Chained CPI equals benefit cuts for retirees, veterans

The billionaire-funded campaign against Social Security has gone into high gear. The cuts would be disguised as a technical fix in the way cost-of-living adjustments (COLA) are calculated. The new formula, called chained CPI, would apply to all programs that are adjusted for inflation, including veterans’ benefits.

There’s some bait-and-switch going on here. Chained CPI is introduced as a more accurate way to calculate COLA. (It’s not. See this explanation of chained CPI.) But it is presented in the context of a “grand bargain” to reduce the deficit. This shows that chained CPI is not about accurate COLA. It is a fig leaf for stealing from seniors to protect tax breaks for the 1 percent.

President Barack Obama and Democratic House Leader Nancy Pelosi have both said they are open to accepting chained CPI, as part of an overall deficit-reduction package. AFL-CIO Policy Director Damon Silvers responds, “America elected President Obama to protect us from bad Washington ideas like chained CPI, not to advocate for them.”

Chained CPI equals benefits cuts

Silver explains, “Chained CPI is a Social Security benefit cut, plain and simple… [It] is a Washington trick to cut the COLA by changing the way inflation is calculated.”

Under chained CPI, initial benefits would be unchanged, but each year the cost-of-living adjustment would be reduced by 0.3 percent. That doesn’t sound like much. But according to Vermont Senator Bernie Sanders, “If a chained CPI goes into effect, seniors who are 65 now will receive $650 less a year at 75 and would get $1,000 less a year at age 85.”

Not only retirees will be affected. A disabled veteran who begins collecting benefits at age 30 would see their check cut by over $3,000 a year by the time they reach the age of 65.

Social Security’s importance in the lives of senior citizens is actually growing. Barely half of all workers have access to retirement plans at work, and few of those are adequate.

Social Security provides only minimum benefits. The average retired worker receives only $1,230 per month from Social Security. This princely sum is the main source of income for most retirees.

Putting it all in context: class war

The excuse used for the chained CPI proposal is that it is a necessary part of a grand bargain to resolve the various budget battles underway in Congress.

We don’t need a grand bargain because the deficit crisis is phony. The large federal deficit is mainly due to the ongoing economic depression and high unemployment, as well as past and present military spending. The best cure is putting America back to work, as outlined in the “Back to Work” budget of the Progressive Caucus.

Social Security does not add a single penny to the budget deficit, now or in the future. It is entirely funded by past and present payroll taxes. Any future shortfalls can be met by making millionaires pay the same payroll taxes as the rest of us.

The essence of the chained CPI and other schemes to cut Social Security is class war, waged by the 1 percent against the rest of us. They want to get their hands on some of the $700 billion per year collected in payroll taxes, instead of wasting it on so-called entitlements for retired workers. The immediate effect of any cuts in Social Security is to make seniors, many of whom barely get by, pay for continuing tax breaks for oil companies, hedge fund managers and other super-rich corporations and individuals.

What are the alternatives?

It is not necessary to do anything about Social Security right now. The Social Security Trust Fund will be able to pay full benefits for another 20 years. The immediate economic emergency is jobs – preferably good paying jobs that meet the country’s long-term needs. The long term economic challenge is rebuilding infrastructure, developing and deploying renewable energy, providing quality education for all, and narrowing the giant wealth gap between the super-rich and everyone else. These measures can provide for a productive economy in the future, able to maintain Social Security while improving life for the great majority.

Sanders, an independent, and Rep. Peter DeFazio, D-Ore., have introduced legislation to eliminate the cap on the payroll tax on income above $250,000 so millionaires and billionaires pay the same share as everyone else. They point out that President Obama made a similar proposal during the 2008 presidential campaign.

Others go further. The AFL-CIO says, “To compensate for the decline of traditional pensions and the loss of retirement savings, Social Security retirement benefits must be increased across the board.” Campaign for America’s Future Senior Fellow Richard Eskow lists a number of individuals and organizations also calling for an increase in benefits.

Politics and action

When he opens the door to cutting Social Security through the chained CPI, Obama is playing with fire. Overwhelming majorities – including Republican voters – oppose cutting Social Security.

Congressional Republicans, no doubt, would be thrilled to have the president sign off on the chained CPI swindle.  As soon as the president signs the bill, they will be running ads telling seniors, “Obama cut your Social Security.”

Attempts to privatize and undermine Social Security during the Clinton and Bush administrations were stopped by organization and mobilization. Chained CPI can also be stopped. Tell President Obama that this is not why we elected him. Tell your senator and representative to support the Sanders-Defazio bill. You can calculate how much in benefits you stand to lose at the AARP website. The younger you are the bigger the cut!

Photo: Demonstrators in Hartford, Conn., protest a “grand bargain” that cuts Social Security, Medicare and other programs, December 2012 (PW/Art Perlo).