The Debt Ceiling Deal
Issues to be considered by supercommittee: Social Security
Let’s look at Social Security and see what the possible recommendations of the supercommittee could mean for retirees.
Social Security has not contributed one penny to the deficit. Benefits to those who are eligible are paid from a trust fund, which can pay 100 percent of benefits until 2037. Nonetheless, the supercommittee will consider proposals that could cut benefits to Social Security beneficiaries.
Change the cost-of-living allowance. One proposal under discussion would permanently change the formula used to calculate the annual cost-of-living increase for Social Security recipients, which is currently based on the Consumer Price Index for Urban Wage Earners (CPI-W). There has been no cost-of-living allowance for the last two years. The CPI-W surveys price changes in the average set of goods that the average person buys. Some members of Congress are proposing that the “chained CPI,” which is a smaller measure of inflation, be used rather than the CPI-W. The chained CPI does not protect seniors’ purchasing power because it fails to account for the fact that seniors spend two to three times more of their budget on medical care than younger people spend. Using the chained CPI would be an immediate benefit cut to seniors and would make it harder for them to make ends meet.
Raising the retirement age for Social Security. Some in Congress propose raising the age (from 67 to 69) at which a person becomes eligible to receive the full Social Security benefit. The age was raised from 65 to 67 in 1983 (a 13 percent benefit cut at that time). If the age is raised again, it would constitute another 13 percent benefit cut on top of the cut made in 1983. The life expectancy of middle- and low-income earners has not increased to such a degree that it justifies another retirement-age increase. Moreover, the number of unemployed older workers who want and need jobs but cannot find them has increased, even though unemployment rates for younger age groups have dropped, according to the Bureau of Labor Statistics. Putting retirement further out of reach for millions of older workers does not create jobs or reduce the deficit, but it does hurt older workers.
Proposals to means-test Social Security benefits are again being put on the table. These proposals suggest that paying benefits to the wealthy is unnecessary, and for some this proposition may look appealing—at first glance. However, Social Security’s popular support is embedded in the fact that it is a program for every worker. Employees contribute to Social Security and therefore have earned the benefits they receive at retirement. Social Security is an important social contract among all Americans. If this contract is broken, it would leave Social Security vulnerable and most certainly leave the door open to benefit cuts in the name of deficit reduction.
Note: The AFT has been involved in the effort to keep Social Security out of the supercommittee.