Categorized | Pushback

Don’t Let Politicians ‘Chain’ Your Social Security Benefits

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Using the  chained CPI for Social Security would cut benefits by$230 billion over 10 years.

By Al Norman

In January, 2019, the Social Security and Supplemental Security Income cost of living adjustment (COLA) rose by 2.8 percent. In terms of actual dollars, the average person on Social Security saw an increase of only $39 a month to keep up with the rising cost of living. That’s $1.29 per day! Imagine what would happen in the future if your cost of living adjustment slowed down.

That’s exactly what could happen.

Candidate Donald Trump promised to protect Social Security from cuts, but his 2020 budget plan included billions of dollars in Social Security administrative cuts. One of the subtler cuts the White House recently proposed was to use a calculation called the “chained CPI” to index the federal definition of poverty.

The White House says the president can do this without Congressional approval. This would result in fewer people meeting the government’s definition of poverty —  which means fewer people qualifying for Medicaid health care, food stamps and public housing.  But it would also lower the Social Security cost of living — a very sore subject for more than 68 million older and disabled people on Social Security and Supplemental Security Income.

For years, Republican lawmakers in Congress have pushed to change the method used for calculating the annual consumer price index (CPI) which not only sets tax rates, but which also determines the cost of living adjustment for federal programs like Social Security and SSI.

socialThe federal Bureau of Labor calculates the consumer price index in a number of ways: for urban workers (CPI-W), for the elderly (CPI-E) etc. The CPI-W measures the impact of inflation on a market basket of more than 200 items of food, clothing, housing, energy and services needed for day-to-day living. The government also calculates the “chained CPI,” which looks at a broader time frame by “chaining” months together to calculate inflation.

A “chained CPI” results in a slower-growing method of calculating cost-of-living increases. Using the “chained” approach, taxpayers more quickly fall into higher tax brackets, meaning they will pay more in taxes.Because the chained CPI grows more slowly than the traditional CPI, taxpayers would pay billions more in taxes on the revenue side.

But the “chained CPI” also has an impact on how Social Security benefits are calculated. If the chained CPI is used, the automatic cost of living adjustment seniors rely upon in Social Security would increase at a slower rate, giving people on Social Security a smaller monthly benefit. Using the  chained CPI for Social Security would cut benefits by $230 billion over 10 years.

The “chained CPI” also has an impact on how Social Security benefits are calculated.

The chained CPIcalculation is based on the concept of “substitution,” which says that if the price of steak goes up, consumers can “substitute” lower cost pork. The current CPI-W already adjusts for some “substitutions,” but the chained CPI allows substitutions acrosscategories of goods. Instead of going to visit the grandchildren in California, you buy a flat screen TV. This kind of substitution isn’t much help to seniors, whose health care costs are skyrocketing.They can’t “substitute” anything to avoid visits to the doctor, or “substitute” for hospital stays. Seniors, who have little discretionary income, spend their benefits mostly on medicine, food and rent — they don’t have much they can “substitute.”

Social Security benefits are automatically adjusted to keep pace with inflation. These annual adjustments already are too low using the CPI-W, but the chained CPI would make SS cost adjustments even lower.

In December, 2017, Congress passed a massive tax cut for corporations and the rich. Because these tax cuts drove up budget deficits, some members in Congress began calling for cuts to “entitlements” like Social Security. Buried in their tax bill was language to increase federal tax brackets by using the chained CPI.

Now, the White House wants to use the chained CPI to calculate poverty rates. It will be more difficult for the disabled and seniors and to qualify for food stamps, and public housing assistance. But in thelong-run, Social Security benefits could grow more slowly. Once the use of the chained CPI to calculate cost of living adjustments is expanded to more programs, it generates more pressure to use it for Social Security also.

Tell your Congressman: “I don’t want my Social Security benefits chained to the ‘Chained CPI.’ Don’t shackle my cost of living adjustment — it’s hard enough now keep up with rising costs for health care and housing.” Just call the Capitol Hill switchboard at 202-224-3121 and ask to be switched to your Congressman by name.

Al Norman worked as an advocate in the field of aging services in Massachusetts for 38 years. He can be reached at alnormaneldercare@gmail.com

 

 

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