Chained CPI

It’s August in Washington, DC and Congress is out of town—but the House Ways and Means Committee wants to know what you think about additional ways to cut Social Security benefits.

Through last week, Ways and Means Committee Chairman Dave Camp (R-MI) invited comments on adopting the chained CPI: a proposal that would reduce annual cost-of-living adjustments for Social Security and cut the value of benefits more and more every year. Seven thousand of you joined us to tell the Committee that the chained CPI is especially harmful to women. Now the Committee is asking for comments by August 29 on other proposed benefit cuts, including raising the retirement age and changing the benefit formula to reduce benefits.

Raising the retirement age is really just another way to cut benefits. It reduces benefits no matter when an individual claims benefits. Increasing the retirement age from 67 (the current retirement age for people born in 1960 or later) to 69 would reduce benefits by about 13 percent, whether an individual claims benefits at 65, 67, 69—or even 70. Read more »

This week the U.S. House Committee on the Budget held a hearing on the progress of the War on Poverty. While poverty remains painfully high as the United States struggles to recover from the worst recession since the Great Depression, social insurance and safety net programs are lifting millions out of poverty. And the nation’s most effective anti-poverty program is Social Security. Without Social Security, a staggering 25 million more Americans – and half of women 65 and older would fall below the poverty line.

Despite the critical importance of Social Security to Americans’ economic security, lawmakers are considering cutting Social Security benefits by switching to the chained consumer price index (CPI) to calculate the annual cost-of-living adjustment (COLA) for Social Security and other programs. But the chained CPI would actually lower the cost-of-living adjustments and the cuts would get deeper every year.  Read more »

As expected, President Obama’s FY 14 budget includes a proposal to use the “chained Consumer Price Index” – a slower-growing measure of inflation that would cut Social Security benefits by reducing annual cost-of-living adjustments. This is not just a technical change – but a benefit cut that would cause real hardship to the elderly and the poor. The President’s budget recognizes this threat and proposes some protections for vulnerable beneficiaries from the chained CPI – but NWLC analysis shows that this strategy is not adequate.

The budget proposes a bump-up in benefits for long-term beneficiaries, who would experience the worst cuts because the cuts grow deeper every year. In addition, the budget would not apply the chained CPI to needs-based benefit programs, such as Supplemental Security Income, or use it to determine eligibility for programs like SNAP (Food Stamps).

NWLC’s analysis finds that the small and gradual benefit increases from the bump-ups wouldn’t restore the monthly benefit of the typical single elderly woman to current-law levels—unless she lives to 104. Read more »

No, the threat to women’s Social Security benefits from the chained CPI hasn’t gone away. After the House and Senate finish voting on their separate budget resolutions this week, the real bargaining begins. And the proposal to cut Social Security benefits by using a lower measure of inflation — the chained Consumer Price Index — to reduce annual cost-of-living adjustments is still very much on the table. Indeed, it's part of the President’s announced plan for deficit reduction, if increased revenues are also part of the deal. 

But after a long week of budget debates that still isn’t over, it’s time to take a break for a little good news. Congresswoman Gwen Moore (D-WI) just introduced the Social Security Enhancement and Protection Act of 2013. Her bill would improve Social Security’s minimum benefit, increase benefits for long-term beneficiaries, restore the student benefit, and strengthen the financing of the Social Security system for decades — without cutting benefits. 

The bill would improve Social Security’s minimum benefit — a change that would be especially valuable to women, who are a majority of low-wage workers and are more likely than men to take time out of the paid labor force to raise children. And, it would recognize the value of childrearing work by allowing credits of up to five years toward the minimum benefit when a parent was raising a child under age six.  Read more »

What does it mean to live to 100? People turning 100 in 2012 have witnessed a lot of amazing events. Four states have entered the union – New Mexico and Arizona the year they were born and Alaska and Hawaii when they were 47. Humans landed on the moon for the first time when they were 57. And when they were 23 – right when they entered the workforce – Social Security was created.  That means many of today’s centenarians paid into Social Security their whole working lives – and have relied on it for many decades as well. This reliance is particularly true for women, who are the majority of elderly Social Security beneficiaries – and especially very old beneficiaries. A new Census report released today (PDF) shows that women were a whopping 82.8 percent of all people who were age 100 and older. Social Security has been there for these women and their families for almost all of their lives.

But both current and future centenarians have reason to worry about a stealth cut to Social Security benefits by changing the way the cost-of-living adjustment (COLA) is calculated for Social Security. The annual COLA is a vital feature of Social Security that helps keep benefits from being eroded by inflation. One proposal being discussed as part of the year-end fiscal talks would base the COLA on the “chained Consumer Price Index” (chained CPI), a lower and less accurate measure of inflation which would reduce the annual COLA and cut the value of benefits year after year. The longer you receive benefits, the deeper the reduction from the chained CPI – meaning that the very oldest Americans, 4 out of 5 of whom are women, would be hit the hardest. Read more »

The Social Security Administration just made its annual announcement of what the cost-of-living adjustment (COLA) for Social Security would be in 2013. Drumroll, please: benefits will increase by 1.7 percent starting in January. For the typical single elderly woman whose monthly benefit is only $1,100, that amounts to $19 per month to meet the rising costs of food, gas – and health care.

No one who tries to make ends meet just on Social Security benefits – as millions of women do – would think that was too much.

The COLA is an important part of Social Security. It helps prevent the value of Social Security benefits from being eroded by inflation over time. But even the current COLA underestimates inflation for the elderly and people with disabilities because it doesn’t take account of their greater health care spending. Read more »

Policy makers have been talking about deficit reduction for months and one proposal keeps cropping up - changing the way that the cost-of-living adjustment (COLA) is made for Social Security and other federal programs.  These policy makers would replace the current cost of living index with another one that will grow more slowly – the chained CPI.

Here are five things you need to know about the chained CPI:

1. It cuts Social Security benefits.  Adjusting benefits for inflation maintains their value over time.  Using the chained CPI would reduce the value of benefits by about 0.3 percent each year.
2. Cuts get deeper every year.  A reduction of 0.3 percent a year really adds up over time.  The cut in the value of benefits would equal the cost of a week’s worth of food each month by age 80 and nearly two weeks’ worth by 95 for the typical single elderly woman.