Do you hear a noise like power saws cutting away at your Social Security benefits? That's the sound of the politicians working on the "Chain Gang."
They're promoting the "chained CPI," Washington's latest gimmick for tricking voters and cutting their hard-earned benefits to protect the wealthy. That may sound like inflammatory rhetoric, but the numbers don't allow for any other conclusion. People retiring today could lose more than $18,000 in benefits over their lifetimes - and people who are already retired will feel the pain too.
What's wrong with this idea?
1) It's an underhanded way to cut Social Security benefits (its true intent).
2) It's unnecessary.
3) It's unfair to women, the poor, minorities, and the very elderly.
4) It reflects a un-American political culture of pessimism and lost faith in the future.
Any politician who signs onto a "chained CPI" approach to Social Security will feel the wrath of the voters - and deserves to.
No math required.
Although they're using hocus-pocus to make the idea sound complicated, it isn't. The government calculates the cost of living in order to do things like determine next year's Social Security benefits. The "chained CPI" approach would alter that calculation by including changes in the way people spend their money when prices go up.
As a government agency explains, "Pork and beef are two separate CPI item categories. If the price of pork increases while the price of beef does not, consumers might shift away from pork to beef." So if people can no longer afford pork, they're spending less. Under a chained-CPI approach cost of living adjustments (COLAs) would then go down.
See where this is going? If not, stick around.
Underhanded
The "chain gang" insists that this wouldn't be a benefit cut, just a more accurate calculation. That's an attractive argument with only one flaw: It's wrong. The "chained" approach would understate the cost of living for the elderly and disabled people who rely on Social Security.
In plain English, it would gyp them.
In fact, even the current system for calculate COLAs gyps them. Retired and disabled people pay twice as much for healthcare as the average person. Healthcare costs have been rising three times as quickly as overall inflation, so their living costs are already understated. Transportation costs are a much bigger piece of their budget, too, which changes the numbers.
What's worse, two of the areas targeted for additional government spending cuts are ... healthcare and transportation!
The chained CPI would kick this gypping process into overdrive by reducing the increases in their benefits. And while younger Americans might make cuts in their travel and health budgets, that's usually not an option for the elderly or the disabled, so the calculations will be even more inaccurate under this system.
The math is what makes the chained-CPI approach a benefit cut.. But the chain gang knows that a lot people are intimidated by math, so they hope voters -- and a lot of lawmakers and journalists -- won't understand what's being done to them.
That's what makes it underhanded.
Unnecessary
It bears repeating, since so many politicians want you to forget it: Social Security doesn't contribute to the deficit. It can't, by law. It's completely self-funded through the payroll tax (which is what makes the choice of the payroll tax for a tax 'holiday' so insidious).
What's more, the dollars involved are trivial when it comes to the budget debate. Politicians say they're looking for $4 trillion in cuts over ten years. Even if benefits did contribute to the deficit the chained CPI would only save $122 billion, a mere 2.8% of the target.
That's peanuts for them. But it's not peanuts for the average woman on Social Security. She only receives $890 per month. By the time she turns 80 this program will be taking $45 dollars out of each month's check - nearly $500 a year. Why would Democrats (or Republicans, for that matter) agree to use her spending money to balance the budget? They'd help an old lady across the street -- then pick her pocket. Why?
Because that's how you show you're fiscally "serious" in today's bizarre Beltway culture. This warped "bipartisan" value system was spawned in large part with money spread around town by people like billionaire Pete Peterson. They see cuts in Social Security and other spending as a way to shrink government and keep taxes low for folks like ... well, like billionaire Pete Peterson.
Remember the expression about "robbing Peter to pay Paul"? Cutting Social Security is a way of "robbing Pa to pay Peterson."
Unfair
The effects of the chained CPI are cumulative, so the longer you live the worse it gets. By the time you're eighty your benefits will have been cut by nearly 5% per year. Some chained-CPI supporters propose a "birthday bump" - small benefit increases after you've been retired for twenty years - but they wouldn't offset the cuts you will have endured before then, and they'll only benefit people who live long enough to "enjoy" them. (Minorities and lower-income people have shorter life expectancies, too, so the "bump" would unfairly benefit wealthier and whiter beneficiaries.)
The chained CPI would be unfair to women, who receive less in benefits on average than men and can least afford the cuts. They live longer than men, too, so they're more likely to see their benefits dwindle with every year that passes. (And remember, the "bump" won't offset those cuts.)
