published Saturday, April 13th, 2013

Don't cut Social Security checks instead of closing tax loopholes

Sen. Bernie Sanders, I-Vt., addresses a group of Social Security cut protesters outside the White House in Washington on Tuesday.
Sen. Bernie Sanders, I-Vt., addresses a group of Social Security cut protesters outside the White House in Washington on Tuesday.
Photo by Associated Press /Chattanooga Times Free Press.

In a bid to entice Republicans into a budget compromise, President Obama has proposed to switch the basis for cost-of-living adjustments for Social Security benefits to what's known as the "chained Consumer Price Index." This amounts to an unreasonable and unfair cut in Social Security benefits. Whatever he thinks he can trade for this cut, Obama's on the wrong path.

When Democrats propose to help lower the federal deficit by eliminating special-interest corporate tax loopholes, Republicans always object, and always filibuster to block such proposals in the Senate. They say eliminating sweetheart tax loopholes to gain revenue to offset deficit spending would be wrong, because abolishing these cleverly lobbied giveaways would amount to raising some corporations' taxes -- even if, as is often the case, many of the nation's largest and most profitable corporations pay no federal income taxes at all, and many even qualify for future tax credits.

But when it comes to Social Security for current and future retirees, Republicans are all over the chained CPI, which is essentially a benefit cut and/or a tax increase that falls most heavily on the nation's broad middle class. These are the very taxpayers who badly need the current benefit structure they have been promised, because their yo-yo 401(k) savings -- if they have any -- fall far short of the fixed-benefit pensions that flush corporations have largely dropped.

The "chained CPI" differs from the traditional Consumer Price Index -- the long-held standard for cost-of-living adjustments (or COLAs) -- in an ingenious way. The standard CPI used to determine COLA increases in annual Social Security benefits measures the price change in a basket of consumer commodities. The chained CPI, by contrast, effectively reduces COLA increases because it measures adjustments that consumers make in categories of spending when selected costs rise.

If the price of particular food items or gasoline rise, for example, consumers may curb their spending on groceries and ride a bus. They hold down their regular cost-of-living by substitution or buying less, and the chained CPI measures the spending adjustment that reflects that chain of economic decisions.

Switching to the chained-CPI, the Congressional Budget estimates, would lower future inflation-adjusted increases in Social Security benefits over the next decade by roughly $135 billion. That, in effect, is simply a cut of $135 billion in currently projected benefits from Social Security. Worse, the cuts in future decades would become exponentially higher as the compounding effect of lower cost-of-living increases snowballs downward.

If these lost benefits were to occur under elimination of a corporate tax loophole, Republicans would never entertain it -- even for the richest corporations. But talk about a big cut in Social Security benefits for the middle class, and they would do it a heartbeat, never mind the tax inequity. They want to cut earned entitlements for the middle class -- the more the better to keep their corporate donors' campaign contributions coming. Unfortunately, middle-class Americans don't have much financial ability to win Republicans to their core economic interests.

The chained CPI formula would especially hurt seniors and disabled veterans, because the majority of these recipients live on tightly fixed incomes and cannot make the sort of budget substitutions that many working families can make. Their core costs for prescription drugs and health care rise faster as they age, and consume so much of their income because health care costs typically rise at double the rate of inflation in other commodities.

Some analysts believe that Social Security recipients need a higher COLA formula, not a lower one. That's not to say that some Social Security and entitlement reforms are not needed. They are. Some examples: removing the income cap on Social Security withholding taxes; gradually raising the eligibility age for Social Security at top income levels; and means-testing Medicare recipients.

Obama is wrong to think he must offer a devastating Social Security benefit cut in which three-quarters of the burden would come from people who make less than $200,000. Republicans would grab it, but it wouldn't push them toward a fair budget compromise.

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conservative said...

The Caption is the lie.

No need to read further.

When it is written into the tax law it is NOT a loophole!

April 13, 2013 at 7:06 a.m.
librul said...

Bull puckey ...

April 13, 2013 at 9:16 a.m.
Plato said...

It's not a matter of either or. In reality we need to do both in order to stay fiscally solvent over the longer term.

April 13, 2013 at 10:23 a.m.
Rickaroo said...

Con-man, you are a black-hearted, pompous little twit. You can take your repugnant brand of Christianity and shove it where the sun don't shine. So what if the loopholes are legal! It is unconscionable to think of balancing the budget on the backs of seniors, many of whom are already living a bare-bones existence, while leaving intact the loopholes that allow the very richest and most comfortable among us to luxuriate in their lifestyles of opulence. While doing away with any or even all of of the loopholes would not in any way detract from the comforts that the rich enjoy, reducing the SS recipients' COLAs even a few dollars could be devastating for many of them. Seniors live according to a different cost-of-living scale anyway, due to the fact that they have to spend more on medical costs than younger people, and all medical costs rise much higher than inflation.

