WASHINGTON -- The pillars of a big budget deal between President Barack Obama and House Speaker John Boehner have begun to emerge: higher taxes on higher incomes paired with cuts to social insurance programs.
Obama and Boehner have both embraced a change to the way the government measures inflation, which would reduce spending on Social Security and other programs by giving beneficiaries smaller cost-of-living adjustments.
Many economists say the alternative version of the Consumer Price Index, known as the "chained CPI," is a more accurate measure of inflation. Chained CPI accounts for the way consumers avoid higher prices by substituting purchases. The Bureau of Labor Statistics has a favorite example: "If the price of pork increases while the price of beef does not, consumers might shift away from pork to beef."
The cut is small at first. After the first three years of a chained CPI regime, the average retiree on Social Security would receive $258 less in cumulative benefits, according to calculations by Social Security Works, a Washington-based advocacy group that opposes reducing benefits.
But the cumulative reduction for long-term beneficiaries would be more significant. If the chained CPI had been in place all along, today an 88-year-old who'd started drawing benefits at age 62 would receive 7.32 percent less in benefits this year, according to the group.
For Carrie Pete, a retiree in Silver Spring, Md., that would mean something like $1,080 less in annual benefits, and a cumulative reduction of roughly $15,000. The lower benefit would increase the burden on her kids to help pay for her living situation.
At 88, there are some things Pete can't do for herself anymore.
"I can't bend over to put on my socks and shoes, unless they're open shoes," Pete said in an interview this summer. "I can't walk nowhere without my walker. Can't even stand."
In February, Pete moved into the Springvale Terrace retirement apartment building, where professionals on the staff help her with those tasks. She takes her meals in the cafeteria, down the hallway from her second-floor apartment, and the staff puts on activities like bingo, Jeopardy trivia or Wii bowling in between. Every day, someone reminds Pete to take her medicine.
"So far so good," Pete said when asked how she likes her new digs. "I feel comfortable. ... Comfortable is peace of mind. I can do things with my hands. I do patchwork quilts."
Her husband died in 1990, leaving her with Social Security survivors' benefits earned from his lifelong career as a pressman in a corrugation plant. She declined to say exactly how much she gets, but when told the average Social Security recipient gets about $1,200 a month, she said she's close to average.
It's not enough to cover the full cost of her apartment, so her kids help. Monthly rates for rooms at Springvale start at $1,130. Reduced Social Security benefits would mean the kids would have to help more.
"My siblings and I are helping because none of us is positioned to be able to cover the entire balance of what her expenses are," Dorothy Coleman, Pete's daughter, said. Coleman lives in Silver Spring and works as the director of a court daycare center in Washington.
HuffPost asked Coleman how things would be different under a theoretical scenario in which her mother had received smaller Social Security cost-of-living adjustments over the past 20 years.
"It would have a significant impact on her, because right now she's getting assistance from her children to cover this," Coleman said during an interview at Springvale. "Clearly, if there was a reduction in that amount, it's going to have quite an impact on her, as well as on us, because our contributions would have to be greater."
Pete said she figured the impact would be manageable.
"If I needed, I'm sure they would" take care of me, she said of her kids.
Kate Lewis, director of community relations for Seabury Resources for Aging, a nonprofit that provides affordable services to seniors and owns Springvale Terrace, said cutting Social Security benefits would make life harder for low-income seniors in the Washington area, where affordable housing is in short supply.
"There's no place for people to go," Lewis said. "We want people to be able to afford some choice in their life when they get older."
The Obama administration has suggested the Social Security piece of its latest fiscal cliff offer would include "protections for most-vulnerable populations," which could mean long-term Social Security recipients with low incomes would receive a boost. The co-chairs of Obama's erstwhile commision on deficit reduction, Alan Simpson and Erskine Bowles, proposed similar protections for low-income and older seniors when they recommended a switch to chained CPI in 2010.
Democrats in Congress are not enthusiastic about the policy, but they have not ruled out voting for a broader budget deal that includes it. The change would save the government more than $100 billion in Social Security spending over 10 years, according to the Congressional Budget Office. Additional savings would come from federal pensions and the tax code, where tax bracket thresholds are indexed to inflation.
Specific cuts to entitlement programs are usually unpopular in polls, and the chained CPI is no exception. Fifty-four percent of Americans said they opposed including the chained CPI in a budget deal, according to a recent HuffPost/YouGov poll.
