Draft legislative language
released by the House Social Security Subcommittee
last night would cut benefits for millions of middle-class and poor Americans still struggling in this economy by adopting a new formula to calculate cost of living adjustments. NCPSSM President, Max Richtman, reacted this way:
“Contrary to claims by some in Washington, the chained CPI is not a 'technical tweak,' and no amount of rationalization can make it so. In reality, the chained CPI is a benefit cut for the oldest and most vulnerable Americans who would be least able to afford it.
Cutting benefits by adopting the chained CPI would cut the COLA by 3% for workers retired for ten years and 6% for workers retired for twenty years. This cut targets both current and future retirees. Three years after enactment, this translates to a benefit cut of $130 per year in Social Security benefits for a typical 65 year-old. The cumulative cut for that individual would be $4,631 or more than three months of benefits by age 75. While supporters claim the chained CPI is more accurate; you have to ask yourself, if this chained CPI really is more accurate, then why the need to offer an incremental benefit “bump” to some beneficiaries? The answer is simple. The chained CPI does not accurately measure these groups’ expenses; in fact, it makes most of the same errors as the current formula and adds a few. Adoption of this new formula is really about cutting benefits and raising taxes on average Americans to reduce the deficit.
While supporters, including the White House, have attempted to wrap this benefit cut in promises to ‘preserve or protect’ Social Security, the stark truth is it’s actually a direct assault on the safety net millions of middle-class and poor seniors and their families depend on.”
Seniors won’t be fooled by Orwellian language which attempts to portray austerity as “accuracy”.
“The current formula, the CPI-W, reflects the expenditures of about 31 percent of households nationally; specifically, wage and clerical households in urban areas. By definition, this population is employed, unlike most retired Social Security beneficiaries. Research has shown that spending patterns differ between the elderly and the general population, especially on health care. Seniors 65 and older spend more than twice as much on health care, and those 75 and older spend nearly three times more than younger consumers. Not only do health care expenditures steadily increase with age but health care costs consistently rise much faster than general inflation. The current price index (CPI-W) does not take these critical differences in the elderly population into consideration. The chained CPI doubles-down on that flaw. Even worse, the proposed chained CPI will cut COLAs immediately for current and future retirees, veterans, the poor and people with disabilities.
For millions of seniors living on fixed incomes and the average $14,000-per-year Social Security benefit, it's frankly unimaginable that some in Washington believe those benefits are too generous. Our nation faces an impending retirement crisis yet rather than address that issue head-on, Washington is instead proposing cuts to the only guaranteed source of income for many retirees, Social Security. It simply makes no sense -- unless your true goal is austerity not accuracy.” Max Richtman, Huffington Post
This chained CPI proposal is just the first of many benefit cutting proposals the House Social Security subcommittee is expected to release in coming weeks. Incredibly, Chairman, Rep. Dave Camp (R-MI) says he wants your feedback. So we say, let’s give it to him. Email Chairman Camp at:
Tell him how losing thousands of dollars in Social Security benefits will hurt you and your family. Tell the House GOP leadership “NO” to the chained CPI.
It seems the “go-to” argument for Washington conservatives opposed to funding anything they don’t like these days is “it will bankrupt Social Security”. We heard it with immigration reform
and we heard it again with the repeal of DOMA
. Problem is, it’s just not so.
Eric Laursen with the People’s Pension breaks it down simply:
“neither change will break us. According to the Congressional Budget Office, the additional cost to Social Security in 2014 of recognizing same-sex marriages in 2004 would be $350 billion over 75 years. That raises the estimated impact a grand total of .01% of covered payroll, from 16.03% to 16.04%. Meanwhile, Social Security chief actuary Steve Goss calculates that immigration reform as embodied in the Senate bill will add $500 billion to the assets in the Social Security trust funds over 25 years, and $4 trillion over 75 years. (One major reason is that these immigrants don’t have parents collecting benefits—when they retire, their children’s contributions will cover their benefits.)”
We also took on Fox News’ bogus claims at NCPSSM’s Equal Time
Repeal of the Defense of Marriage Act (DOMA) impacts more than one thousand areas of federal law, including Social Security. So, it’s no surprise that implementation details and timelines are still being debated today...and likely will be for awhile. However, delay is not an option. The Obama administration needs to act quickly to reverse the benefit inequity that was at the heart of the high court’s ruling. Specifically, the Social Security Administration must move quickly to review and revise its policies regarding benefits for same-sex couples.
