Charles Krauthammer is A Short Term Thinker

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Friday, 12 April 2013 15:18

Charles Krauthammer is not impressed with President Obama's proposal to cut the cost of living adjustment for Social Security. He complains:

"First, the proposal — “chained CPI,” a change in the way inflation is measured — is very small. It reduces Social Security by a quarter of a penny on the dollar — a $2,000 check reduced by a five-dollar bill."

This is a correct statement (or almost correct statement, the Social Security Administration estimates the impact 0.3 percent annually) on the first year impact of the cut. However the impact accumulates over time. After ten years it would be between 2.5-3.0 cents on a dollar or $50-$60 on a $2,000 check. This is a considerably larger hit to the typical beneficiary than the typical high income taxpayer would see as a result of the increase in tax rates last year.

It is also worth noting that a $2,000 monthly check would put this person near the top of the distribution of beneficiaries. The average check is a bit over $1,200.