April 23, 2013
The Honorable Tom Harkin
Hart Senate Office Building, Room 731
Washington, D.C. 20510
Dear Senator Harkin:
On behalf of the millions of members and supporters of the National Committee to Preserve Social Security and Medicare, I am writing to endorse S. 567, the “Strengthen Social Security Act of 2013.” We thank you for introducing this important legislation, which, when enacted, would substantially improve the financial condition of the program and adequacy of benefits.
Your bill would improve Social Security by calling for the use of the consumer price index for the elderly, or CPI-E. We have for years advocated perfecting and using the CPI-E for the purpose of determining annual cost-of-living adjustments (COLA) for Social Security. We believe that the COLA should be based on the most accurate measure of inflation that is available, and we believe that the CPI-E more accurately measures the effect of inflation on the kinds of goods and services that are purchased by our nation’s seniors than any other measure that is available. It is more accurate because it takes into account the increased costs that many seniors and people with disabilities face, especially medical costs, which are rising more quickly than overall inflation. We understand that the CPI-E yields a measure of inflation that in most years runs about 0.2 percentage point higher than inflation as measured by the current index.
S. 567 would also strengthen the adequacy of Social Security benefits by reforming the method by which the basic Social Security benefit is calculated. This change would result in an across-the-board benefit increase for newly-eligible Social Security beneficiaries, when it is fully phased in, of about $70 per month. An increase of this magnitude would be especially helpful to those in the low- and middle-income distribution, and for whom Social Security is a principal source of retirement income.
We would note, however, that the bill could be strengthened by providing protection for those who receive Supplemental Security Income (SSI). A $70 increase in the Social Security benefit has the potential to make some seniors and disabled beneficiaries ineligible for SSI. This is particularly problematic since, in many states, eligibility for SSI benefits also leads to eligibility for Medicaid. We recommend that the increase in benefits stemming from the enactment of S. 567 be excluded from consideration in determining eligibility for SSI. Alternatively, the SSI general income exclusion, which has remained at $20 per month since the program’s enactment in 1972, could be adjusted to some higher amount. We understand that indexing the exclusion for inflation occurring since 1972 would yield an exclusion of about $110 per month.
But most important, S. 567 substantially improves the long-term financial condition of the Social Security trust funds by eliminating the cap on earnings that are subject to payroll tax contributions. In 2013, no one contributes to Social Security on earnings that exceed the current tax cap of $113,700. By eliminating this cap, your bill makes sure that everyone pays into Social Security on all of their wage income. In addition, it preserves the earned-right nature of Social Security by providing an increase in benefits in return for increased contributions.
In total, the “Strengthen Social Security Act of 2013” would extend the solvency of Social Security by almost two additional decades, until 2049. This is an important step in strengthening Social Security for the generations of seniors who will benefit from the program in the future.
We look forward to working with you to preserve Social Security for the long term, and we thank you for your leadership on this important issue.
President and CEO