Thursday, January 17, 2013

The importance of Social Security benefits and why cutting them as Obama proposed is a really bad idea

Robert Stoker in Saving Social Security by Cutting Middle-Class Taxes Huffington Post 01/14/2013 makes the case for not only raising the current ceiling on the FICA tax but also applying it to other sources of income.

I was particularly interested in this statement of how vital Social Security benefits are and why cutting benefits on Social Security as President Obama has proposed is a really, really bad idea:

A leading proposal to reduce benefits would alter the cost-of-living adjustment using the "chained CPI." Social Security benefits are initially set on the basis of earnings history, marital status and retirement age and then are adjusted annually to reflect changes in living costs.

The chained CPI is expected to reduce Social Security benefits by 0.3 percent per year. This would be a 3.7-percent cumulative reduction by age 75, and a 6.5-percent cumulative reduction by age 85. (The longer one receives Social Security benefits, the greater the cumulative reduction.)

Progressives are concerned. Although the elderly are the least likely age cohort to be poor, this is largely a consequence of Social Security. At present, approximately 9 percent of elderly people are poor, but the near-poverty rate (the proportion of people within 125 percent of the poverty standard) is 5.7 percent. Beyond this, Social Security benefits are modest, providing only about $1,200 per month to the average retiree. Yet Social Security provides 100 percent of the income for more than one third of beneficiaries and half of the income (or more) for 65 percent of beneficiaries. Benefit reductions are likely to have more and more seniors facing poverty and privation.

... President Obama has considered the chained CPI ... [my emphasis]
Actually, Obama has done more than consider it. He proposed it and publicly defended it during the contrived "fiscal cliff" crisis of late 2012. House Minority Leader Nancy Pelosi also defended it.

And it's a really bad idea. Bad in itself. And bad because it would open up Social Security for further attacks by greedy Wall Street banksters and Republican ideologues.

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