Even before President Obama released his budget proposal this week for the next fiscal year that begins Oct. 1, preliminary details about his plan to effectively cut Social Security cost of living increases has caused a firestorm among supporters who now feel betrayed.
Under the plan, Obama would shift the way federal benefits are indexed from the Consumer Price Index (CPI) to the “chained” CPI, gradually reducing benefit payments. Without getting overly technical, the chained CPI – a way of indexing living costs – has grown on average by about 0.3 percentage points per year more slowly than the official CPI. Social Security actuaries assume the gap between the two CPIs will continue to average 0.3 percentage points per year in the future;
White House officials point out that the chained CPI would not affect initial Social Security benefits because they are based on wages. It is the subsequent cost of living increases that would be affected.
According to an analysis by the Associated Press, Social Security benefits for a typical middle-income 65-year-old would be about $136 less a year under the new indexing. At age 75, annual benefits would be $560 less. At 85, the cut would be $984 a year. While that might not seem huge to some, it represents a significant loss of income from the elderly living on a fixed income.
Senator Bernie Sanders (I-Vt.) shares Robert Reich’s outrage.
“If Obama is serious about dealing with our deficit, he would not cut Social Security – which has not added one penny to the deficit,” Sanders said in a statement posted on his website. “Instead, he would support legislation that ends the absurdity of one out of four profitable corporations paying nothing in federal income taxes. He would also help us close the offshore tax haven loopholes that enable large corporations and the wealthy to avoid paying $100 billion a year in federal taxes.”
Social Security payments and COLAs are not limited to the elderly.
According to the Center on Budget and Policy Priorities, approximately 6 million children under age 18 (8 percent of all U.S. children) lived in families that received income from Social Security in 2011. That includes children who received their benefits as dependents of retired, disabled, or deceased workers as well as those who live with parents or relatives who received Social Security benefits.
Democrats are irked that Obama is breaking a pledge he made in 2008 not to cut Social Security. And regardless of how he couches it, that’s the net effect of his action.
President Obama’s new proposal also calls for placing a 28 percent cap on tax deductions and other exclusions. Because the change would raise taxes of the wealthy, GOP leaders are expected to reject the plan.
Social Security provides monthly benefits to more than 50 million retired workers and workers with disabilities, their dependents, and survivors.
Obama faces considerable opposition from his own party, largely because of the importance of the popular retirement program.
“Social Security benefits play a vital role in reducing poverty,” observed the Center for Budget and Policy Priorities. “Without Social Security, 21.4 million more Americans would be poor, according to the latest available Census data (for 2011). Although most of those whom Social Security keeps out of poverty are elderly, nearly a third are under age 65, including 1.1 million children.”
George E. Curry is editor-in-chief of the National Newspaper Publishers Association News Service (NNPA.) Curry can be reached through his website, www.georgecurry.com.