Friday, 08 July 2011
Two Things You Need to Know About Social Security Right Now
THE DEBT CEILING AND SOCIAL SECURITY PAYMENTS
For all the public posturing, threats and uninformed chatter over looming default by the U.S. government, you may have noticed an eerie silence from politician- and medialand on this topic: if the debt ceiling is not raised, will Social Security benefits be paid?
A U.S. default would be certain to cause long-lasting and cataclysmic economic consequences worldwide but since this has never happened before, no one knows how cataclysmic.
Republican Representative, presidential candidate and leader of the Congressional Tea Party Caucus, Michele Bachmann (who believes the Founding Fathers ended slavery), along with other Republicans, says in a new television commercial for herself currently airing in Iowa, “I will not vote to increase the debt ceiling.”
Additionally, this past week, she shrugged off the consequences of a U.S default:
It's that “prioritize our spending” - meaning other government obligations after paying interest on the debt - that is of concern to elders. Millions of elders live month-to-month on Social Security and two-thirds of people 65 and older rely on Social Security for more than half their income.
Will Social Security payments be prioritized out of the mix if the debt ceiling is not raised by the deadline? Official Washington and the media are not saying.
SOCIAL SECURITY CUTS ARE ON THE TABLE
This is a stealth Social Security cut that would affect not just those age 55 and younger whom other proposals to “strengthen” the program would affect. This would impact you and me too.
The idea being “seriously discussed” in the deficit talks as part of a compromise to allow raising the debt ceiling is to change the formula by which inflation is calculated (“chained-CPI” versus the current “CPI-W”) which would dramatically affect the cost of living adjustment (COLA) to Social Security and would go into effect immediately. Here is what is at stake as explained by Social Security's chief actuary:
“...moving to chained-CPI would constitute an immediate 0.3 percent benefit cut. That may sound small, but the effects would compound, and '[a]dditional annual COLAs thereafter would accumulate to larger total reductions in expected scheduled benefit levels of about 3.7 percent, 6.5 percent, and 9.2 percent for retirees at ages 75, 85, and 95, respectively.'”
This chart shows the difference in an average Social Security benefit over time. (Click here for a larger, more readable size.)
The skewed idea behind the chained-CPI is that as goods and services become more expensive, people adjust their buying habits downward and therefore, presumably, don't need as large a COLA.
Tell that to elders who already go hungry and cut their medications in half or do without entirely. There is a level of income below which there is nowhere to go and millions of Social Security recipients fall into this category.
It is said that President Obama is open to this CPI shift. As Richard Eskow notes, the COLA change would raise taxes “on everybody but the wealthy.” He goes on to analyze where this proposal currently stands in Washington:
Contrast the White House's bobbing and weaving with Harry Reid's firm statements on the topic. In January Reid said Social Security cuts were 'off the table.' He asked the President to leave Social Security out of the deficit talks in February. In March he said he wouldn't consider restructuring Social Security for twenty years.
“But now the President has announced that he's taking direct control of negotiations, and it could be hard for Reid to block a White House/GOP deal - especially if that could lead to a government shutdown.
“That means that Social Security is now in the President's hands, and he's not telling us what he plans to do.”
No one has any business making Social Security any part of the debt ceiling ruckus or deficit reduction. It does not and never has contributed one penny to the deficit and contrary to hysterical Republicans, there is an easy fix for the minor shortfall in future years.
Dean Baker, co-director of the Center for Economic and Policy Research:
“...the longer-term gap in Social Security is relatively modest. The Social Security tax only applies to the first $107,000 of wages. If the tax applied to all wages, so that Bill Gates paid more than a senior firefighter, it would fill the gap in full.
“So this shortfall is not some huge chasm. It can be relatively easily met and there is no rush to do it.
That is, of course, the best and simplest proposal for Social Security held by many economists, and some, but too few, politicians agree. Don't hold your breath for it to happen anytime soon.
At The Elder Storytelling Place today, Mary B Summerlin: Surprise Letter