October 21, 2020

Social Security Cuts Possible in Budget Deficit Deal

“In a move that could anger both Republicans and Democrats, President Obama is considering changing the way inflation is measured. This would involve cutting Social Security by $112 billion over 10 years, cutting pension payments and veterans’ disability payments by $24 billion, and raising taxes by $60 billion.

Social Security Cuts Possible in Budget Deficit Deal

Inflation is currently gauged using a consumer price index in order to determine annual cost of living changes for Americans. The alternative would be to use a ‘chained consumer price index’. Advocates favoring a change say that the current method of measuring inflation overstates the speed with which prices rise.

Opponents, such as Representative Xavier Becerra think that the chained CPI is a negotiating tactic on Obama’s part. “”He has tried many ways to get out Republican colleagues to come to some middle ground and hasn’t succeeded. I suspect he’s saying, ‘Look, I’ll put everything on the table, let’s see what sticks.’”"

Senator Tom Coburn, R-Oklahoma, and one of the ‘Gang of Six’ who have worked to put together a long term debt plan, said “”There hasn’t been any economist anywhere that says we shouldn’t do that. We need a CPI [Consumer Price Index] that truly reflects what’s happening in the economy, not what’s good for politicians.”"

This idea was initially discussed by the Gang of Six and Vice President Joe Biden, in a series of meetings. It was brought back up on July 6th, when Treasury Secretary Timothy Geitner met with House Democrats. When pressed on the subject by Democrats, Geithner didn’t dismiss it.

In a meeting on July 7th between President Obama and congressional leaders, they tried to come to an agreement over a deficit-reduction plan. This is needed to help pass the debt-limit increase by the deadline of August 2nd.

Although he described the meeting as “”constructive”" and “”frank”", Obama pointed out that they are still “”far apart on a wide range of issues.”"

Some Democrats view the ‘chainsaw CPI’ as a cut in Social Security benefits, reducing projected spending by 1.2 percent. Representative Jan Schakowsky, D-Illinois, pointed out that seniors already face increased cost of living due to medical care.

“”Seniors get the double whammy – higher health care costs and deeper benefit cuts,”" she said.

Senator John Thune, R-South Dakota, supports applying the chained CPI to benefit programs but not taxes. “”That would be a license to steal for the federal government if you just locked in tax increases every year based on what some index is,”" he said.

Inflation is a rise in the cost of goods and services. It is measured by surveying what people buy and where they shop. Every month, price collectors in 87 cities record prices of various products, and use this information to calculate what the typical family buys each month.

This methodology is considered flawed by economists, due to the fact that it doesn’t account for individuals and their response to increasing prices. An overestimate of inflation can lead to a cost of living increase for beneficiaries of Social Security, veterans and federal retirees. Other people affected are people who qualify for food stamps and other aid, due to the fact that eligibility for these programs is tied to federal poverty guidelines.

Marc Goldwein, the former associate director of the administration’s deficit commission summed it up this way. “”It’s a no-brainer. We’re measure inflation wrong now and it’s obvious we should measure it right – especially if it’s going to reduce the deficit.”"”

Bloomberg

In Debt Talks, Obama Offers Social Security Cuts

Obama Urges Dems To Accept Changes To Medicare, Social Security

Speak Your Mind