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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 17, 2012 6:16PM
Social Security benefits should, by law, be separate from the general budget as they were at the start.  Somehow our congressmen believe the money in social security is just another fund they can draw from whenever they need more and then they call it an entitlement because retirees are taking money congress could be spending on their special programs.   
Dec 17, 2012 6:16PM
The COLA is too generous?? iwant the damn politicians to try to live on SS with its whopping 1.7% increase this year. Do any of those douchebags ever go food shopping??? I bet not. I didn't ask to become disabled but that sadly was the luck of the draw for me. The politicians should walk in my shoes and we would all see how fast their tune would change...What totally out of touch asses they ALL ARE....REGARDLESS OF THE PARTY......SCREW EM ALL.....
Dec 17, 2012 6:15PM

what idiots, the repubs get the money they are bchin about, nobody eats cash , they spend it and the rich people own the business that the money gets spent at.

Fire all the thieves that are running us into the ground.

Plan and invest in our future, make tomorrow brighter than today.  not hard as horrible as today is....We pay congressmen and senators to plan for us, they are planning for themselves and we get the bone. without incentive , no one is going to work here in America and Pride? forget about it. Greed and selfishness.  this is why the shooters too, no hope for a better tomorrow, why try?????


Dec 17, 2012 6:14PM

When the federal employees pension and retirement plan is revamped and the one for Congress, they can talk about cutting the citizens benefits. Congress will find we will rise up and fight them if they try and cut pormised benefits to of the public without doing something about the millions of past employess and Congressmen.
Dec 17, 2012 6:14PM
Wow,my husband is 71 years old and Im disabled and we can hardly afford chicken or hamburger meat let alone steak like you people in Washington.Are health care eats us alive,your health care doesnt because us little peolpe pay for it. It costs you nothing. Why dont you peolpe take a big pay cut because thats where all or money goes.You sit on your big butts an rake it in.You had all better be more careful are the little people in this country are going to finnaly have enough of are big goverment. This country is for its people not for you to squander away. Get smart or get out.
Dec 17, 2012 6:07PM

Don't touch Social security.Remove social secirity tax which was given by GOP

under President Busch.Most sensebily remove Social security Max taxable

income to all income taxable.All problem with Social security will be gone

Dec 17, 2012 6:06PM
Social Security has never been an entitlement as individuals have paid into and worked all their lives to be able to retire and receive a modest income for doing so. The crooked politicians in Washington need to take a hard look at cutting their own retirement and benefits that they will receive upon leaving office and accept Social Benefits under the same terms and conditions as current seniors do.  When they cut entitlements they need to start with welfare recipients who don't work and have never worked. There are entirely way to many individuals and families that receive welfare benefits and have been all their lives as the government has never forced them to even look for work. I personally say they need to stop all welfare payments to any individuals that are physically capable of working and then maybe our deficit will come down as the lazy bastards can starve to death and live in the gutter as far as I'm concerned.
Dec 17, 2012 6:02PM
How do they come up with 1-2% being overly generous!!  I live off of Social Security, not by choice, but because I have no choice.  I've paid into Social Security since I was 15 yrs old.  I'm 68 now.  My "pitance" doesn't even come close to being able to survive.  The "Cost of Living" raises result in only a few dollars difference... if we're lucky!  Have these government entities gone to the grocery store lately?  Have they had to buy food, toiletries, clothing (haven't been able to do that for years!), or even buy stamps to send the Christmas cards I can't afford to buy!!!  Gas is so high, I can barely afford to go to the doctor/hospital when I need to.  Get a grip you guys!  I live off $125 a week.... can you???
Dec 17, 2012 6:01PM
Hi, Boehner thinks he is the President or something,                   the average yearly income in Americia now is $40,000 a year,   Americans voted for the President  because he said he wanted to cut the Bush tax cuts for the wealthy , that would be anyone over $40,000 !
Dec 17, 2012 5:58PM
I am on Social Security Benefits now. I am receiving $906.00 a month. I've paid in to this since I was 14 years old. Now they just gave us a 1.7% cost of living raise. Guess how much I got? $15.00 a month. WOW REALLY!!!!?????? Between all the goods and services gone or going up guess what? That doesn't do me a damn bit of good to get out of the poverty level. Hell, if I could work right now I would but I can't since I have now become disabled. Not even enough on food stamps to help out...$16.00 a month on them. As you can see, I'm guess rolling in the dough. I'd like to see all our government officials living on the money I make a month. Damn them all to hell. They all make me mad. They sit on their asses all day long and get paid in the hundreds of thousand's of dollars.
Dec 17, 2012 5:58PM


If reducing Social Security will give the government an additional 1 trillion dollars in the next 10 years, guess what the government will decide.



