Tuesday, December 18, 2012

Obama Offers Social Security Cuts in Latest Deal

The proposal to change how Social Security calculates inflation sounds benign, but it's far from it. David Dayen:
First of all, this is a benefit cut of about 0.3% a year, as Dean Baker points out. He adds that “This loss would be cumulative through time so that after 10 years the cut would be roughly 3 percent, after 20 years 6 percent, and after 30 years 9 percent.” Actually if we started using chained CPI in 2002, we’d be 3.6% behind today. That’s well over $1,000 a year, and the situation grows worse over time. So the greatest impact would be on the oldest seniors, which happens to correlate with the poorest.
If you think that senior citizens have had it too good for too long, getting that sweet sweet cost of living adjustment to make them unfairly wealthy, then maybe you think chained CPI is a solid idea. If you think that the highest expense for a senior is medical costs, that seniors don’t exactly comparison shop when they need medical care, that they cannot substitute along those lines, and that a cost of living index that features that substitution effect prominently doesn’t correspond to the real costs seniors face, well, you would be right.
But it makes sense in Washington to “get a deal,” regardless of the consequences of that deal on our seniors. We just had a national conversation about how the primary task of government was to protect the vulnerable. How quickly we forget.

There are a couple variables in the reporting. First of all, Administration sources say that they plan to protect “the most vulnerable populations.” For example, they don’t want to apply chained CPI to wounded veterans and the disabled on Supplemental Security Income. This is an admission that people will get hurt by chained CPI; they’re just trying to manage the fallout. The rest of the ways to protect the most vulnerable haven’t been defined. Usually, you see some sort of “bump-up” in benefits to compensate for the changes to the COLA, particularly for the poorest recipients. However, the National Women’s Law Center points out that the bump-up envisioned in Bowles-Simpson (which included chained CPI) would only restore benefits to current-law levels for two years, before falling behind again. So we don’t know, but if the bump-up took complete care of the benefit cut, nobody would be suggesting doing this as a means to save money.
So much shame to go around.

1 comment:

  1. Does anyone else hear "hierarchy of oppression" when someone says the most vulnerable populations? Because as this points out we're not talking about vets (not that we can do much less for them) or SSI recipients (unless you're Kristof). It feels like they want to or are trying to invoke a deserving poor argument with the idea we're cutting waste instead of from those who really need it. Let's start calling this what is it "slow austerity."