{"id":38481,"date":"2011-08-11T10:00:00","date_gmt":"2011-08-11T15:00:00","guid":{"rendered":"http:\/\/media.lclark.edu\/content\/hart-landsberg\/2011\/08\/08\/social-security-is-in-danger\/"},"modified":"2011-11-08T22:54:05","modified_gmt":"2011-11-09T03:54:05","slug":"social-security-is-in-danger","status":"publish","type":"post","link":"https:\/\/thesocietypages.org\/socimages\/2011\/08\/11\/social-security-is-in-danger\/","title":{"rendered":"Social Security Is In Danger"},"content":{"rendered":"

Cross-posted at Reports from the Economic Front<\/a>.<\/em><\/p>\n

Social Security is in Danger<\/strong><\/p>\n

The recently approved deficit reduction plan<\/a> includes the establishment of a Congressional super committee that is supposed to propose ways to achieve\u00a0$1.2-1.5 trillion in deficit reduction over the next ten years. <\/span>Everything is on the table, including Social Security. It must complete its work by November 23, 2011.<\/span><\/p>\n

While the committee could decide to spare Social Security, the odds are great<\/a> that its final proposal\u00a0will include significant benefit cuts. M<\/span>ost Republicans have long sought to dismantle\u00a0the program and President Obama is\u00a0willing\u00a0to accept a reduction in Social Security benefits for the sake of deficit reduction.\u00a0 Standard and Poor\u2019s downgrade of the federal\u00a0government\u2019s credit rating\u00a0only adds to the pressure.\u00a0 The rating agency explained<\/a> its decision as follows:<\/p>\n

We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process.<\/p><\/blockquote>\n

Why Social Security is Important<\/strong><\/p>\n

There has been little media discussion of the importance of Social Security to those over 65.\u00a0\u00a0According<\/a> to\u00a0the Economic Policy Institute:<\/p>\n

The average annual Social Security retirement benefit in 2009 was $13,406.40, slightly above the $10,289 federal poverty line for individuals age 65 and older, but less than the minimum wage. While modest in size, Social Security benefits comprise a substantial share of household income for most elderly recipients.<\/p><\/blockquote>\n

The chart<\/a> below shows that\u00a0the poorest 40% of households with a head 65 years or older rely on social security for more than 80% of their income. <\/span>Even the middle 20% depend on social security for more than 60% of their income. <\/span>In sum, cutting social security benefits will hit hard at the great majority of seniors.<\/p>\n

<\/a> <\/a>\"ss.jpg\"
\nHow the Change Will Undermine Benefits<\/strong><\/p>\n

If the super committee does decide to go after social security, it will likely do so by proposing that social security benefits be adjusted using a new measure of inflation. <\/span>Right now benefits are adjusted using the CPI-W, which measures the change in prices of goods and services commonly consumed by\u00a0urban wage earners and clerical workers. <\/span>The new measure is\u00a0called the Chained Consumer Price Index for all Urban Consumers.<\/p>\n

This all sounds very technical, but the basic idea is simple. <\/span>The CPI-W measures the increase in the cost of a relatively fixed bundle of goods and services. <\/span>The Chained Consumer Price Index assumes that consumers continually adjust their purchases, giving up those goods and services that are expensive in favor of cheaper substitutes.\u00a0The chained index would produce a lower rate of inflation because the goods and services whose prices are rising the fastest would be\u00a0dropped from the index or given lower\u00a0weight. The result would be <\/span>a smaller annual cost of living adjustment for those receiving Social Security, thereby cutting Social Security outlays.<\/p>\n

Those who support using a chained index argue that it is a more accurate measure of inflation than the CPI-W. <\/span>In reality, it just masks the fact that people are unable to buy the goods and services they once enjoyed. <\/span>If we are\u00a0really concerned about accuracy, we could use the CPI-E, which measures the change in prices of those goods and services\u00a0commonly consumed by seniors. T<\/span>he CPI-E has risen much faster than the CPI-W, demonstrating that\u00a0current cost of living adjustments are actually too low, not too high.<\/p>\n

The following chart<\/a> should leave no doubt as to what is at stake in this \u201ctechnical\u201d adjustment.\u00a0 A medium earner retiring this year at age 65 would receive $15,132.\u00a0 The retiree\u2019s\u00a0real (inflation adjusted) earnings would remain constant over\u00a0time assuming that Social Security\u00a0benefits were adjusted using the existing CPI-W.\u00a0 If benefits were adjusted using\u00a0the proposed Chained CPI, the retiree\u2019s real earnings would steadily decline, falling to $13,740 at age 95.\u00a0 By comparison, benefits would grow to $16,131 if the CPI-E were used.
\n\"social-security-graph.jpg\"<\/a>
\nWhy Social Security is the Wrong Target<\/strong><\/p>\n

Social Security shouldn’t be on the cutting board at all.\u00a0\u00a0 It is a self-financing system, one with a large surplus.\u00a0 Some analysts say that the system will not have sufficient funds to meet its obligations by 2037.\u00a0 In fact, this claim is based on very extreme and unlikely assumptions<\/a> about future economic activity.\u00a0 But, even if we accept these assumptions, we can easily escape the predicted crisis by applying the Social Security tax to labor income above $106,800.\u00a0 Currently, earnings above that amount are exempt from the tax.\u00a0 Removing the tax ceiling would ensure the solvency of Social Security through the next 75 years<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Social security is in danger.\u00a0 The recently approved deficit reduction plan includes the establishment of a Congressional super committee that is supposed to propose ways to achieve\u00a0$1.2-1.5 trillion in deficit reduction over the next ten years.\u00a0 Everything is on the table, including Social Security.\u00a0 It must complete its work by November 23, 2011.
\nWhile the committee […]<\/p>\n","protected":false},"author":1853,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[349,29,36,85],"class_list":["post-38481","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-ageaging","tag-class","tag-economics","tag-politics"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/posts\/38481","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/users\/1853"}],"replies":[{"embeddable":true,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/comments?post=38481"}],"version-history":[{"count":10,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/posts\/38481\/revisions"}],"predecessor-version":[{"id":38496,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/posts\/38481\/revisions\/38496"}],"wp:attachment":[{"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/media?parent=38481"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/categories?post=38481"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/tags?post=38481"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}