There is a war on social security and America is losing the battle. One constant in the fiscal cliff negotiations is the agenda to cut your retirement benefits by a ruse, a lowering of the inflation adjustment. Congress and the Obama administration are out to do the old switcheroo and swap out the current CPI-W inflation measurement tool for one called chained CPI. Using Chained CPI instead of CPI-W will reduce the adjustment for inflation.

Every year social security is adjusted to keep up with inflation. As we noted in our CPI overview, chained CPI cuts benefits by reducing the cost of living adjustments, known as COLA, to social security benefits. COLA is designed to keep up with inflation, yet chained CPI assumes, wrongly, one can substitute some goods for others as prices increase. We confirmed that the current proposal is to simply swap out CPI-W for chained CPI and use the same formulas to calculate the annual COLA adjustment to account for rising prices. We overviewed the formula to calculate cost of living adjustments earlier. Below is a graph of the current COLA adjustments.

The next graph shows what social security benefit adjustments would have been, if COLA had been using chained CPI instead of the cost of living adjuster CPI-W. Notice in the graph below how much lower those annual increases adjusting for inflation are using chained CPI. For example, this year instead of a 2013 1.7% increase, chained CPI would have given a 1.5% cost of living adjustment increase, a full 0.2 percentage points less.

Let's assume someone in year 2000 had an monthly social security benefit of $1000. Below are the COLA increases for this person using the current COLA adjustments using CPI-W and then the COLA adjustments using chained CPI. By the time 2013 rolls around this person is now short $49.7. When one is only getting $1000 a month, not enough to live on, those 50 bucks makes a world of difference. While the traditional inflation adjuster, CPI-W has increased benefits 34% over 12 years, chained CPI has only increased 29% over the same time period. That's 5% less in benefits with the same price increases by using chained CPI instead of the current CPI-W series for COLA. The situation only gets worse the longer one collects benefits and the smaller one's start amount social security benefits were. In other words, the very aged and the poor are hit most. The Chained CPI ruse is also regressive in other words.

The group Strengthen Social Security is an action coalition trying to stop this reduction in benefits. On their website are more examples much more realistic on the total cuts to beneficiaries. By the time a retiree is 95, using the average original social security benefit amount, those 95 year olds will have lost 9.2% of their benefits by using chained CPI instead of CPI-W.

It's even worse than that. Older people spend 12% of their income on health care whereas those between the ages of 25-54 only spend 5%. Health care costs, as we've shown in the CPI overview continually increase. While the COLA increase for 2013 is 1.7%, medical care costs have increased 3.7%. In other words, the current COLA using CPI-W does not keep up with health care costs.

To put this attack on benefits even more in perspective, an 85 year old retiree could lose 24 weeks worth of food using chained CPI. That's how bad this ruse is by Congress. It's political too. Chained CPI sounds innocuous, whereas the consequence of chained CPI means Congress is cutting your benefits. If this fact was more amplified, the alarm bells would ring causing the American public to rise up in protest. Congress is hoping America does not wake up and realize what's really going on. Odds are the fiscal cliff grand bargain will be passed at the 11th fiscal cliff hour in the dead of night, all to hoodwink the American people. Make no mistake, chained CPI does mean Congress is cutting social security.

EPI is calling the chained CPI switcheroo the unkindest cut:

This is a travesty, not least because Social Security is required by law to operate in long-term balance and therefore does not belong in budget talks ostensibly aimed at reducing long-term budget deficits.

We at EPI and our allies in the Strengthen Social Security coalition have written at length about the downsides of a COLA cut. It would have the biggest impact on the oldest retirees, who are often the poorest retirees. It would disproportionately affect disabled beneficiaries, including veterans, many of whom will see the cut cumulate over decades.

Senator Bernie Sanders has been speaking out about what an actual cut to benefits using chained CPI is:

Instead of fixing the problem, some in Washington and on Wall Street want to make a bad situation even worse by cutting benefits for senior citizens and veterans through a so-called chained CPI.

Needless to say AARP is fighting this tooth and nail as well. They note:

The reductions with a chained CPI would disproportionately affect the poor, who may get all their income from Social Security, and women, who generally live longer than men. The oldest widows, many of whom barely scrape by, would be among the main losers.

That's the situation, while Congress claims to be fighting over a 4.6% tax increase for millionaires, what they are really doing is stealing out of the pockets of old widows.

Folks, clearly this is a reduction in benefits most needed by people who simply cannot earn, beg, borrow and steal additional retirement funds. America needs to deliver a strong message to Congress, Don't Touch My COLA.