep living and telling us that this isn't the case. You are fooling who? I believe we need to elect all new people to Congress. Weed out all the old and start over. Or go involve yourselves at how the lower middle class and what is left of the middle class of your constituents. You don't get it, you don't care. And you wont see this or hear about this. Too bad, not that it would make a difference. Shame on you! 

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