WASHINGTON -- A coalition of 96 organizations representing veterans, the elderly, minorities and labor unions on Tuesday used the occasion of the annual Social Security cost of living adjustment to plead with Congress not to manipulate the measurement as a way to reduce the deficit in coming negotiations over tax and spending policy.
Leading members of both parties have hit upon the cost of living raise to help pay for extending parts of the Bush tax cuts as part of a new "grand bargain" to reduce future deficits. By swapping out the current measurement for a new, stingier method of gauging inflation, politicians hope to reduce Social Security benefits over the long term, enabling more of the tax cuts to remain in place.
The coalition of Social Security defenders argued that such cuts would be devastating to seniors, more than 40 million of whom received Social Security benefits in August, according to the program's latest monthly statistical snapshot. The average senior on Social Security receives $1,235 per month. The benefits lifted nearly 14.5 million seniors out of poverty in 2011, according to the U.S. Census Bureau.
The Social Security Administration on Tuesday announced that the recent rise in the cost of living would be offset by a 1.7 percent increase in Social Security benefits starting in January. The increase -- one of the smallest in Social Security's history -- is calculated using a measure of inflation called the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which seniors groups say already fails to account for rising health care costs.
The stingier inflation measure is called the chained CPI. It accounts for the way consumers try to avoid inflation by not buying the same goods as prices increase. For instance, if the cost of turkey goes up, some consumers will switch to chicken. Some economists and members of Congress consider the chained CPI a more accurate measure of inflation; senior and labor advocates say the chained CPI will just make people poorer.
"The cuts that Social Security beneficiaries and others would face as a result of implementing the chained CPI may seem to some like a relatively small sacrifice, but the cuts quickly snowball as they compound, growing deeper every year," the advocacy groups, led by Washington-based Strengthen Social Security, said in their letter to congressional leaders.
"By age 85, the individual who began to receive benefits at 65 would be losing $984 in benefits that year; by age 95, the annual cut would be $1,392. Many individuals reaching this age have little to no retirement savings to rely on to make up the difference," the letter continues. "Additionally, since elderly individuals living on modest fixed incomes spend, on average, $56 on groceries for a week, cuts of that size may mean foregoing [sic] food or needed medicine."
The change would reduce overall Social Security outlays by $112 billion over 10 years, according to the Wall Street Journal.
During his debate with Republican presidential nominee Mitt Romney two weeks ago, President Obama said Social Security needed to be "tweaked." The program's trust fund is projected to run out of money in 2033, at which point incoming tax revenue will cover 75 percent of benefits. Tweaks could include raising the retirement age, increasing the amount of payroll earnings subject to taxes, or reducing benefits via the chained CPI. The president has previously suggested he's open to switching the inflation measure, and reportedly offered the chained CPI during "grand bargain" budget negotiations with House Speaker John Boehner (R-Ohio) last year.