Not the Way you Want to Spend a Birthday

Being under attack is not the way you want to spend your birthday.  But as Social Security celebrated the 78th anniversary of its enactment, which occurred on Aug. 14, 1935, that’s where the nation’s retirement security system found itself.

That’s because as part of so-called deficit-cutting schemes, both congressional Republicans and Democratic President Barack Obama are backing smaller future Social Security benefit increases.

Their vehicle is something called the “chained CPI,” a recalculation of the Consumer Price Index.  The Social Security Administration uses the regular CPI every year to calculate the increase in recipients’ benefits for the following year.

The chained CPI would reduce that increase, by assuming that when the cost of an item in the regular CPI’s “market basket” of goods and services rises too much, consumers change to a cheaper item – say, buying chicken when beef costs too much, for example.  And the “chained CPI” would reflect that “chain” of change.

Considering the average Social Security recipient gets just over $15,000 a year from the nation’s retirement system, using the chained CPI rather than the regular CPI to calculate yearly benefit hikes could cost its 56.8 million present recipients – not to mention the rest of us, as future recipients — quite a lot.

That’s why the labor-backed Alliance for Retired Americans spent the week of August 14 celebrating Social Security’s birthday by orchestrating nationwide events denouncing the chained CPI.

“Under the chained CPI, the average earner retiring at age 65 would see a cumulative benefit cut of $4,642 at age 75, $13,921 at age 85, and $28,015 at age 95,” a report for the Alliance and a sister group, socialsecurityworks.org, says. The alliance and Social Security Works have posted the report on their websites.

Unions and progressive lawmakers, led by Sen. Bernie Sanders, Ind.-Vt., also clearly oppose the chained CPI.  And Senate Labor Committee Chairman Tom Harkin, D-Iowa, has legislation in the hopper to make Social Security even stronger than it is now, by removing the current cap, now $113,700, on an individual’s salary (and it’s just on salary) subject to Social Security’s payroll taxes.  That would increase its revenues.

“Through war, Depression and multiple recessions, Social Security has never missed a payment and has amassed a $2.7 trillion surplus” in its trust funds, says Edward Coyle, the Alliance’s executive director, urging readers to sign its Save Social Security petition at www.retiredamericans.org.  The petition opposes the chained CPI.

“With the reliability of pensions, 401(k)s and housing values dwindling, Social Security remains more important than ever for today’s seniors and for future generations,” Coyle adds.

“Americans across the political spectrum strongly believe we need to strengthen this vital program, not cut it.  Over the past months, citizen activists have been out in the streets with a message for any elected official considering compromising the program in a budget deal: ‘Don’t even think about it.’”

Yet both the GOP and Obama are “thinking about it.”  Why?

For congressional Republicans, especially those who rule the House, there are two reasons: One is history.  They’ve always been against Social Security.

The other is campaign contributions.  The corporate plutocrats who bankroll the GOP would love nothing better than to see seniors – and the rest of us – fend for ourselves in investing our retirement dollars, if we have any to invest.  Where would we go?  To financiers and their firms, which would reap tens of billions of dollars in transaction fees for managing and mangling our hard-earned money.

But why is the Democratic president advocating the chained CPI?

Well, Obama is no economist.  And he draws his economic advisors from groups fixated on the size of the federal deficit.  They view Social Security as an “entitlement,” and part of the deficit problem.  Cut $1 trillion in future “entitlement” spending, Obama says, as part of a plan to cut $4 trillion in overall future spending increases and deficits.

But as Coyle points out, Social Security is not part of the deficit problem.  Indeed, its trust fund surplus helps mask real deficits elsewhere in the government.

Social Security’s trust fund will have a deficit, its trustees admit – 25 years from now.  If there is no change at all, its reserves run out then.  But Social Security would still be able to pay 77 cents for every dollar it pays now, just from payroll taxes alone.

The alliance doesn’t want future seniors facing that gloomy prospect.  It’s enlisting us to make sure that Social Security’s still paying dollar for dollar in 2038, by banning the use of the chained CPI and campaigning for Harkin’s bill.

Both are worthy goals we all should support.  But all this is a hell of a way to celebrate a birthday.

-PAI