The Gang of Six’s “Bipartisan Plan to Reduce Our Nation’s Deficits" proposes immediate and significant cuts to Social Security benefits, and a process for addressing the program’s funding shortfall projected to appear 25 years from now. The process would virtually guarantee devastating cuts. This plan breaks faith with the American people, who overwhelmingly oppose benefit cuts.
The Gang of Six framework contains very few specifics but one is glaring – the immediate cuts that would affect all 55 million Social Security beneficiaries by changing the way the annual cost-of-living adjustment (COLA) is calculated. Their plan would substitute the less accurate and less-generous chained consumer price index (CPI) for the current CPI in calculating the COLA. This breaks a promise made by many politicians to not cut the benefits of anyone over age 55.
Over the next 10 years alone, the chained CPI would take $112 billion directly out of the pockets of beneficiaries, with cuts growing larger each year and pushing many of the oldest old—primarily women—into poverty. The COLA cut would reduce benefits by 3.7 percent after 10 years, 6.5 percent after 20 years and 9.2 percent after 30 years. For a typical senior who retires at age 65, their Social Security benefits would be $1,000 less by the time they are 85—on a benefit of just $16,000 a year. That’s a big loss of income that may be affordable for politicians in Washington but not for most people across the country.
Adopting the chained CPI goes in the wrong direction. Most people who depend on Social Security devote a much larger share of their income to health care, and these costs are increasing at a much higher rate than other living costs. They need a more accurate formula that reflects these higher costs, which would result in a cost-of-living increase, not a cut. (There are other reasons the chained CPI is bad that are detailed in this fact sheet and this post by Daniel Marans.)
Seniors and other Social Security beneficiaries have not gotten a cost-of-living adjustment for two years. Apparently some in Washington think that was too generous.
Especially troubling is that the Gang of Six plan would hold a gun to the heads of all those who contribute to and depend on Social Security. If a supermajority of the Senate did not agree to a major overhaul of Social Security, then a deficit-reduction bill would not proceed. This leverage would virtually guarantee devastating cuts to Social Security benefits along the line of what was proposed in the Bowles-Simpson deficit commission created by the White House last year, including raising the retirement age to 69 and dramatically changing the current benefit formula.
Social Security should be considered on its own, separate and apart from the deficit, because Social Security does not contribute a penny to the deficit. It should not be used as a bargaining chip in a Washington game of chicken. Social Security should be strengthened, not cut. With stagnant wages, reduced savings, declining home values and fewer employers offering pensions, Social Security benefits should be expanded.
While it is fully funded for the next 25 years, Social Security’s long-range funding gap should be closed—but not by cutting its modest benefits. Scrapping the payroll tax cap and requiring those with wages over $106,800 a year (and their employers) to pay taxes on all of their earnings would accomplish that.
Social Security is too important to have a long-term fix be done when the focus is budget-cutting instead of protecting and improving the economic security of the American people.