Obama should be pushing to RAISE the annual cost-of-loving adjustment for SS recipients, not reduce it. For me personally, the very fact that he has put this on the table, after he had PROMISED that he would never consider tampering with Social Security in any way, makes him a slimy weasel. I have tried to excuse his centrist approaches over the years by thinking that a viciously stubborn GOP has had his back to the wall and he was just playing the necessary game of politics in an attempt to break the gridlock and get something done. But he has gone too far this time. I no longer support this man in any way. He's a sell-out to the teabagging wing-nuts, Wall St., and the MIC.

You conservatives who call Obama a socialist/communist/Marxist need to get hold of a primer and do a little studying on what those ISMs really are. You are only displaying your stupidity when you call him that. Obama is nothing of the sort - hell, he's not even a liberal. But you conservatives today have gone so far out in right field, you can't see that. You're standing on the other side of the boundary line and are not even in the game any more.

April 13, 2013 at 10:34 a.m.
Rickaroo said...

Plato, social security does not need to be on the table in any way. What little might be saved up front by the cuts will only be lost in the long term, from SS recipients having less and less to put back into the economy. What ails SS could easily be fixed by simply lifting the ceiling on the SS tax for the upper income levels. No deficit hawks are really serious about reducing the deficit until they talk about military waste, doing away with at least some of the tax loopholes, and especially raising the capital gains tax. Until they get serious about those things, they are only farting and stinking up the room.

April 13, 2013 at 10:47 a.m.
Lr103 said...

Social Security shouldn't even be on the table. It adds nothing to the deficit.

R. Kuttner/altorg said:..

Social Security benefits should be increased, not cut. The share of workers with traditional pensions is down to about 15 percent. The rest either have no pensions or have 401k plans that are not pensions at all. 401k's, like IRAs and Keoghs, are tax-sheltered savings plans. More than half of people between 55 and 64 have no pension and no retirement plan at all other than Social Security.

What we need is an increase in core Social Security benefits, and a second tier of Social Security as a universal, fully portable pension. It could be funded by raising taxes on the rich, whose effective tax rates have been steadily cut for four decades, and who now command more of our national income than ever before.

If you don't read any other piece of policy wonkery this year, you owe it to yourself, your parents, and your own golden years to read "Expanded Social Security," the recently published report from the New America Foundation (co-authored by my Demos colleague, Robert Hiltonsmith.) It provides a politically serious blueprint for expanding the retirement income of the elderly, rather than selling them out. If we had a Democratic Party worthy of the name, it would get behind this proposal and change the entire dynamics of the Social Security debate.

Every Democrat in Congress should be standing up to the White House and refusing to back a budget that cuts a nickel from Social Security or Medicare.

April 13, 2013 at 4:19 p.m.
NirvanaFallacy said...

CPI reform is not Social Security reform, it is correcting how we measure inflation. I'm glad that Obama acknowledged this needs to be fixed. The fact Democrats are freaking out over a technical correction so we can accurately measure inflation shows they are not serious about fixing Social Security. We need real Social Security reform and this is just a small step in the right direction.

Sadly, people have been lied to about Social Security. People have been told that it is a retirement insurance program where contributions are linked to benefits. In reality, however, it is a transfer of income from workers/self-employed to retired people. The Baby Boomers better wake up and realize that Social Security is broke before it is too late.

April 13, 2013 at 6:03 p.m.
Lr103 said...

Norana, SS isn't broke. Too many past administration looted SS. SS just needs to start calling in those loans past adminstrations and departments took out. SS is solvent

In the private sector, retirement income is transfer income too. Private retirement pay to retirees not only rely on contributions those retirees payed into the company, but also what its present workforce pay into retirement acounts.

April 13, 2013 at 8:55 p.m.
Plato said...

Folks - for the record I'm not opposed to raising the contribution cap on payroll taxes, however the fact is the social security trust fund is now running a deficit of around $50 Billion per year and will be exhausted by the year 2024. That comes straight from the horses mouth: http://www.ssa.gov/oact/trsum/ so it's going to need more than minor tweaking to get it back on the track on continued solvency.

The president's offer to index social security adjustments is part of what will hopefully be a grand bargain that will put us back on a road towards reducing the national debt and continue to cut the deficit. To achieve this concessions will have to be made by both sides. To me this is a rather small one but it shows the the president is making a good faith effort to reach an agreement with the other side, and it is symbolic and can give Republicans some political cover to hopefully allow them to agree to some revenue increases through reforms to the tax code etc.

BTW I'm a retiree myself, but I want to make sure that social security is still around for my 24 year old step son and his generation when they get there.