It would also be unfair to the middle class, which has has seen its retirement savings (much of which was invested in their houses) disappear because of Wall Street's shenanigans. And ir would be unfair to lower-income working people who are the least likely to have retirement savings or pension plans.
Un-American
Remember the paragraph about how the chained-CPI figure goes down if people can't afford pork? That's not a sound way to calculate the overall cost of living. If I can't afford cable TV and stop watching it, Time Warner's prices don't go down. But under this plan, my misfortune also becomes my little contribution to next year's benefit cut.
How would this work for Social Security? Let's see: If old people stop buying pork their "chained CPI" benefit will go down. If that forces them to live on catfood, their benefit goes down again. And if that forces them to switch to the local supermarket's cheap generic brand instead of the tastier cat foods (Fancy Feast's "Grilled" line was my late cat's favorite), benefits would go down even more.
It's a death spiral. Soon we'll be calculating the cost of survival, not the cost of living. It's a process that leads nowhere but down, until even survival is factored out of the equation.
Besides, what would it mean if we adopted the chained-CPI mentality? What are we saying about ourselves if we calculate our cost of living by subtracting out all the things we can no longer afford? The chained CPI is institutionalized pessimism. It's a way to prefabricate our own shrinking future, to accelerate an ever-diminishing way of life while hiding the truth from ourselves.
That's why it's un-American. We've always been a nation of optimists who believe in growth. The chained CPI reflects a new and diminished political culture - one that believes in a future of dwindling resources, increasing deprivation, and inability to meet our own promises.
Voters in both parties and across all demographic lines oppose Social Security cuts. They'll see this for what it is - a sucker punch to the middle class and the most vulnerable among us. If our leaders sign onto it they'll be making a tragic mistake that we - and they - will come to regret.
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REFERENCES
For more on the chained CPI's impact on women, see this report from the National Women's Law Center.
For more about its impact on disabled and elderly recipients, see the National Association for Social Insurance.
For more on the different rates of cost inflation for the elderly vs. the general population, see this Congressional Budget Office report.
For a thoughtful criticism of the chained-CPI approach from a conservative who served in the Social Security Administration under President Bush and supported Social Security privatization, see this piece by Andrew Biggs on the website of the American Enterprise Institute.
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for the devalued dollar. What is the purpose of the trust if not to protect the anuniants? Most railroad anuniants are ignorant of the law, as the changed to the deceptive CPI and please if you know the argument after the Nixon public law that initiated the CPI contingent only to increase anuniants anunity value.
What goods and services does the CPI cover?
The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:
FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
APPAREL (men's shirts and sweaters, women's dresses, jewelry)
TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).
Also included within these major groups are various government-charged user fees, such as water and sewerage charges, auto registration fees, and vehicle tolls. In addition, the CPI includes taxes (such as sales and excise taxes) that are directly associated with the prices of specific goods and services. However, the CPI excludes taxes (such as income and Social Security taxes) not directly associated with the purchase of consumer goods and services.
The "chained CPI" approach would be even worse. Let's not just outright LIE about it.
By the way, the CPI-W was 222,954 in May 2011, up from a low of 204.813 in December 2008... wonder why is it that there has been no increase in SS benefits for the last two years running? http://www.ssa.gov/oact/STATS/cpiw.html
"I don't think very wealthy people get completely shafted by Social Security. For 2010, they paid 6.2% of their income up to $106,800 (if I read this correctly). That means that for individuals who make, say, $250,000, they are not actually paying 6.2% of their total income, whereas someone like myself, who makes less than $50,000, does end up paying 6.2% of her total income because she's never able to pay in enough to reach the yearly limit. Plus, if I'm not mistaken, the monthly amount that wealthier people get back at retirement is greater percentage-wise than what someone in my bracket would get back, again because they reached the yearly limit. I do not begrudge anyone great wealth. Not at all. But for folks who aren't wealthy and do pay the total percentage throughout their working lives, are they not kind of getting shafted because they didn't make a higher salary?"
If you bought an annuity in 1940 that would pay you $200 a month, wouldn't you pay more later to increase your retirement benefits, or would you expect your small premium and small benefit to cover your needs despite inflation? It wouldn't take much of a premium increase to preserve full benefits for all future SS recipients. It would be idiotic not to increase the income cap or otherwise raise more premium to preserve full SS.
We have to cut government spending across the board, and the most painful way to do it, is what is going to happen, it is called inflation.
It will effect the poor and working poor the mostly have they have no assets that will inflate with time, but this is giong to happen because we refuse to make logical choices on the budget issues.
All they talk to are the wealthy who drive Mercades, BMWs or even better. They go to the places like the Hamptons and Chappequidic.
