Occupy Wall Street’s success in drawing attention to the soaring wealth gap, and the national outcry against cuts to Social Security, Medicare and other programs, has led slashers in Congress to explore backdoor methods to achieve their aims.
Republicans and Democrats inclined to go along with the slashers are reportedly considering adoption of a new formula that would allow progressively larger reductions in Social Security and other benefits over the years, without lawmakers having to enact actual cuts in current benefit rates.
The new formula would have the effect of slashing billions of dollars from programs that currently keep millions out of poverty. In addition to Social Security, Medicare and Medicaid, other benefits that would be affected include veterans’ benefits, food stamps, heating assistance, Head Start, school lunch programs and even tax rates for lower-income people.
The idea is to replace the Consumer Price Index, which has been traditionally used to calculate future increases in Social Security and other benefits, with a gimmick called the “chained Consumer Price Index.” Advocates of the chained CPI say that inflation does not really affect beneficiaries in direct proportion to rising prices because, when prices go up, people make changes in what they purchase. The advocates say these “adjustments” by consumers wipe out some of the effects of inflation, so future increases in benefits can be smaller.
But opponents of the chained CPI formula say that people do make changes to save money when prices go up, but these are not positive changes. “When the heating bill goes up and they can’t pay it, they put on more sweaters,” said David Center, a spokesperson for the AARP. “Is that their argument for saying those people don’t need a cost of living increase?”
Some members of the congressional supercommittee dealing with the deficit are reportedly eyeing this approach to cutting popular national programs both to avoid criticism for making outright cuts and to find a “compromise” attractive to Republicans and at least some Democrats.
“I think the thought process behind this is to slip this in and people won’t realize what is happening,” said Max Richtman, president of the National Committee to Preserve Social Security and Medicare. Richtman says he has a warning for the politicians: “Don’t believe that this won’t be noticed. If you try it, you will pay for it.”
One of the chained CPI formulas being talked about would reduce Social Security Cost of Living Adjustments by 0.3 percent each year.
A look at what would happen to a typical 65-year-old shows just how the backdoor cuts would work. His or her benefits would be $135 less the first year. At age 75, he or she would get $560 less and at age 85, $1, 393 less, all with no actual up-front cuts in benefit rates.
“You don’t notice too much the first year,” said Center, “but as people get older and they get poorer and rely more on Social Security, the cuts get larger.”
With all the programs that could be affected by using the chained CPI, said Center, “Eventually, people living above the poverty line in the future will actually be poorer than many who are now living below the poverty line.”
“The proposals are just another part of the ongoing war on the poor,” said Dean Baker, the noted economist. “With the way things are going,” he said, “the only victory that the supercommittee can hand the American people is a blank sheet of paper. People have enough to worry about this Thanksgiving without adding a congressional plan to reduce their Social Security and Medicare.”
Photo: In this Sept. 15, photo, Judith Odyssey sets up her weekly medication, in Hartford, Maine. Odyssey, who has congestive heart problems, fibromyalgia, asthma and arthritis, gets $674 a month in Social Security. (Robert F. Bukaty/AP)
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