Chained CPI Proposal Would Cut Social Security Retirement Benefits by About 2 Percent, on Average

[ProSense]

Chained CPI Proposal Would Cut Social Security Retirement Benefits by About 2 Percent, on Average

By Paul N. Van de Water and Kathy Ruffing

April 23, 2013

The President’s new budget proposes to use the chained Consumer Price Index (CPI) for computing cost-of-living adjustments in Social Security and certain other federal benefits, as well as for indexing key parameters of the tax code.[1] The effect of this proposal on Social Security retirement benefits would vary by a person’s age and benefit level and would differ for current and future beneficiaries, but most future beneficiaries would experience a benefit reduction averaging about 2 percent over the course of their retirement. For most current beneficiaries and for low-income beneficiaries, the average reduction would be smaller.

• Future beneficiaries receiving an average benefit would experience a benefit reduction averaging 1 percent to 2 percent over the course of their retirement. The benefit reduction would average 1.1 percent if they draw benefits through age 71, 1.8 percent if they draw benefits through age 81 (which is more common), and 1.6 percent if they draw benefits through age 91.
  
  
• For future beneficiaries receiving smaller-than-average benefits, the reduction would be smaller, likely in the 0.5 percent to 1.5 percent range — except for beneficiaries poor enough to qualify also for Supplemental Security Income (SSI), who would be held harmless.
  
  
• For future beneficiaries receiving higher-than-average benefits, the reduction would be larger, averaging 2 percent or slightly more.

Current beneficiaries would suffer smaller losses than future beneficiaries at any given age. Current beneficiaries now 69 or older receiving an average benefit would receive lower benefits than under current law for the first ten years, but generally would receive higher benefits than under current law in years after that. After 15 years, the cumulative change in benefits for the average current beneficiary would be near zero. Current beneficiaries receiving smaller-than-average benefits would come out ahead if they lived more than ten or 15 years.

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http://www.cbpp.org/cms/index.cfm?fa=view&id=3957

This makes no friggin sense. Raise the cap, no complex, benefit-cutting scheme required.

[Newest Reality]

1. That's not how

America works!

Raising the cap would step on the toes of the Members of the Preferred Club.

What are you gonna' do? Don't make wealthy, powerful people angry, (you won't like them when they are angry and they are the MIC) or skim some money off retired people's checks? Chuck some benefits, maybe.

I mean who has the most power and impact? Who matters most?

Really.

[ProSense]

2. I'm starting to believe

"Raising the cap would step on the toes of the Members of the Preferred Club."

...that the reason members of Congress aren't pushing harder for this is because their own salaries would be affected.

As much as I support Senator Sanders' bill (http://www.democraticunderground.com/10022475178), it leaves a huge gap between $113,700 and $250,000:

Under their legislation, those with yearly incomes of $250,000 or more would pay the same 6.2 percent payroll tax already assessed on those who earn up to $113,700 a year. Applying the Social Security payroll tax on income above $250,000 would only affect the wealthiest 1.3 percent of Americans, according to the Center for Economic and Policy Research. Social Security officials say that simple change would yield about $85 billion a year to keep the retirement program strong for at least another 50 years.

Raise the cap, even if there is a limit, it should be applied to every dollar up to that limit.

[JDPriestly]

4. Raise the cap. Wealthy people will not be affected that negatively by the chained CPI.

It's the middle class that will be affected most.

Look at the chart. It compares the average of the relatively tiny number of wealthy people on Social Security with the very, very large numbers of people in the middle who stand to lose a substantial amount of an already very small income.

The chart misrepresents the reality because it is not weighted by the numbers of people affected.

Chained CPI is no good.

Most of us on Social Security are in the middle.

And what this chart does not say is where the money is to come from to help those who will be helped the most -- those who receive very little Social Security and SSI.

And there is the rub. There is only one way to raise their benefits as much as they will be raised -- and that is to shift the burden for providing what they now receive from subsidies for their housing, food stamps, etc. FROM THE GENERAL FUND TO SOCIAL SECURITY. The chained CPI will lower the amount that indigent seniors receive from the general fund and shift the cost for that to Social Security. That is why the largest group of Social Security recipients will suffer cuts.

This chart misrepresents what the chaine CPI will really do to seniors. It makes it look like mostly rich people will be hurt.

If they want to reduce the benefits of Social Security to the very wealthy, then they should raise their taxes. Don't adopt the chained CPI. It's a horrible idea.

Raise the cap.

[byeya]

3. It might not even be 2% if the double whammy with reduced Medicare causes oldsters like me to die

a few years before their time.
You can visualize the smiles on Wall Street and those who are owned by them.