Reuters’ Mark Miller details some of the Social Security and Medicare issues to be resolved after the DOMA repeal:
The extension of Social Security spousal and survivor benefits is today's most significant retirement benefit story. But experts point to ambiguity about exactly how the DOMA decision will reverberate through the Social Security program.
WHERE YOU LIVE
Same-sex couples who were married in states recognizing gay marriage, and who still live in that state, will be recognized for purposes of federal benefits. But the picture gets murkier for married couples who move to states that don't recognize same-sex marriage. The Social Security Act's definition of a spouse relies on the definitions in the state where an applicant lives.
What happens now to a couple that is married in a state that recognizes legal same-sex marriage, but currently lives in one that doesn't?
Children constitute a major category of Social Security beneficiaries. The Social Security Administration says 4.4 million children receive benefits because one or both of their parents are disabled, retired or deceased.
Adopted children generally are eligible to file on the record of either parent in the case of heterosexual couples, but some states don't recognize joint adoption. That could impact same-sex couples who adopt, says Webster Phillips, senior legislative representative at The National Committee to Preserve Social Security and Medicare.
"Prior to the repeal of DOMA," Phillips said, "a child could qualify on a parent's record, but not on that of a stepparent. Will that change now? We'll have to see how far the Obama Administration goes in the way it interprets and implements the court's decision."
Our advice to same-sex couples who qualify is to apply for benefits now while Washington hammers out the details.
One of the favorite poll-tested messages used widely by Washington’s billion dollar anti-entitlement lobby is that America’s “greedy geezers” are stealing from their grandchildren. They claim that if we allow retirees to collect the Social Security benefits they’ve contributed throughout their working lives, then somehow our children will suffer. This flawed argument assumes that every dollar these anti-Social Security crusaders would cut from Social Security benefits would then be sent to funding children’s programs, rather than reducing the deficit or cutting taxes. Which do you think is more likely?
This mythological link between funding for seniors programs and children’s programs makes for good propaganda but there’s literally no basis in reality for such linkage. We could just as easily say military spending, transportation spending or tax expenditures for the wealthy are stealing dollars from children’s programs. In fact, new research by the Center for Economic and Policy Research shows that real linkage may exist between the dollars spent on our nation’s top 1% and reduced spending on children.
Economist Dean Baker asks: Do Wall Street and the 1 Percent Thrive at the Expense of Our Kids?
“As a practical matter, if we look across countries we find that there is actually a positive relationship between spending on the elderly and spending on children. Countries that have been willing to commit a larger share of their output to ensuring that seniors enjoy a decent standard of living also seem willing to commit the necessary resources to ensure that their children have a good start in life.
While there may actually be no tradeoff between spending on seniors and spending on kids, there do appear to be other tradeoffs. For example, if we look at the share of GDP devoted to finance we find solid evidence of an inverse relationship with the willingness to support children.
Figure 1 graphs government spending per kid divided by per capita GDP against the share of GDP originating in the financial sector. There is a significant negative relationship, meaning the larger the share of the financial sector in the economy the less money is spent on kids. (The countries are all the OECD countries for which data is available, excluding former Soviet bloc countries.)
The chart clearly shows that countries with larger financial sectors are less generous to their children. While this hardly proves causation (it could be that if countries spend more money on their kids they won't go into finance), it certainly should raise questions as to whether financial interests are hostile to public spending on kids.
In fact, we also look at the question about the wealthy more broadly. Figure 2 shows government spending per kid divided by per capita GDP against the share of income going to the richest 1 percent. The chart includes all the countries for which data is available. In this case there is also a negative relationship with an even stronger statistical fit. The downward slope to the line is just slightly short of being significant at the 1.0 percent level.
This chart again shows a clear negative relationship, this time between the share of income going to the richest 1 percent and the amount of money that governments are willing to spend on kids. This may suggest that the richest 1 percent are not happy about supporting other people's children through the government. In that case, the more money they are able to control, the less is likely to go to kids.”
