How Obama aims to cut Social Security benefits by 10%
Word is that Obama is willing to cut a deal on the f***** c**** (I can’t bear to type the words) that would use the chained CPI (C-CPI-U) to adjust Social Security benefits for the cost of living. Let’s leave aside the technical details of the C-CPI-U vs. the standard CPI-U (the U stands for urban consumers, about 87% of the U.S. population) and the somewhat less standard CPI-W (the W stands for urban wage earners and clerical workers, about 32% of the population) for now. What attracts budget cutters to the C-CPI-U is that it’s risen less slowly over time than its unchained counterparts, meaning smaller cost of living adjustments for Social Security benefits.
Since 1983—a year I’ve picked for a reason I’ll reveal in a moment—the CPI-U has risen 136.0%; the CPI-W, 131.7%. Interesting that the CPI-W is the one used to index Social Security benefits now, even though it covers less than a third of the population; it does have the advantage of rising more slowly, though (advantage for those writing the checks, not those cashing them). That 4.3 point difference is not huge. But it does mean that a check that was worth $500 in January 1983 would be $1,179.90 in November 2012 dollars if adjusted by the CPI-U, and $1,158.53 if adjusted by the CPI-W. A difference of $21.37 may not sound like much if you’re doing well, but if you’re barely scraping by, it’s not nothing.
And here’s why I picked 1983. The Bureau of Labor Statistics has also been publishing an experimental CPI for elderly households (CPI-E), who are disproportionately hit by medical inflation. It’s risen 146.5% since January 1983. So that $500 check in January 1983 would be the equivalent of $1,232.75 today—$74.22 more than the CPI-W-adjsuted check. That’s considerably more than nothing. [These CPI figures were wrong in the original version, though the adjustments to the $500 check were correct; thanks to Seth Ackerman for pointing out the error.]
Unfortunately we can’t do these long-term comparisons with the C-CPI-U, since the BLS has been publishing monthly estimates only since December 1999. But here’s what a $500 check back then would look like now: $687.00 if adjusted by the CPI-W; $691.44, if by the CPI-E (it hasn’t been rising as quickly in recent years as it did in earlier decades)—and $659.74 if adjusted by the C-CPI-U. It would be $31.70 smaller, or almost 5%, than the CPI-W check. And that’s over just 13 years. Over the course of a normal retirement, the difference would swell to 10% or more.
So Obama wants to cut the real value of Social Security benefits by 10% or more over the course of a retirement, starting almost immediately. And although a lot of Dems will tell you that Obama’s been forced into this maneuver by hardass Republicans, recall that he’s been talking about “tweaking” Social Security since at least 2007, and said in the first debate that his and Romney’s positions on the issue were “somewhat similar.” Let’s see if Congressional Democrats roll over on this one. Bet they do.
I bet they do too!!
We are F****d!