April 13, 2013 at 9:46 p.m.
drifter49 said...

This has got to be the worst President we have ever had. I firmly believe that had we limited the voters to ONLY taxpaying individuals that have contributed to society and paid their share, that Obama would not have even come close to winning. Did this guy ever answer the questions on Benghazi? then there is the flying of all the individuals on Air Force one that were parents of the killed children to help make a statement where as we all know that guns are not the problem but people are the problem. Did he ever even try to make new laws Against using certain guns in a felony, or even gun magazines? No he wants to eliminate guns instead of addressing the problem and rip our 2nd amendment rights. And now he wants to take away from the SS that all of "us" that have worked all our lives to put into the program. And just last night there was an hour long program on "ObamaCare" which is another JOKE this president has developed. Doctors are dropping out of practice, businesses are cutting back on their employees and not even to mention that the paperwork will be a nighmare as well as the thousands of people Obama hired to "explain" what program we "need. It's like the fox watching the henhouse!! Cannot for the life of me understand why in the world...ESPECIALLY...seeing what he accomplished in his 1st 4 years that anyone in their right mind would vote Obama for a 2nd term. Wake up America!!! This gut is going to destroy this country with all this "revenge for the Republicans", lies, and deceit to the American people. It' a shame that we let this President ....and Congress.... Free food stamps, free housing, free cell phones. All at the Taxpayers expense!! WAKE UP AMERICA !!!

April 14, 2013 at 9:42 a.m.
Lr103 said...

drifter49, you are rambling and making no sense whatsoever! You highacked a topic just to spew your own personal hatred and senseless rhetoric. The Reason the GOP suddenly became quiet on the Benghazi tragedy is because they know they have blood on their hands. They're the ones who cut U.S. foreign embassy funding around the the world. Although they were warned about the dangers of those cuts. You really need to check your facts and sources before speweing your ignorance on matters for which you have no idea.

check out: myths and facts about Benghazi.

There Have Been At Least 15 Attacks On U.S. Embassies And Consulates Since 1979 -- Including Seven Under George W. Bush. U.S. embassies and consulates were attacked at least 15 times under the presidencies of Carter, Reagan, George H.W. Bush, Clinton, and George W. Bush. Seven of those attacks occurred during the presidency of George W. Bush. [Media Matters, 9/14/12]

pssst! drifert/everybody in America pays a form of taxes on some level.

April 14, 2013 at 9:55 a.m.
fairmon said...

Social security, a Ponzi scheme, and Medicare should be phased out and abolished.

April 15, 2013 at 7:33 a.m.
jjmez said...

fairmon said... Social security, a Ponzi scheme,

Not according to those Brazillion, who had a choice of opting out of their country's retirement program and go the way of private investing. Upon retirement, and meager returns from retirement investments, the countrys' retirement system ended up having to kick in just to keep them from living on the street. That was part of that 999 plan old boy Hermann Cain was trying to sell the public when he was trying to get into the presidential race. He modeled his idea after the failed Brazilian private investment plan.

and Medicare should be phased out and abolished

And replace it with what? What will happen to the elderly in nursing homes? Do want everyone to die young and die early? There are young people, even children, in nurshing homes too who rely heavily on medicare for their care. What's your solution? Have the all injected with a permanent knock-out med or something?There are severely disabled childre whose families rely in part on medicare for their care too. Would you deprive those families?

Don't be fooled by what the GOP feeds you. They're plan is not to reduce or do away with taxes, but to redirect taxes into what they love most. Starting fires around the world that gets America into more wars and conflicts around the globe.

April 15, 2013 at 10:54 a.m.
chet123 said...

chet123 is back ha ha ha....i see the same people continue to drink the kool-aid....ha ha ha.....

April 16, 2013 at 10:32 a.m.
chet123 said...

hey fiarmon.......since congresses are servant to the public... see if you can convince them to drop their govenment health care....and their govenment paid pension that pays over 100,000 a year for the remaining of their lives.....

now thats not a ponzi scheme....thats pulling the wool over stupid people thats bent on breaking the backs of descent hard working people while turning their head and looking the other way against corruption alone with the rich and greedy.......

thats rigtht fairmon....show everyone how big a man you are ha ha ha!!!!

April 16, 2013 at 10:44 a.m.
NirvanaFallacy said...

How about letting me and others who so desire opt out of Social Security? I will agree to never accept a social security check once I retire. And heck, I will even let the government keep all that money that they have squared away for me in the old "magical lock-box" free and clear. What is wrong with this idea? How in the world is this not fair?

April 16, 2013 at 6:24 p.m.
NirvanaFallacy said...

Your point Easy? Or you just showing everyone that you can type the phrase "opt of social security" into google and copy and paste the first result you get?

April 16, 2013 at 11:32 p.m.
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