During the recent budget cliff negotiations with John Boehner, President Obama supposedly put Social Security on the table as an area where budget cuts could be made to appease Republicans who want more in cuts than in new revenue. As I have discussed here on more than one occasion, Social Security does not add one dime to the national debt since the money paid out to recipients comes entirely from the trust fund into which all workers pay a portion of their wages. It is not an entitlement, but rather an earned benefit. You take home less money each week while you are working, and that money buys you a retirement plan from the Federal government. So Social Security shouldn’t even be under discussion in deficit reduction talks
Now the President is talking about a new way to calculate cost of living adjustments, called Chained CPI. This change would save the Social Security System a lot of money over time, but it would also be worse for future retirees than it is for current retirees.
If we use Chained CPI for Social Security, it will mean that the cost of living adjustments will be at least 0.3% too low every year. For current retirees, that means that in ten years, they will see about a 3% reduction in their real (inflation adjusted) benefits. This comes to roughly $100 per month. This is important and we should not accept it.
Chained CPI is wrong. It won’t allow benefits to keep up with inflation, so why is it even being considered? The answer is that those in power in Washington want to cut benefits. But they are cowards and don’t want to be seen as doing so. So they use this convenient backdoor to gut Social Security.
But as I said before, this will affect future retirees even more. Think of the poor sucker retiring 75 years from now. His Social Security check will be worth about half what a current check is worth.
Can it be possible that Democrats don’t understand that not increasing Social Security benefits with the rate of inflation is just a long term plan to destroy the program? The Republicans have tried for years to destroy the program in other ways. They have failed. This way is sure fire, it just takes a long time. Accepting Chained CPI is like a time bomb that conservatives want to put into law.
And note: this doesn’t just affect Social Security. It affects everything. In particular, it will push people with low incomes into higher tax brackets. So it is yet another regressive tax increase.