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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 8:22PM

Oh great.  Here the dirtbags in the govt. go again.  Congress is the biggest problem of the people anyway.  Talk about crooks screwing the workers and those who have worked and paid into the system.  Congress wants to take it from us again.  The crooks could not leave it alone and let l. b. jerk, put it into the general fund and deliver our, hard earned wage savings, into the hands of those who have not paid into the system.  How about the Crooks putting about 2 Trillion Dollars, back into the fund and strengthen it????


Dec 17, 2012 8:22PM
(book) Animal Farm - "All animals are created equal, some are just more equal than others (pigs, politicians).
Dec 17, 2012 8:07PM
History Lesson on Your Social Security Card
Just in case some of you young whippersnappers (& some older ones) didn't know this..
It's easy to check out, if you don't believe it. Be sure and show it to your family and friends. They need a little history lesson on what's what and it doesn't matter
whether you are Democrat or Republican. Facts are Facts.
Social Security Cards up until the 1980s expressly stated the number and
card were not to be used for identification purposes. Since nearly everyone in the United States now has a number, it became convenient to use it anyway and the
message, NOT FOR IDENTIFICATION, was removed.
An old Social Security card with the "NOT FOR IDENTIFICATION" message.
Our Social Security
Franklin Roosevelt, a Democrat, introduced the Social
Security (FICA) Program. He promised:
1.) That participation in the Program would be
Completely voluntary,
No longer Voluntary
2.) That the participants would only have to pay
1% of the first $1,400 of their annual
Incomes into the Program,
Now 7.65% on the first $90,000
3.) That the money the participants elected to put
into the Program would be deductible from
their income for tax purposes each year,
No longer tax deductible
4.) That the money the participants put into the
independent 'Trust Fund' rather than into the
general operating fund, and therefore, would
only be used to fund the Social Security
Retirement Program, and no other
Government program, and,
Under Johnson the money was moved to
The General Fund and Spent
5.) That the annuity payments to the retirees would never be taxed as income.
Under Clinton & Gore Up to 85% of your Social Security can be Taxed
Since many of us have paid into FICA for years and are
now receiving a Social Security check every month --
and then finding that we are getting taxed on 85% of
the money we paid to the Federal government to 'put
away' -- you may be interested in the following:
------------ --------- --------- --------- --------- --------- ----
Q: Which Political Party took Social Security from the
independent 'Trust Fund' and put it into the
general fund so that Congress could spend it?
A: It was Lyndon Johnson and the democratically
controlled House and Senate.
------------ --------- --------- --------- --------- --------- --------- --
Q: Which Political Party eliminated the income tax
deduction for Social Security (FICA) withholding?
A: The Democratic Party.
------------ --------- --------- --------- --------- --------- --------- -----
Q: Which Political Party started taxing Social
Security annuities?
A: The Democratic Party, with Al Gore casting the
'tie-breaking' deciding vote as President of the
Senate, while he was Vice President of the US
------------ --------- --------- --------- --------- --------- --------- -
Q: Which Political Party decided to start
giving annuity payments to immigrants?
A: That's right!
Jimmy Carter and the Democratic Party.
Immigrants moved into this country, and at age 65,
began to receive Social Security payments! The
Democratic Party gave these payments to them,
even though they never paid a dime into it!
------------ --
Dec 17, 2012 7:59PM
Are the ridiculous Government and Teacher Pensions also Entitlements?  Apply all gov't pensions to the SS fund and make gov't workers live off SS like everyone SS make a come back!
Dec 17, 2012 7:58PM


Boehner must have had a lot of facial Botox if he can make these statements and still keep a straight face.



Dec 17, 2012 7:55PM
Tell these scum bag republinuts to leave SS alone. The scum bags have been trying to get rid of SS since it started and they figure this is their best chance. Why these idiots are so against SS is beyond me - since we pay into it - what the hell is their problem. They want the money in SS so they can give the rich low lifes more tax cuts.
Dec 17, 2012 7:52PM
1st off ss is not an entitlement. welfare and medicaid are entilements=re-distribution of wealth. here's 4 ways how to fix ss: eliminate the disabilty portion. disability claims are up 4 fold since 2000. go buy disability insurance @ work/dirt cheap. raise retirement age to 69/should have been done a decade ago. return all money stolen from it since the johnson admin. place all bureaucrats and lawmakers into ss along with their funding. problem solved.
Dec 17, 2012 7:49PM
How about no raises for Congress the next 50 years! 
Dec 17, 2012 7:47PM
Back off Boehner how about you politicians taken a cut in your over pay which you don't earn to start with and leave us old folks social security alone we earned ours
Dec 17, 2012 7:47PM
Entitlement ? what in the hell kind of education do you morons in Washington have? You know what a entitlement is? Its Mr Boehners #$$$#@@# paycheck thats what an entitlement is!!!!!!!!!
Dec 17, 2012 7:44PM
Dec 17, 2012 7:44PM

Amazing how the Republican elite can turn their voter base off. Boehner, touch Social Security and tens of Millions of Seniors will find another Party to represent us. Can you say TEA PARTY Mr. Boehner?

