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View Diary: The Thing About Social Security (178 comments)

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  •  so, how much of a gambler are you? (19+ / 0-)

    should we take our chances on budget talks in february with the new House where Boehner is down two teabaggers and a handful of other Reps?  is our leverage better right now with boehner trying to avoid defense spending cuts and higher taxes?

    sausage

    Please don't dominate the rap, Jack, if you got nothin' new to say - Grateful Dead

    by Cedwyn on Sun Dec 23, 2012 at 09:33:09 AM PST

    •  No need to make immediate changes. Lift cap on (3+ / 0-)
      Recommended by:
      ferg, Ian S, tardis10

      wages, consider 1/2 to 1% increase in payroll tax (if needed).

      Here's a couple of pertinent excerpts:

      Alex Lawson, executive director of Social Security Works, which opposes cuts to the program, said the chained CPI is painful policy. "Almost every elected official just spent an entire election season saying they wouldn't cut the benefits of those 55 and older. The truth is the chained CPI hits everyone's benefits on day one," he said. "It hits the oldest of the old and disabled veterans the hardest. If it wasn't being bandied about as being 'on the table,' I would guess that it was created as an office joke to see who could create the most noxious and offensive policy possible."

      Boehner included the chained CPI in his counteroffer to Obama earlier, which also called for broader reform of social insurance programs. In 2011, Boehner and Obama reportedly agreed to a "Grand Bargain" that included the chained CPI, but the deal fell apart.

      Here's the link to "Obama Hits Social Security In Fiscal Cliff Offer Friendlier To The Wealthy."

      And there's this especially indepth explanation of the "Chained CPI Index."  Here's the link.  This WaPo piece is entitled "Everything You Need To Know About Chained CPI In One Post."

      Welcome to the dark art of obscurantist deficit reduction. Of course, the only ways to cut the deficit are by increasing tax revenue (either through higher rates, fewer deductions, or faster growth) or cutting spending. But both of those methods are unpopular. So, to get any support for their plans, politicians who insist on cutting the deficit have to find ways to cut spending or raise taxes that don’t look like they’re doing just that. Perhaps the most popular option along these lines is adopting “chained CPI.”

      Here’s how it works: Numerous government programs, most notably Social Security benefits and the income thresholds for tax brackets, are indexed for inflation. But inflation can be measured in a number of ways. The tax code, for instance, uses CPI-U (Consumer Price Index – Urban), which measures prices for consumers in urban areas, to adjust the income cutoffs for different tax brackets. Social Security uses CPI-W, which is like CPI-U but only counts prices paid by urban wage-earners, not all consumers.

      Various deficit-reduction frameworks, including Bowles-Simpson, Domenici-Rivlin and the Gang of Six plan, would convert all programs using CPI-U or CPI-W to a third measure — called C-CPI-U, or chained CPI. Most inflation measures, including CPI-U and CPI-W, track the price of a certain basket of goods. That basket could include, say, a year’s supply of propane. When propane costs go up, CPI-U and CPI-W include that as an increase in the cost of living.

      But some people would just stop using propane if its price went up. They’d switch to electric heating, or a geothermal system, or a wood stove. So their actual heating costs wouldn’t go up as much as CPI-U and CPI-W would suggest. Chained CPI attempts to take “substitution effects” like this into account. Thus, its number generally rises more slowly than other metrics.

      That adds up to a big cut in Social Security benefits. Imagine, for example, a person born in 1935 who retired to full benefits at age 65 in 2000. According to the Social Security Administration, people in that position had an average initial monthly benefit of $1,435, or $17,220 a year. Under the cost-of-living-adjustment formula and 2012 inflation, that benefit be up to $1,986 a month in 2013, or $23,832 a year. But under chained CPI, the sum would be around $1,880 a month, or $22,560 a year. That’s a cut of over 5 percent, and more as you go further and further into the future:

      The results by using chained CPI for taxes are also striking. The Tax Policy Center calculated the income tax increases that would be caused by a switch to chained CPI. They’re not big — a little more than $100 a year for most families — but they’re oddly regressive:

      The group getting the biggest tax hike is families making between $30,000 and $40,000 a year. Their increase is almost six times that faced by millionaires. That’s because millionaires are already in the top bracket, so they’re not being pushed into higher marginal rates because of changing bracket thresholds. While a different inflation measure might mean that the cutoff between the 15 percent and 25 percent goes from $35,000 to $30,000, the threshold for the top 35 percent bracket is already low enough that all millionaires are paying it. Some of their income is taxed at higher rates because of lower thresholds down the line, but as a percentage of income that doesn’t amount to a whole lot.

      All told, chained CPI raises average taxes by about 0.19 percent of income. So, taken all together, it’s basically a big (5 percent over 12 years; more, if you take a longer view) 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.

      Bear in mind, this is the "least" draconian of the "3" cuts to Social Security that the President's own Fiscal Commission has recommended.  

      As the piece above points out, this subject matter is not well understood by the general public, and should not be oversimplified.

      There's absolutely no "urgency" to fix Social Security.  

      Here's a video of the actual staffers from the 1983 Greenspan Commission.  They warn of the deep cuts yet to come under that law, and make their suggestions as to "reform."

      Apologize that the C-Span embed code is unavailable.

      Future of 1983 Social Security Law.

      Mr. musiccitymollie and I will be fine.  Having served long term "missions" in South America, we will be fortunate to enjoy a decent retirement in a beautiful and inexpensive country.

      But we are in culture shock when coming back to some parts of the US.  And two of our siblings have already been told that they will be forced into the exchange in 2014.  Both are in states that will not from their own state-run exchange.  One sibling has suffered two occurrences of cancer in the past five years.

      Everything must be done to actual bolster the flimsy social safety net in this country.  Now is not the time to consider any cuts.  

      Good luck to everyone.

    •  I don't believe negotiating from a position of... (1+ / 0-)
      Recommended by:
      tardis10

      ...strength constitutes the need to gamble. Not only did Barack Obama win re-election with more than 50% of the popular vote and an overwhelming majority of electoral votes (including most swing states), but Democrats did exceedingly well in the senate races.

      I am puzzled by an approach to strengthening Social Security that does not levy taxes from those in the best position to pay them, but rather takes from those who have the least to give. I don't find this approach to be very Christian, to say nothing of its indecency from a humanist perspective.

      Just my 2 cents...take it for what it's worth :)

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