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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.


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Dec 17, 2012 4:50PM
Those dum asses in the white house, senate, and congress, should ask the seniors.  Hell,we are already buying non-brand name products, now.  Tell the dum asses to try and live off of Social Security, and see how they make it.
Dec 17, 2012 4:46PM
I paid into Social Security for 45 1/2 years; so if S.S. is an entitlement, I want my money back plus interest. Question: does Congress pay a portion of their salary into their retirement program? If not, then why is their retirement pay so much better than S.S? All that's needed to fix Social Security is to eliminate the cap - pay on all your earnings. If this was done, the % could probably be reduced, and S.S. would have excess monies.  Here's an idea -- move Congress onto Social Security retirement, & let's see how long it takes them to fix it then!!!
Dec 17, 2012 4:44PM
The previous writers hit the nail on the head.. why should others in government service not be part of social security? Let the members of congress and the courts change the way they receive pensions.. let them work until they are 65 ... let them belong to medicare .. let them use an hmo. Why should they have office expenses of 1 million a year each?. Why doesn't the press explain all their retirement bennies to their readers and viewers?
Dec 17, 2012 4:41PM
Here again the big shot bastards in congress and the senate with there over inflated paychecks are going to take away from the elderly and poor or middle class. WHY don't THEY TAKE A PAY CUT????? Hell they'll get a nice pension after one term of service and free medical care for life. We the people  of this country need to stop this runaway government!!!!! Hell lets all stop paying taxes and see how long the government can survive!!!! It's the same difference when they cut social security to those that have worked and earned it. All I see the government that is being SELF SERVANT!!! What the HELL happened to the statement, "FOR THE PEOPLE BY THE PEOPLE" Might as well pack up and move overseas; at least I've heard some countries are GLAD AND HAPPY TO HAVE AMERICAN RETIREES; more so than OUR OWN GOVERNMENT... This is a sad state of affairs, and makes me sick to my stomach!!!!  
Dec 17, 2012 4:41PM

those a _ _ _ _ _.  They don't need Social Security - so how very very easy it is for them to sit up there and say oh!!!  your getting too much- , cut back on cost of living amount,  back on dollars paid out, cut back on anything they can think of...  They think that because we are older  and retired that we all of sudden became dumb too..  How dare they!!  I say, take away ALL, ALL, ALL of THEIR PERKS, and see what they would have to say about that!!!!  Make them pay for their HEALTH Insurance, gas, cars, postage- no raise or better yet give THEM the $19.00  a month and see what would happen..


Sick of it!!! I think everyone of them should be fired.

Dec 17, 2012 4:41PM

Since when did Social Security become the issue. I thought we got in this fiscal mess by unfunded, undeclared and prolonged wars that have gained us nothing but the loss of life and national treasure. While we need to tighten our belts everywhere...why do we lead off with social security....How about we quit being the aggressor in the world and change our posture to one of defense. Bet we could defend our selves for a fraction of what we spend now. So as soon as we cut the bloated defense budget...then let' entertain what we should do to keep social security solvent ( which it currently is it is not contributing to the deficit).

On Medicare, yes it must be reformed but just continuing to raise the premiums for seniors and chopping benefits is not the answer. How about we tackle the out of control costs. If the free market drove medical costs I do not believe we would have a problem. Government and Insurance companies have removed medical care in the U.S. as far as possible from the free market.

Finally, how about we do a little chopping at the bloated government...maybe a few less chefs on the whitehouse staff. few less trips in Air Force one...maybe a few less senior level bureaucrats in each department...It adds up.

So lets not lead the discussion with how to cut Social Security

Dec 17, 2012 4:39PM
so on social security the highest prcie meat i can afford to buy is hamburger---as the price of that goes up i am supposed to switch to canned  dog food------got it !
These law makers broke the law of insider trading for their personal gain of over several hundred million dollars, our laws are for every one including congress !. They want to cut S.S, ok, any one that makes a million dollars should not be intitled to collect any S.S. that's only fair. Old people on S.S. are poor and don't have money for any vacations or home repair's or for gas. It's clear they don't want to up their own taxes. The cost of living formula they use is worthless and not accurate and too late to help. We need more money to keep up with inflation now.
Dec 17, 2012 4:37PM
Social Security isn't an entitlement!  What the heck, I've paid into SS for forty years now, and when I retire, I want my money back.  If the government has given my money to people who don't deserve it, I want names and address so I can go and shake these people down.  Just because the entitlement programs are using the SS money, SS should be paid back and solvent.  This is why bigger government is such a mess.  The government takes the money from the people who pay in and make money, and give it to the people who do nothing and don't contribute one cent.  The american taxpayers are very generous to people who are incapable of working, are sick, or short term disability, the poor, but there are so many entitlement programs, we just can't afford it anymore, and frankly, we're all tired of it!
Dec 17, 2012 4:36PM
Most of us in the Green Valley retirement community don't seem to be flush with the COLA formula as it stands now. As others have stated, if the Senators and Congressman change over to Social Security as their pension system, we would be much more receptive to "Diet COLA" increases.

I wonder how many real people doubt this will ever occur.

Republicans keep talking about "entitlements" like it's a freebie the government gives to people. I've calculated that I'd have to live to 113 to recoup the taxes I've paid into Social Security and Medicare without any compounded interest which would more than double what I've paid. If the government wants to give me the taxes I've paid with compounded interest since 1973 then I'd be fine with opting out of Social Security and Medicare. This payment might even bounce me into the "top 2 %. I didn't ask to be taxed for the last 39 years.
Dec 17, 2012 4:35PM
Sounds like the GOP is after the lower/middle class dollars again. Sure, tax the rich, but let's get back at the poor by starving them and costing them out of health care.
Dec 17, 2012 4:33PM
The burden of "BIG GOVERNMENT" is getting so out of control that the people at some point will be forced to step in and cut out a lot of the non essential and duplications of services in all levels of government. Hope it is soon so I be around to witness the changes.
Dec 17, 2012 4:29PM
When do you think our senaters,congressmen, and the rest of the government is going to take a hit on their retirement, hospital coverage and the rest of their entitlements? When they do i believe the rest of us would not mind a reduction. 
Dec 17, 2012 4:23PM
I'm sure seniors would agree to this deal IF the House, Senate, Judiciary, and Executive Branches of the government convert from their current pension plans to Social Security under the same terms and conditions the social security seniors endure.  Continue the Social Security payroll tax rate decrease for another year???   REALLY?????
Dec 17, 2012 4:13PM
since when have social security benefits been an entitlement.  I mean everyone on of the working US citizen has paid into the Social Security since the first day we worked.  Now its an entitlement.  Does that mean I do not have to pay in.
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