"Americans understand that Social Security's COLA has not, for many years, adequately reflected the rising cost of health care of seniors and people with disabilities," Eric Kingson, co-director of Social Security Works, said in an email. "They understand that the proposed 'chained CPI' is nothing more than a benefit cut for everyone who receives Social Security."
Earlier on HuffPost:
Prosecution For Financial Fraud Hit A 20-Year Low During The Obama Administration
Despite Obama's <a href="http://www.thedailybeast.com/newsweek/2012/05/06/why-can-t-obama-bring-wall-street-to-justice.html" target="_hplink">promises to crack down</a> on Wall Street, federal prosecutions of financial fraud hit a 20-year low last year, according to a <a href="http://www.huffingtonpost.com/2011/11/15/financial-fraud-prosecution_n_1095933.html" target="_hplink">November study from a watchdog group</a>. The number of these types of prosecutions has been falling every year since 1999 -- in other words, there were more prosecutions during every year of George W. Bush's presidency than during every year of Obama's.
Income Inequality Is Worse Under Obama Than Under Bush
The rich took home a <a href="http://www.huffingtonpost.com/2012/04/11/income-inequality-obama-bush_n_1419008.html" target="_hplink">greater share of America's income pie</a> from 2009 to 2010 than they did between 2002 and 2007, according to an April analysis from Emmanuel Saez, a professor at the University of California, Berkeley. That means the gap between the rich and the poor was more pronounced under Obama's presidency than under George W. Bush's.
Obama Wants To Lower The Corporate Tax Rate
Some of America's most profitable companies used a variety of loopholes to pay <a href="http://www.huffingtonpost.com/2011/11/03/major-corporations-tax-subsidies_n_1073548.html" target="_hplink">less than zero in taxes</a> between 2008 and 2010, according to a November 2011 report by the Citizens for Tax Justice. But the Obama administration wants to make it even easier for corporations to have a smaller tax bill; Obama proposed a tax overhaul that would <a href="http://www.huffingtonpost.com/2012/02/22/barack-obama-proposing-to_n_1292939.html" target="_hplink">cut the corporate tax rate</a> from 35 percent to 28 percent.
Health Care Reform Won't Make Health Care Cheaper For Most Americans
Once the health care law takes effect, insurance companies will be footing the bill for millions of previously uninsured Americans and for those who were denied coverage for pre-existing conditions. And health insurance companies will <a href="http://www.huffingtonpost.com/2012/04/20/health-care-costs-rise_n_1440584.html" target="_hplink">likely pass on to consumers the cost</a> of insuring the new patients. After Massachusetts enacted a similar health care plan in 2006, premiums for an individual plan in the state <a href="http://www.huffingtonpost.com/2012/06/28/health-insurance-ruling-supreme-court-costs_n_1634555.html" target="_hplink">rose 18 percent</a> over three years.
Obama's Housing Programs Have Largely Been A Failure
In 2009, Obama announced the Home Affordable Mortgage Program, promising to help 3 to 4 million borrowers, but as of January -- more than three years into the program -- HAMP had <a href="http://www.huffingtonpost.com/2012/01/27/hamp-loan-modification-expands_n_1237169.html" target="_hplink">only reached 1 million borrowers</a>. In an aim to give the program legs, administration <a href="http://www.huffingtonpost.com/2012/01/27/hamp-loan-modification-expands_n_1237169.html" target="_hplink">officials changed the rules</a> in January to make more borrowers eligible. Still, the fixes were likely too little too late, experts said at the time.
Homeowners Haven't Seen Much Out Of That Huge Mortgage Deal
The Obama Administration touted the $25 billion mortgage deal it reached with 49 states and the big banks to settle allegations that banks mishandled mortgages. As part of the settlement, banks said they would <a href="http://www.huffingtonpost.com/2012/06/12/national-mortgage-settlement-_n_1589499.html" target="_hplink">offer at least $10 billion</a> in loan forgiveness to homeowners. But months after the deal was inked, <a href="http://www.huffingtonpost.com/2012/08/29/debt-relief-mortgage-settlement_n_1839923.html" target="_hplink">banks have been slow</a> to hand out the money.
