Proposals to Cut Social Security Resurface

by Jessica Schieder, 10/10/2013

Proposals to cut earned Social Security benefits have resurfaced as politicians scramble to build a budget deal that could reopen the government and potentially avoid an economic disaster caused by a federal default.

By 2020, 33 percent more Americans over the age of 65 are expected to be living in poverty, as compared to the 6 million living in poverty today, according to a report by the U.S. Senate Committee on Health Education Labor and Pensions. Now is not the time to cut a program which 65 percent of qualified seniors rely on for more than 50 percent of their income.

Cutting Social Security at a time when there are more seniors, seniors have much less than necessary saved for retirement, and seniors are living decades past their working years could push millions of elderly Americans below the poverty line during the course of their retirement.

Approximately 75 percent of Americans nearing retirement age have less than $30,000 in their retirement accounts. Implementing chained CPI would result in an average 3 percent cut in earned Social Security benefits over the course of a 20 year retirement, according to Dean Baker of the Center for Economic and Policy Research, further reducing seniors’ income.

This cut would be magnified as the retiree aged. Consequentially, the oldest and poorest would be hit the hardest. At age 75, retirees would receive 3.7 percent less in benefits. At age 85, retirees would be receiving 6.5 percent less in benefits. At age 95, retirees would 9.2 percent less in benefits.

Rep. Ted Deutch (D-FL) said last Wednesday that, if chained CPI is adopted to calculate cost of living adjustments (COLA), “We’re telling hungry seniors, ‘You’re not pinching your pennies hard enough … Skip more meals, don’t fill all of your prescriptions.’”

Recycled proposals to tie earned benefits to the chained CPI (chained consumer price index) have not changed, and they would be no less harmful to vulnerable seniors than experts have previously warned. We’ve been down this road before: proposals to tie Social Security benefits to chained-CPI (consumer price index) were brought up in a 2010 deficit reduction plan produced by the “Gang of Six”, during fiscal cliff negotiations in January, again by Senators Bowles and Simpson in February , and by the president’s FY2014 budget.

Using the chained CPI to calculate Social Security benefits would reduce federal obligations by approximately $107.8 billion over the next decade (with cuts increasing over time), but cutting earned retirement benefits is not a silver bullet to reduce the federal deficit.

Additionally, cutting the income of one out of every eight Americans would have ripple effects throughout the economy. Tying Social Security’s inflation adjustment to chained CPI would mean $107.8 billion less would flow into the economy. Social Security benefits make up approximately 40 percent of all income for our nation’s seniors, who represent approximately 13.1 percent of the total population.

With less income, seniors would be able to spend less. The National Committee to Preserve Social Security and Medicare estimates that decreasing the purchasing power of seniors would suppress GDP growth and result in job losses.

Proponents of tying benefits to chained CPI are quick to explain their concern for the long-term viability of the program. But while it is true that an aging population has put strain on the system, the program is far from broken.

Americans are living longer, and the U.S. population as a whole is aging. In 1960, there were 5 workers per Social Security beneficiary- or 5 individuals paying Social Security taxes per qualified senior. The ratio has since dropped to three-to-one, and is expected to continue falling until there are 2.3 workers per beneficiary in 2050. These pressures are not the fault of the program.

Small changes to Social Security could close the funding gap and ensure the Social Security Trust Fund remains solvent well into the future, supporting Americans during a vulnerable time in their lives. Cutting retirees’ earned benefits is not the solution.

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That is right!!!!! Refill the pot you stole from us!!!!! We want our money back NOW!

Jim,
As a senior who is also on SS, I disagree with your premise. The Social Security system was supposed to invest the monies collected, and if it had done so, would have been well able to withstand the present difficulties and then some.

However, with pilferage from the fund ~~ such as President Kennedy's $60 million Youth Corps boondoggle ~~ and other "hands in the pot" by the Congress of the United States, which has caused an additional burden on the contributors now, it seems that if it had been left alone, the Fund would have been just fine.

If you have a retirement income from a responsible private company, then you realize that the retirement fund has been carefully invested and nurtured so that there will be enough money there to pay you when you retire. If you have a bunch of greedy politicians (or employers) who can put their hands in the pot anytime they want, who do not see the necessity of investing the Fund, and who are generally "know nothings" about finance in general and economics in particular, then you end up with a Fund that is somewhat in trouble at this point or a lot in trouble, as is the case with some private retirement funds.

Further, if I had kept my own money which the U. S. Government conscripted from me and my employers, I would have been very much better off, because I at least, understand economics and know how to invest wisely.

I am not a greedy Senior, but I think it is irresponsible to offer something, start it, then raid it, and try to make everyone think it is going broke, when that is just not the case. You should check your facts a little further before making such an ill-advised comment.

As a senior who is on SS, it is time for us to make additional sacrifices for the future of the next generation. We, as a group, are presently or will be, far exceeding what we contributed to the SS system. I am all for anything that helps solidify the system for the future. Time for the greedy Senior lobby organizations to step up to the plate and do what is right for America...of course they never will, cause they have fooled all the Seniors into believing "they earned it", when the reality is it they are simply pilfering it.

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