A proposal swirling in the halls of Congress to switch the Social Security cost of living adjustment (COLA) to another formula would have a devastating impact on the benefits of current and future retirees, according to the Strengthen Social Security campaign.
During a recent press call, members of the group maintained that the shift to what is known as the chained CPI (consumer price index) would result in beneficiaries getting fewer dollars in their monthly checks in the future. Strengthen Social Security is a made up of more than 300 national and state organizations advocating for the rights of women, consumers and disabled persons and is adamantly opposed to any cuts to Social Security.
Basing the COLA on the chained CPI would result in a savings of $208 billion over 10 years, according to the Congressional Budget Office. Of that amount, $112 billion would come from cutting Social Security benefits.
Josh Bivens, an economist with the Economic Policy Institute, said that the CPI-W, the current index used to measure cost of living increases shouldered by beneficiaries, already understates the rising costs they face, particularly in regards to rising health-care expenses. “Even today’s COLA is not protecting Social Security beneficiaries from the growth in the cost of living [expense] that is most germane to them.” Bivens said.
Switching to the chained CPI would exacerbate that problem, say critics of the proposed change. “The so-called chained CPI proposal generates lower cost of living adjustments than the CPI W,” stated Nancy Altman, co-chair of the Strengthen Social Security Campaign. “The experts believe the current CPI under-measures the living costs of seniors and those with disabilities because it doesn’t adequately take in account health-care costs. The chained CPI will under-measure their cost of living [increase] even more.”
Joan Entmacher, vice president, family economic security, at the National Women’s Law Center, said that if the COLA is reduced further, the cuts will fall disproportionately on senior women, who live longer than men and depend more heavily on Social Security.
Specifically, for a single woman who receives the median benefit of $1,100 per month at age 65, the switch to the chained CPI would mean $56 a month less at age 80.
“That may not sound like a big cut to some members of Congress, but for a woman who depends on her Social Security check to get by, it represents the loss of a week’s worth of food every month, or 13 weeks a year,” Entmacher said. “With most Americans, especially women, facing an increasingly insecure retirement we should be making benefits more adequate, not reducing them.”
It appears a switch to the chained CPI was not part of the latest debt ceiling deal. However, Mark Miller, in an article on Reuters, said the proposal may come up again in the second round of deficit reduction talks later this year. “Major benefit cuts seem likely to emerge from the second phase of this process,” he wrote earlier this month. “The most likely cutting tactic is the chained CPI measure of cost-of-living adjustments. This is the only way to get near-term savings from Social Security, since it reduces benefits for current retirees.” Miller writes extensively on retirement issues.
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