A central theme of the Gang of Six's deficit reduction crusade is lowering the annual cost of living for Social Security. They propose to change the formula so that the annual adjustment would be 0.3 percentage points lower than would otherwise be the case.
This cut will add up through time. After 10 years the reduction in benefits will be close to 3 percent. After 20 years it will be close to 6 percent and after 30 years, when beneficiaries are in their 90s, it will be close to 9 percent. A typical beneficiary gets close to $1,100 a month, so the Gang of Six would be taking close to $100 from their monthly check when they are in their 90s.
Since one third of retirees are almost completely dependent on Social Security, this will be felt. Anyone who questions the impact of such cuts should ask Speaker Boehner about a 9 percentage point increase in the top tax rate.
The rationale for the Gang of Six's Social Security cut is that the current inflation index doesn't take account of the fact that people can switch away from goods with rapidly rising prices to goods with slow rising prices. Research from the Bureau of Labor Statistics (BLS) shows that accounting for this switching would reduce the inflation rate by about 0.3 percentage points.
However, we know that the elderly have different consumption patterns than the population as a whole. They spend a larger share of their income on health care and less on computers and cell phones. BLS research shows that the rate of inflation experienced by the elderly is actually somewhat higher than the standard index used to adjust Social Security benefits. This research implies that if we are interested in an accurate cost of living adjustment, as the Gang of Six claim, then we might have to increase, rather than decrease, the annual adjustment.
The elderly cost of living index that shows they experience a higher rate of inflation is an experimental index, not a full price index like the other indexes calculated by BLS. However, it could be a full index if the Gang of Six and the rest of Congress wanted it to be. In other words, if the Gang of Six is really interested in a more accurate cost of living adjustment for Social Security, they can propose legislation that would direct BLS to construct a full elderly index. This would let them know whether it is necessary to raise, lower, or leave along the annual cost of living adjustment, to ensure that Social Security checks keep pace with the cost of living.
However the Gang of Six shows no interest in going this route. The only possible conclusion is that the Gang of Six is scared of what a full elderly index might show. In short, the gang of six is scared of the information. They obviously have made the decision to cut Social Security and they are not going to let evidence stand in the way.
Follow Dean Baker on Twitter: www.twitter.com/DeanBaker13
If I die early - I get nothing back ... gov gets to keep it.
If I don't die too early - gov promises no guaranteed rate of return, no guaranteed age of benefit, no guaranteed benefit level - can change all these at-will.
Actually - if I live to get the "benefits" (how the HELL can they be called " benefits " !?) - I will almost surely get LESS than I put in (otherwise the ss fund is "bankrupt" and they have to raise age or lower payouts) ...
And people are clamoring for MORE OF THIS ???
I'll give anyone who likes social security 1% more than the government if you start giving me that same amount every month - and to be "funny" I'll invest it all in government bonds that way it's JUST AS SAFE as their offer.
More importantly, seniors are the responsibility of their children and grandchildren. An school education cost $100,000+ and college education may cost even more.
So rather that expect the govt to hold the financial bag for seniors, its time society expects and demands that children do their share of caring with the govt/ SS as back-up.
We have some very basic decisions to make as a country and people. They are not complicated. Mostly it comes down to one question, what do we want as the average American life.
ICC Court,Name Change
Marinchek
Marn
http://www.socialsecurity.gov/OACT/TR/2011/II_A_highlights.html#76460
SS was never meant to be like this, maybe it's a good thing that younger people will realize that they should plan for their own retirement and hope SS doesn't go belly up by the time they are of age.
Well certainly they could depend on pensions that were promised by companies like United Airlines, Delta, IBM, and Pfizer...oh wait, they defaulted on their pensions and or cut millions of dollars from the pension reserve.
Well surely those janitors, housekeepers, food delivery persons, babysitters, store-clerks, waiters, and/or minimum wage employees have been setting aside hefty chunks of their paychecks for retirement into their 401Ks…oh wait, they kind of need what they earn for little things like food, rent, child and healthcare. Besides, those crooks on Wall Street kind of destroyed quite a few 401Ks.
Well of course people could rely upon money that they've invested in real estate. I mean if there is one thing you can depend on in this country it’s that your land will always be worth something...oh yeah, there was that thing about the housing bubble bursting. Something about unscrupulous real estate practices and dishonest/unethical behavior within mortgage lending companies.
Well darn! I’m sure there must be something else out elderly people who are ready to retire. But what on earth could that be?
What this country needs is more deregulation of business dealings, do ya think?
Geez, have you noticed how expensive dog food has become?
We won't even be able to afford that....
Better still, let's tie their pensions to Soc Sec and their health benefits to Medicare.
After all, they are getting taxpayer-funded benefits. Why shouldn't the taxpayer get a break on THOSE costs?
My understanding is that property tax increases here are primarily due to reductions in funding from the state, which are primarily due to reductions in federal funding and to the Bush recession. But I suppose it's more satisfying to blame it all on teachers and cops?
Go back to sleep.