Dec 17, 2012 5:53PM

the biggest entitlement is the government pensions. Serve 1 term and get benefits for life. Work as little as 10 rears get state benefits for life. Work 20 25 or 30 years and retire at full pay with cost of living increases.

 Pay into social security and you may get 1/3 the amount for retirement after 46 years. If they want to cut the cost of government they always talk about social security and never government pensions. WHY?

Dec 17, 2012 5:52PM

For all of you that gave me thumbs down before, google "Social security is bankrupt", and you'll see the TRUTH about how DECADES of mis-management thanks to BOTH sides of the political aisle has led to a shortfall of money into this "entitlement" program, that in 20 years, UNLESS MAJOR DEPOSITS ARE MADE NOW, NOT LATER, seniors will be going to cash a check that there will NOT be enough money in the account to cover it.

If you still think that I am wrong, then I feel sorry for you.  Waiting 20 years, until we are at the brink is TOO late...


Just saying...



A dis-satisfied customer and voter...


Dec 17, 2012 5:51PM

SINCE WHEN IS SOCIAL SECURITY AN ENTITLEMENT? I've paid into this all my working life for over 50 yrs. and was told when I first started working is this would be my form of pension when I RETIRED.


There were no COMPANY PENSIONS or 401K PLANS back then, we relied on this to sustain us in our retirement years. Who ever thought that OUR GOVERNMENT would INAPPROPRIATELY use this money for there benefit, meanwhile SCREWING the hard workers that contributed into it then and now taking it apart to better serve everyone but the ones that are ENTITLED for paying into this program.


 REMEMBER, WE HAD NO CHOICE IT WAS TAKEN OUT OF OUR PAYCHECKS. It was our way of helping those who retired while we still worked.

You don't hear about the politicians giving up there self imposed raises and benefits, and most are MILLIONAIRES that don't even need the salaries that they vote themselves.


 All politicians should be ashamed for letting the workers of this country down, they should be in office no more than two terms and receive no special benefits or retirement package. They should retire like the rest of the people that work and pay taxes to support this GOVERNMENT.






Dec 17, 2012 5:49PM

Social Security was set up with the main intention of eliminating poverty among seniors. If there is a problem with it now, then it seems they are only doing what's logical.



Redefining poverty...

Dec 17, 2012 5:48PM
Hey this is all and good for the rich why do they think they are paying for what i earned Sure is easy to say eat food that is of no value IE Iceberg lettuce and store brand cereal more sugar and filler Cellulose
Dec 17, 2012 5:44PM
Total BS of course.  I live on SS as my only income.  Food prices have almost doubled over the last five years.  Chicken in stead of about grains in stead of any meat.  I paid into SS for over 40 years so how about just give me MY money back in stead of using it to fund the presidential vacations
Dec 17, 2012 5:44PM
The problem with Social Security is the economic returns stink. Social Security isn't terribly different than spending quarters to buy dimes. DC solution is for us to agree that our children will spend quarters to buy nickles. Either you fix the system to have a positive return or it is toast.
Dec 17, 2012 5:39PM

why is it that everytime the politicians think they have a plan it always involves cutting Social Security.  I mean we put the money in the plan therefore we should be allowed to remove the money from the plan.  It is NOT an entitlement, it is our money to begin with.  I tell you what, someone should propose cutting the salary of every politician (senators and reps) by 50% for each year they do not agree and fix  the budget, the deficiet and medicare.  I would be the first in line to vote for this amendment.

Dec 17, 2012 5:37PM

Chained CPI? Ummmm....


We already switched from arugula to iceberg, among many other things,  years ago to shore up our budget and plan for retirement.By the time we're actually IN retirement, that would mean switching from iceberg to lawn clippings...





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