In his new budget proposal, President Obama proposed a modest reform to Social Security: implementing the so-called Chained CPI for future benefits. The proposal is getting ripped to shreds by Democrats and liberals.
What is the Chained CPI? Over at “The Fix,” Sean Sullivan spells it out:
…Social Security benefits are currently calculated using CPI-W, or the Consumer Price Index for Urban Wage Earners and Clerical Workers. (Yes, that’s a mouthful.) Over time, benefit levels tick up based on CPI-W, to keep up with the fact that a dollar twenty years ago is not worth what it is today.
Here’s the bottom line: Using chained CPI instead of CPI-W means the rate at which those benefits tick up would be slower, because the former reflects substitutions consumers would make in response to rising prices of certain items. Therein lies the “chained” part of the name. The metric utilizes a basket of goods and services that are measured changes from month to month; much like a daisy chain. If the cost of a certain form of transportation goes up, for example, people might switch to another kind. This kind of “substitution” is part of what is factored into chained CPI.
Daily Kos has a list of Democratic Senators who have made strong statements in opposition to the idea. The list consists of Senators Elizabeth Warren (D-MA), Sheldon Whitehouse (D-RI), Tom Harkin (D-IA), and Bernie Sanders (I-VT). In the list, two statements stuck out:
First, Senator Warren’s statement – seen in full here – claims that “two-thirds of seniors rely on Social Security for most of their income; one-third rely on it for at least 90% of their income.” According to the SSA, she got her numbers about right. What she missed was the real story about senior citizens – while they may not have a lot of income, they are far wealthier than younger Americans because of the assets they own, such as cars, houses, and investments, and the fact that they generally have less debt. Furthermore, it is the comparably poor young people who are paying into Social Security, even though they are highly unlikely to ever see benefits approaching their “investment” in the program.
Senator Whitehouse’s comment also caught my eye. From the Daily Kos post:
“I made a promise to the people of Rhode Island that I would always oppose cuts to Social Security, and I’m going to keep that promise. Social Security is fully solvent for the next twenty years, has not contributed to our budget deficits, and has no place in this debate over federal spending.
This is only half of the Senator’s comment, but it consists of three popular yet misleading statements:
First, Social Security does indeed contribute to federal deficits. This is the result of the unified budget accounting used by the Congressional Budget Office and the White House’s Office of Management & Budget. Because of this accounting system, Social Security’s deficits and surpluses are included in the federal government reported deficits.
Second, while the Social Security actuaries’ intermediate projections do indicate the program will be solvent until 2033, they are notoriously unreliable.
Related, waiting until 2033 to implement changes means reforms will have to be far more dramatic and painful than changes made now. To the tune of hundreds of billions of dollars annually.
Tea Party Patriots reached out to Senator Whitehouse’s office to see if the Senator had any plans to keep Social Security solvent without cuts to the program. According to spokesperson Seth Larson, Senator Whitehouse and several other Senators “introduced the Keeping Our Social Security Promises Act, which would ensure that Social Security remains solvent for the next 50 years by asking the wealthiest Americans to pay their fair share into the system.”
The legislation, explained in a press release from Senator Whitehouse’s office, eliminates the payroll tax cap on taxpayers making $250,000 per year. However, claiming making “the wealthiest Americans pay their fair share” through this tax increase in order to make Social Security solvent is inaccurate for two reasons: first, wealthier seniors already take in a much smaller ratio of benefits to taxes when compared to lower-income Americans.
Second, according to Social Security Trustee Charles Blahous, it used to be the case that eliminating the cap entirely could make Social Security solvent. However, the program’s finances have deteriorated so drastically over the past few years that we could eliminate the cap for all taxpayers and still not gain solvency within the 75-year projection typically used to estimate the health of the program.
Perhaps worst of all, taxing the wealthy more for the Social Security program is manifestly unfair, since they already get less for every dollar “invested,” and greater taxes on them will make this worse. This is not making seniors pay their “fair share.” It’s outright ripping them off.
Here is the irony of these overwrought statements: the President’s Social Security cuts amount to only $230 billion over a decade. That’s approximately 3% of what we are projected to spend over the next decade in the program.
In opposing one of the only spending reductions in the President’s budget proposal, these Senators are drawing a line in the sand that will lead to the insolvency of Social Security, massive benefit cuts in the near future, or the implementation of major tax increases – or aspects of all three. Yet, somehow, they claim to stand for the program and its recipients.