Wednesday, December 19, 2012

Obama agrees to cut Social Security

Negotiations to avert falling off the ‘fiscal cliff’ before the end of the year have compelled President Obama to agree to cuts in Social Security payments.

Included in the spending cuts portion of the potential deal is the use of a formula called the chained consumer price index, or chained CPI, to calculate cost of living adjustments to Social Security payments.

With the chained CPI, Social Security payments would decrease over time, instead of going up with cost of living adjustments as they currently do. There are also tax increases associated with the chained CPI that hit low and modest income seniors the hardest.

Ezra Klein describes the Social Security cuts in the Washington Post:

All told, chained CPI raises average taxes by about 0.19 percent of income. So, taken all together, it’s basically a big across-the-board cut in Social Security benefits paired with a 0.19 percent income surtax. You don’t hear a lot of politicians calling for the drastic slashing of Social Security benefits and an across-the-board tax increase that disproportionately hits low earners. But that’s what they’re sneakily doing when they talk about chained CPI.

Since Social Security is funded by payroll deductions, it does not contribute to the federal deficit.

“The opponents' tactic of setting up Social Security as a false culprit in the deficit problem diverts attention away from the real causes of the deficit -- two wars not paid for, the Bush tax cuts for the wealthy, and the costs associated with the economic crisis, such as the Wall Street bailout,” according to the Huffington Post.

The average Social Security payment is about $1,230 a month. If Obama signs a deal that includes using a chained CPI to reduce payments over time, for seniors struggling to make ends meet, life is about to get harder.

Continue reading here.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.