They must think we are just like them. We are not.
Many of them nust think we are rich or they wouldn't push everything off on us, then try to ruin our retirement and Medicare.
I really can't fanthom how far they think the low pay people are getting will stretch.
http://www.boston.com/business/articles/2010/03/26/social_security_could_be_in_the_red_this_year/
The calculation of the initial benefit for a newly retired or disabled worker does not use a price index but instead uses the National Average Wage Index which is based on the total employment income of all taxpayers (not just Social Security wages). The decline in this index between 2008 and 2009 resulted in a decline of about 1.5% in the initial benefit amount for those turning 62 in 2011 (including me), except those receiving close to the maximum benefit. It is the first time that the Average Wage Index has ever declined since it was introduced.
He need those greedy middle class votes.
"Little person" making $12,500 a year pays SS tax! LUCKY "little person gets a 10% raise, gets to pay 10% more in SS taxes. But there luck runs out for "little person" his benefit,between the two salaries DID NOT GO UP 10%=it went up 5.7 %. And so it goes for each raise "little person" gets. If he should become one of the "evil rich" his 10% raise from 90k to 99k will get a5.4% return in benfit for the extra 10% in tax! By the way those that want to take what others have earned are caring only for themselves!
Stop spreading the "50% do not pay any taxes" lie. When you figure in state, local, and sales taxes, lower income folks pay 22% of their income in taxes. $30K x .22 = $6,600. That leaves this person $23, 400 to live on. The person who makes $90K x .16 pays a total of $14,400 in taxes, leaving this person $75,600 for expenses. So while income seems 3 times greater, it's or over 3.2 time more purchasing power because of the LOWER overall tax rate. Upping that rate a bit to make it even with the TOTAL rate paid by the poorer person seems fair to me.
I cannot for life of me see how it is fair to ask an 80-year-old woman living on $875 a month to give up $45 a month so fat cats can keep their jets, and the top earners can keep their $130K they get, year in and year out, as a result of the Bush tax cuts. If they had used it to create jhobs for the rest of us, maybe I could stomach it, but they clearly have not done so. Soe don't give me any of that "job creator" BS. What jobs???
Retirees today are shortchanged on Social Security because they have been shortchanged on wages for their entire working lives. The labor economist Richard B. Freeman points out that the hourly earnings of workers dropped by 8 percent from 1973 to 2005 while productivity shot up 55 percent or more.
The United States is one of the few developed countries where workers are routinely cheated of a share in higher productivity.
And where has the money from the extra productivity gone? It’s gone right to the top, to the top few percent.
If wages had been paid fairly based on productivity, there would have been enough money subject to the payroll tax to avoid even a modest shortfall.
We could lift the cap on high earners, the 6 percent of workers who make over $106,800 a year. If earnings above the cap were subject to the payroll tax with no increase in benefits to high earners, there would be no deficit in the Social Security trust fund in 2037, as projected.
Paul Krugman from 2001:
Reckonings; Pants On Fire: Published: August 24, 2001
To: Mitch Daniels, Office of Management and Budget
Dear Mitch:
I have a suggestion. It's dishonest and irresponsible -- but I suspect that doesn't bother you. And it would help you squirm out of a problem that we both know isn't going away.
True, your bobbing and weaving have been impressive. Some people have actually bought your line that the surplus has vanished because of Congressional big spending, even though the spending numbers have hardly changed since your previous, bullish projection.
In the end, we both know, the truth will become apparent. Eventually there will be no disguising the fact that thanks to the tax cut the nation has failed to make adequate preparations for the demographic deluge, that money that was supposed to be accumulated to pay retirement benefits has been used instead to provide big tax cuts to the very, very affluent.
But then that's been the plan all along, hasn't it?”
The COLA & CPI calculation are so outdated. It was based on workers with 30 years of service at the same job, with a modest pension, a mortgage free home, empty-nesters, no expectation to travel abroad, a very low cost life style and with a life of expectancy of 72 to 75.
Reality: Baby-boomers continued their education beyond bachelors degree and bounced around jobs to stay ahead of inflation; adversely affecting the 40 quarters needed for substantial Social Security Benefits and the ability to begin saving early in life. They purchased homes & remodified loans (for a slew of reasons) resulting in mortgages beyond their retirement age. As retirees, they're still caring for both their children & grandchilden b/c housing is so expensive. Employer's no longer fund pension plans that would replace 25-50% of their income.
Bottomline: A reduction in the Cost of Living does not reduce mortgage payments, costs associated with owning a home and healthcare.