Democrats Have Received Lots Of Campaign Cash From Bain Employees
The Democratic National Convention will feature <a href="http://www.huffingtonpost.com/2012/09/03/bain-capital_n_1852302.html" target="_hplink">employees of firms run by Bain Capital</a> -- the private equity firm where Mitt Romney was formerly CEO -- likely in an aim to raise questions about Romney's tenure at the now-controversial company. But Democratic candidates and committees had <a href="http://articles.boston.com/2012-05-23/nation/31814221_1_obama-campaign-mitt-romney-romney-claims" target="_hplink">actually netted double the amount of campaign cash from Bain workers</a> as of May than their Republican counterparts since 2008, according to the <em>Boston Globe</em>. Now, Republicans are beating their Democratic colleagues in Bain cash, with <a href="http://www.opensecrets.org/overview/topcontribs.php" target="_hplink">58 percent of donations from Bain</a> employees going to Republican candidates and parties, according to the Center for Responsive Politics. <strong>CORRECTION:</strong><em> An earlier version of this slide misstated that Democrats were receiving more donations from Bain employees than Republicans. That was the case in May. As of September Republicans are receiving more donations from Bain employees.</em>
Goldman And Other Wall St. Firms Have Largely Escaped Punishment For Their Role In The Financial Crisis
The announcement last month that the Justice Department wouldn't be prosecuting Goldman Sachs over allegations surrounding the financial crisis was <a href="http://www.huffingtonpost.com/2012/08/15/matt-taibbi-eric-holder_n_1784167.html" target="_hplink">a reminder for many</a> that the Obama Administration has largely let banks off the hook for their role in the meltdown. And regulators and officials may be running out of time; <a href="http://dealbook.nytimes.com/2012/08/09/goldman-says-sec-has-ended-mortgage-investigation/?ref=business" target="_hplink">the statute of limitations</a> for crimes related to the financial crisis is fast approaching, according to <em>The New York Times</em>.
The Revolving Door Is Alive And Well In Obama Administration
Many current and former members of the Obama Administration have ties to Wall Street. The <a href="http://www.huffingtonpost.com/2012/08/30/wall-street-washington_n_1842517.html" target="_hplink">list includes</a> the president's current and former chiefs of staff -- Jacob Lew and Bill Daley, respectively -- as well as his former budget director, Peter Orszag, and others.
Too Big To Fail Banks Have Grown Under Obama
At the end of 2011, five big banks, including Bank of America and JPMorgan Chase, held <a href="http://www.bloomberg.com/news/2012-04-16/obama-bid-to-end-too-big-to-fail-undercut-as-banks-grow.html" target="_hplink">56 percent of the U.S. economy</a>, according to Bloomberg, compared to 43 percent five years earlier. That's right, the too-big-to-fail banks have actually gotten bigger.
The U.S. Has Gained A Lot Of Low-Wage Jobs During The Recovery
Welcome to the U.S. of Low-Wage America. Most of the jobs lost during the recession paid middle wages, while most of those <a href="http://www.huffingtonpost.com/2012/08/31/low-wage-jobs_n_1846733.html" target="_hplink">gained during the recovery were low-wage jobs</a>, according to a recent study from the National Employment Law Project.
Incomes Declined More During The Recovery Than The Recession
Median <a href="http://www.nytimes.com/2011/10/10/us/recession-officially-over-us-incomes-kept-falling.html" target="_hplink">household income fell 6.7 percent</a> between June 2009, when the recession technically ended, and June 2011, according to a Census Bureau study cited by <em>The New York Times</em>. That's more than the 3.2 percent incomes fell during the recession, between 2007 and 2009.
Payroll Tax Cut May Expire On Obama's Watch
Last December, congressional Democrats managed to save the payroll tax cut for one more year, giving 122 million workers a few extra bucks each paycheck, but now that <a href="http://online.wsj.com/article/SB10000872396390444130304577561410867407728.html" target="_hplink">boost may quietly disappear</a>, according to the <em>Wall Street Journal</em>. That's because the White House won't be pushing for another payroll tax cut extension this year.
Many Top Obama Donors Are Employees Of Major Corporations
Of the top 10 companies with employees donating money to Obama's campaign, three are big banks: JPMorgan Chase, Citigroup and Goldman Sachs, according to <a href="http://www.opensecrets.org/pres08/contrib.php?cid=N00009638" target="_hplink">the Center for Responsive Politics</a>. Some of Obama's other major contributors include employees from big companies such as Microsoft and Google.