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.
chained CPI would affect Federal Pensions, many other items
This article focuses in on social security but Federal pensions would also be reduced. It's quite shocking that chained CPI is presented to "reduce government spending", when the primary target are workers and their benefits.
There seems to be no mention how benefit reduction will also affect GDP, economic growth and it will be a detriment. Less income probably means less consumer spending, PCE, which makes up about 70% of GDP.
Chained CPI, COLA for Soc. Security
What can I do to fight back? Many older people on my street who are disabled will be affected.
write, call your Congress reps. the White House
I have a link to contact your representatives. What I didn't realize is this has been presented for over two years to "reduce federal spending" and it's beyond belief! This is not federal spending, it's people's earned benefits, held under government trust.
There are many other ways to fund social security so this is completely unnecessary and also has nothing to do with the budget deficit.
Anyway, write, call, fax and often, multiple times. I fear the only way to stop this is to go over the fiscal cliff but that said, to protect social security and federal pensions I think just going over the fiscal cliff would be worth it.
BlackRock and others lobby for cuts so they can take our $
Check out BlackRock's contributions on other sites - they cover all bases on both the Democratic and Republican sides. In addition, BlackRock CEO Fink is arguing the "fiscal cliff" can only be fixed by cutting spending, and of course, he's not talking about cutting his fellow corporate welfare recipient Honeywell's or another's government handout, no, he wants to cut Social Security and Medicare and other entitlements. But why oh why? Well, if Social Security is cut, obviously people from their 20s on through their 80s and 90 will be screwed hard. After all, companies no longer have pensions, and BlackRock and others love marketing their financial products to people to make up the shortfall. It's sweet, they argue for cuts (looking out for us, of course, they seem so trustworthy) in the halls of power and on the airwaves in our "Nation's interests," cuts are made, people look for returns anywhere, and big banks and financial snakeoil salesman are all too willing to sell their crap products to us for fees of 1% to 2 and 20 for hedge funds that can't beat market indexes. And with that loot, they then turn around and pump it right back into their own personal bank accounts and a small slice into their favorite whore politicians' accounts.
So, struggling to hold onto that Social Security or pension you literally crippled yourself over while working in a shipyard, or in a field, or on a factory floor, or as a teacher in a class with 30 kids for 30 years? No worries, Larry Fink wants to cut it down to nothing so you have to invest with him (these folks also lobby in state capitals hard, so state pensions are also forced into these money-losing funds that lose to market indexes before they even pay out outrageous fees). So, Larry Fink and other folks spouting on the airwaves merely want to cut "entitlements" so they can get their mitts on our money. Sure, they didn't work for it, they have no clue about real sacrifice, but they want it, and they will get it, because they own "our" representatives.
Here's an article talking about these clowns.
It's funny, there's a reference to "shared pain" by business leaders talking about politicians. Huh? What about us? So, as you struggle with a broken hip or handicap from working for 30 years, ask at your neighborhood bar or PTA meeting if Larry Fink has been around lately to share your pain. Larry Fink and other banksters, they don't think too highly of us commoners, but they sure do want our money.
truly corporate takeover at it's finest
I noticed that the "choices" for deficit reduction are missing about 98% of the good ideas and proposals out there in the CBO scoring. Seems they have been pushing chained CPI since 2010.
You're right it's just corporations demanding to cut what is left for most of America to live on.
So unreal like watching a slow motion implosion.
Dean Baker on Chained CPI
He did a fairly detailed analysis the claim chained CPI is valid (not).
Dems will support their president over seniors
Conservatives, take heart! The Republicans may as well go the way of the Whigs while the conservative Democrats take their place. Oh, they huff and they puff and they produce a pea in the form of support for THE most conservative Democratic president since Grover Cleveland.
IT'S TIME FOR THE NEW SOCIALLY LIBERAL MAJORITY TO LEAVE THE DEMOCRATIC PARTY EN MASSE, AND GIVE YOUR VOTES TO THE GREENS INSTEAD---WHO ELSE?! Keep putting the RepubloDems back in? Just how much do you want them to leep tearing you a new one? Can't get enough of that Republicanesque screwing by the betrayers YOU voted for? Is liberal just another word for masochist??
It's up to you, now, Liberals. The Republicans are receding under a barrage of sheer hatred by the majority of Americans. Now's your chance to stick it back to these jerks who run for office like your daddy's Democrats, but act in office like your granddaddy's Republicans.
KILL THE TWO-PARTY SYSTEM. Vote in numbers greater than you ever have for the Greens in 2014. Put THEM in, give THEM a mandate, and watch em bring back honesty in government.
WHO ELSE??? WE DON'T HAVE ANYBODY ELSE.