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.
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Of course they have no idea how the majority in this country lives.
How could they possibly while relaxing on long vacations, planning their next pay raise, collecting pay-backs from lobbyists. Those guys are too busy taking care of themselves.
No one has mentioned cutting their own benefits and pensions, or did I miss something?
As a professional Tax Preparer I see a great disparity in the way our taxes are used. I've, over several years, seen single mothers/fathers (at least they claim single) with multiple children, and earnings less than 8K file a tax return and with Child Tax Credits (CTC) & Earned Income Credit (EITC) get back a refund of 7K plus. Yet, they have paid little or nothing into the Federal Income Tax System. Yet, they received State benefits (Welfare/Health Care etc.) and don't have to report that as income! What the Hey? It's a "cash" benefit, therefore INCOME. But no paperwork or legal requirement to report this. Every State/the Fed needs a formula that takes this into account. Part of that enormous refund needs to be returned to the State/taxpayers of that State for supporting these people. OUR Tax system is "supposed" to insure that all wage earners pay their fair share. If I have a State card, worth CASH at the Grocery store, and HEALTH benefits for my children, is that not earnings??? Why aren't they required to pay some of it back?? When will we the people who pay into this system wake up? Better yet when will the States & Fed wake up?
With a "fiscal cliff" looming, think about it. If your entitled to the benefits, so be it. But you should expect to have to repay a portion of those benefits to the people of that State that have supported you and your children. Especially if your Income Tax Refund is greater than the Income you "earned" and the "Benefits" you received!! Reality check time!!
1. you can not legislate the poor into prosperity by legislating the wealth out of prosperity.
2. what one person receives without working for another person must work for without receiving.
3.the govermentcant give to anybody anything that the goverment does not first take from somebody else.
When these people seeking a change to SS can live on 14,000 dollars a year..then ok...Why must we give up more then the rich...remove income caps on what is paid in, claim a million dollar salary then pay ss tax on it but don't change pay-out cap...quit borrowing from ss to fight wars or any other programs..use it only for what it was intended....
Mon. 12/17/12 Well now didn't that idea really Piss Off some People !
Ya say the word ENTITLEMENT & People immediately think FREE STUFF
Now Hear This all of You AzzHoles in Washington DC.
SOCIAL SECURITY IS NOT A ENTITLEMENT, SOCIAL SECURITY IS EARNED RETIREMENT INCOME & BENEFITS !
I worked My Azz Off for 50 long Bust Azz Years & Not Once Not Ever did I receive One Damned Dime in Social Security Income or Benefits.
Social Security & MediCare was deducted from My Pay Check each & every month for over 50 years without receiving a Dime in Income or Benefits.
WE EARNED ths INCOME & BENEFITS from a damned LIFETIME OF BLOOD SWEAT & TEARS
Now Kiss My Tired Old Azz ! SPW in Alaska
For 2012, the maximum taxable earnings amount for Social Security (OASDI) taxes is $110,100.
If the GOP is serious about Social Security, then all wages, including bonuses, should be subject to Social Security taxes.
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