We highly recommend you read the full analysis here. Thanks to CEPR for backing up what most American families understand intuitively. Cutting benefits to generations of middle-class families won’t help the children, parents and grandparents in those families. The Recession Generation and beyond will need Social Security as much, if not more, than current generations. It’s time to reverse a 40 year trend of income inequality and redistribution to the wealthy while reigniting the American dream for middle-class families which benefits young and old alike.
Max Richtman, NCPSSM President/CEO
Austerity or Accuracy? Why Seniors Need a CPI-E
In 1987, while the Staff Director of the Senate Special Committee on Aging, I helped develop legislation to create a Consumer Price Index for the Elderly (CPI-E). The goal was to more accurately measure the prices and inflation seniors face, ultimately leading to more representative cost of living adjustments (COLAs) for America’s retirees. Never in my wildest dreams could I have predicted that, 26 years later, our nation would still be without an accurate CPI formula for millions of seniors, and that the CPI-E would still be considered “experimental.” Even in Washington, a quarter of a century should be enough for any experiment. It’s long past time for Congress to provide the resources needed for the Bureau of Labor Statistics (BLS) to finish it’s work on the CPI-E.
This is especially important now as many politicians in Washington hope to adopt a new formula called the chained CPI (C-CPI-U). Proponents of the C-CPI-U in the White House and Congress claim COLA accuracy is the goal, yet, they have also offered to “protect” millions of older beneficiaries, veterans, people with disabilities and low-income Americans from this change. You have to ask yourself, if this chained CPI really is more accurate, then why the need to offer an exemption to millions of people? The answer is simple. The chained CPI does not accurately measure these groups’ expenses; in fact, it makes most of the same errors as the current formula and adds a few. Adoption of this new formula is really about cutting benefits and raising taxes on average Americans to reduce the deficit.
The current formula, the CPI-W, reflects the expenditures of about 31 percent of households nationally; specifically, wage and clerical households in urban areas. By definition, this population is employed, unlike most retired Social Security beneficiaries. Research has shown that spending patterns differ between the elderly and the general population, especially on health care. Seniors 65 and older spend more than twice as much on health care, and those 75 and older spend nearly three times more than younger consumers. Not only do health care expenditures steadily increase with age but health care costs consistently rise much faster than general inflation. The current price index (CPI-W) does not take these critical differences in the elderly population into consideration. The chained CPI doubles-down on that flaw. Even worse, the proposed chained CPI will cut COLAs immediately for current and future retirees, veterans, the poor and people with disabilities.
For millions of seniors living on fixed incomes and the average $14,000 per year Social Security benefit, it’s frankly unimaginable that some in Washington believe those benefits are too generous. Our nation faces an impending retirement crisis yet rather than address that issue head-on; Washington is instead proposing cuts to the only guaranteed source of income for many retirees, Social Security. It simply makes no sense -- unless your true goal is austerity not accuracy.
Contrary to claims the current COLA is too generous, the Social Security COLA has averaged just over 2% over the past five years with 0% for two of those years, far below the largest spending increase seniors face, which is spending on health care. It’s hard to imagine any one arguing with a straight face that a 0% COLA increase is too generous. But if the CPI-E determined the Social Security COLA, the expected average COLA would increase about 0.2 percentage points per year. In contrast, using the chained CPI would reduce expected average COLAs by 0.3 percentage points per year. That means a typical 65 year-old would see a decrease of about $130 in Social Security benefits using the chained CPI, three years after the C-CPI-U kicks in. At age 95, the same senior would face a 9.2 percent reduction—almost $1,400 per year. The BLS acknowledges the current CPI-W does not “produce official estimates for the rate of inflation experienced by subgroups of the population, such as the elderly or the poor. This is why we need a true elderly index like the CPI-E and not a formula change that will cut benefits and drive more seniors into poverty. A provision in Senator Bernie Sanders's bill to reauthorize the Older Americans Act (S. 1028) would require the BLS improve the CPI-E and should be adopted by this Congress without any further delay.
According to the BLS, it needs to conduct additional research on where elderly households are located, where the elderly actually shop, and what mix of products the elderly purchase. That research will cost money but the cost to develop the CPI-E is miniscule compared to how much seniors and their families will lose without adequate inflation protection. After nearly three decades, it’s past time for Congress to provide the resources BLS needs to finish its work.
This blog post originally appeared on Huffington Post.
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