Obama Looks to Trim Social Security with 'Chained CPI' Proposal; May Be Cuts in Name Only
When a reporter asked President Barack Obama on Tuesday whether he still intended to cut Social Security benefits in a deal to avert the fiscal cliff, in reference to reports that Obama and Republicans may agree to adopt a "chained consumer price index," Obama said he was willing to do some "some very tough things" that even "some Democrats don't want to see."
Obama was referring to complaints from liberals about how the the chained consumer price index would make the annual cost-of-living adjustments smaller and impact vulnerable seniors. Under this new index, tax brackets would also grow "more slowly, forcing more people to pay higher marginal tax rates," which could give the government $70 billion more in taxes over a decade.
But history suggests that these may just be cuts in name only because Congress can be pressured to exempt groups of people from cuts they write into legislation.
The current consumer price index -- and the "basket of goods" used to measure it -- does not take into account that people may buy less of a product if the price of it increases. As Quartz describes:
... if one thing gets too expensive, like the price of beef is going up because of droughts, people don’t just keep buying expensive beef: They switch to cheaper chicken. Accounting for that kind of behavior means a slower increase in prices, and thus a slower increase in the cost of living. Slowing those benefits increases would save around $125 billion over a decade, without the political pain of cutting benefits directly or raising the access age.
As the publication notes, though, adopting the chained consumer price index would maintain "the program’s existing structure," which means "that these cuts could be more easily reversed in the future."
Every year, Congress passes legislation, known as the "doc fix," to restore Medicare reimbursements to doctors that have been scheduled to be cut from previous pieces of legislation. Congress does this, of course, because groups who are threatened with cuts usually vociferously complain and mount campaigns to get those cuts restored. Seniors, because they are the most reliable voters, would have even more power than doctors to get similar "fixes" like these enacted even if a chained CPI gets put into the deal to avert the fiscal cliff.
The Center on Budget and Policies Priorities already put forth a study suggesting these very types of fixes. In February, a report titled, "Chained CPI Can Be Part of a Balanced Deficit-Reduction Package, Under Certain Conditions," encouraged policymakers to exempt from the new index the nation's "poorest elderly and disabled people":
Policymakers should exempt the Supplemental Security Income (SSI) program from the switch or make other changes to SSI to mitigate the chained CPI's impact. Applying the chained CPI to SSI, which serves the nation's poorest elderly and disabled people and still leaves them well below the poverty line, raises particular problems. Policymakers should exempt SSI from the switch or soften the impact on SSI beneficiaries ...
Obama and Republicans can agree to a chain CPI as part of a broader deal to avert the fiscal cliff, but this does not mean Congress will not pass "fixes" to exempt broad swaths of people from being impacted by the new -- and reduced -- cost-of-living adjustments to their Social Security checks.