Virtually everyone in this Nation knows the problem is not Taxes or as you like to say in DC Revenue but TOO MUCH SPENDING on failed Departments, agencies and multiple programs doing the same thing. You want money the get rid of DOE which has not produced a barrel of oil yet, HUD who created the Financial Mess,  is their anyone who thinks Education is better for HEW being in charge get rid of it. Two agencies EPA & OSHA who's problem was solved years ago but continue to hang on creating more and more expensive solutions with smaller and smaller benefits. think about the last ditch cave-in, OSHA rushes out to get the worker out of the ditch by fines, fees and court orders; that really helps get the guy out of the ditch.

BTW, put the REAL MONEY back that Congress stole from SS funds over the last 40 years and we get a raise. 

When a Corporation is bankrupt, employees are cut not given salary increases, its past time to cut 30% of DC employees.

Dec 17, 2012 7:37PM

I've been reading the comments on this and I think I agree with most of them if not all of them.  I really think the people in the government should read them also.  Maybe they will start to wake up.

Dec 17, 2012 7:36PM

Hey, are there any attorneys, are knowledgeable legal students, out there in the audience that are sick enough of this mess to get a partition started for everyone who wants Congressman to convert to Medicare and SS like the rest of us? Everyone of us that want to, could sign electronically. WHY ARE WE SITTING BACK COMPLAINING AND NOT TAKING ACTION?? 


If a partition won't work, at least it will tell them what we expect. It's better than a revolt or Tea Party.

Dec 17, 2012 7:32PM
If they screw with social security at all .... I'm going to be camped out in Washington in protest. The sad part about all of this is that those cost of living raises haven't even kept up with everything, and I know older seniors who can't even buy decent food in their last days. I'm 62, and there is no way I'll ever be able to make it on what Social Security is going to pay me at 62 ... 65 ... 70 ... or 75, because everything is going up faster than the current system in place. Cut the dam defense budget instead of stealing from old people.
Dec 17, 2012 7:31PM

I don't know where John Boehner gets this crap about entitlements.  Entitlement is something given to me social security isn't an entitlement.  I have paid 6.5% of my paycheckes into social security for over 50 years I earned my social security.


John Boehner  is so stupid he his picture should be put in every school telling kids if you don't study hard you will be like dumb John Boehner.  Why isn't boehmer taking the advice of the pentagon that said they can cut 3 billion or more out of their budget.  not boehmer one of the biggest defense companies lie in his state he said that would cost 100,000 jobs. 


You know I call boehmer a stupid half wit no one should go to war then cut taxes hell that is what made us such a big deficit and have to worry about a fiscal cliff.  Bush lied to us about iraq then he cut taxes and put us in a debt for 8 years of his term.  I think the republicans should heed the warning the people are mad and if I had my way I would be voting republicans out of office and never let them in again until they start doing what the people want. The only way I know to get out of debt is to raise the taxes and stop and cut back on spending.  to get rid of my debts I had to get a parttime job cut back on my spending and it took me 3 years to get it so i could start saving money and pay cash for 95% of what i buy.




p.s. lets cout back on boehmers and congress entitlements full retirement after one term and  lifetime medical care,

Dec 17, 2012 7:30PM
anyone that would suggest that is brain dead
Dec 17, 2012 7:27PM
Since social security cola is not even keeping pace with healthcare costs, the largest expenditure for the elderly, it is much too small now.  Why don't they figure our cola on what we actually purchase not on buying a home, etc. that we do not purchase only to keep the cola down.  WHY DON'T THE POLITICIANS PUT BACK ALL OF THE MONEY THEY STOLE OUT OF THE SOCIAL SECURITY TRUST FROM LBJ FORWARD.  THE AMOUNT IS OVER 2 TRILLION DOLLARS.
Dec 17, 2012 7:24PM

Here is a novel idea, uncap the social security tax and have everyone pay there fair share. That would make SS solvent for decades and we wouldn't have to have this discussion. Why should the middle class pay a larger share of there income to SS than the wealthy. We don't cap federal taxes, why do we have to cap SS, and don't tell me it's because your benefits are capped with SS, do the wealthy get to drive in a special lane on the highway because they pay more in federal tax dollars than the middle class person, no we all have the same benefits regardless of how much we pay in taxes, it's a stupid argument.

Dec 17, 2012 7:22PM
Social security has a 2.7 trillion dollar surplus and in no way related to the deficit. I feel very strongly that Boehner should turn in his resignation for unethical conduct unbecoming a United States senator for attempting to misslead the American people and members of the House and Senate.
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