The Social Security Cut Washington Does Not Want You to Understand

from In These Times:



The Social Security Cut Washington Does Not Want You to Understand
By Daniel Marans


Politicians often rely on a complacent press to enact a draconian agenda. Rather than inform the public of the effects of a policy and expose politicians’ lies, in such cases the media validate the spin of the people in power. Right now, the mainstream media are failing in their duty to inform Americans about the “chained” CPI (Consumer Price Index), a cut to Social Security’s COLA (cost-of-living adjustment) that is likely to become part of whatever deficit-reduction deal comes out of frantic last-minute negotiations this week.

The chained CPI is a more modest measure of inflation. It increases 0.3 percent less on average than the CPI-W (Consumer Price Index for Urban Wage Workers and Clerical Workers), which is currently used to determine Social Security’s COLA. The COLA is an annual increase in Social Security benefits that beneficiaries receive at the end of the year to ensure that those benefits do not lose value due to inflation. There is not a COLA every year; it is only provided when the CPI registers inflation. In fact, because of the recession, there was not a COLA for the past two years.

The chained CPI is seen as an attractive change in the current bipartisan deficit talks in Washington, because when applied government-wide, it both cuts spending and increases taxes. In addition to Social Security, when applied to several other programs that provide COLAs, such as Veterans Affairs benefits, federal employee pensions and other program’s whose benefits are based on inflation (such as Supplemental Security Income), the chained CPI would dramatically reduce government spending. When applied to the tax code, it would slow the rate at which tax brackets and refundable deductions like the Earned Income Tax Credit (EITC) increase, thereby increasing revenue.

And COLA works its magic through a technical change that both Democrats and Republicans can spin as not selling out their principles. In total, two-thirds—$145 billion—of the $217 billion in savings from the chained CPI would come from benefit cuts, and one-third—$72 billion—of the savings would come from revenue increases, according to CBO. From Social Security alone, the chained CPI would save $112 billion from benefit cuts — more than half of all savings from the measure. ...........(more)

The complete piece is at: http://www.inthesetimes.com/article/11767/the_social_security_cut_washington_does_not_want_you_to_understand/

Sorry I am on my way out the door so don't have time right now to read all.

Chained CPI should not be an attractive change in SS, it represents about .2% of GDP leaving another .4%. According to the Trustees low cost scenario the .6% can be up thru mostly widespread job creation and wage growth, in combination with some level of Cap increase, 170k to 250k and only moderate job creation, We can improve SS benefits, for example adding a new minimum benefit based on poverty level, and still see SS never go broke thru 2085.

http://2.bp.blogspot.com/_fjW71B3WLTQ/TC3Bs2undtI/AAAAAAAAAYI/PQiTSfBitWo/s1600/CBO-SS+options+Fig+1.jpg