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Home Publications Blogs Beat the Press Hey Stupid Seniors! The Post Says a 9 Percent Cut In Social Security Benefits Won't Hurt

Hey Stupid Seniors! The Post Says a 9 Percent Cut In Social Security Benefits Won't Hurt

Friday, 27 May 2011 05:16

It's amazing what you can learn reading the Washington Post. Today it's lead editorial told readers that reducing the annual cost of living adjustment for Social Security by 0.3 percentage points won't hurt. This would come as news to most seniors who rely on Social Security for most of their income.

This 0.3 percentage point cut is cumulative. After a person has been retired for 10 years benefits would be roughly 3 percent lower than would otherwise be the case. Benefits would be almost 6 percent lower after 20 years, and almost 9 percent lower after 30 years, when most beneficiaries will be in their 90s.

The poverty rate is highest for the oldest seniors, most of whom are women living alone. Most people think cutting benefits for this group by 9 percent would hurt, thankfully we have the Washington Post to tell us otherwise.

(This is a newspaper that has run front page stories warning that raising taxes by less than 1 percent [of income] on people earning $300,000 a year would inflict real pain.)

The rationale for the benefit cut is the use of an alternative measure of inflation, the chained consumer price index, that assumes substantial substitution between consumption items in response to prices changes. The Post asserts that this index is a more accurate measure of inflation.

Actually, the Bureau of Labor Statistics has an experimental elderly index that measures the rate of change in the basket of goods and services consumed by people over age 62. This index shows that the inflation rate experienced by the elderly increases by an average of 0.3 percentage points more than the overall CPI to which Social Security benefits are indexed.

While this is an experimental index that does not track the actual purchasing patterns of the elderly (e.g. examining the specific retail outlets where they shop and the items they purchase), those who are interested in an accurate cost of living adjustment would advocate a fuller elderly index. Those who want to cut Social Security benefits advocate using the chained consumer price index, which we know will show a lower measured rate of inflation.

Comments (3)Add Comment
written by bmz, May 27, 2011 6:24
The Post also ignores the fact that under the CURRENT law Social Security benefits will fall in real dollars. The Reagan administration established the taxation of Social Security benefits--but didn't index the income levels for that taxation; hence, every year more and more Social Security benefits become taxable, at higher rates. Accordingly, real Social Security benefits are constantly being reduced.
Consistency please.
written by AndrewDover, May 27, 2011 6:26
On Wednesday, Dean answered the projections of a persistent 20% drop in benefits
after the trust fund empties around 2040 with:

"There are no, as in none, zero, projections that show that Social Security will not always be able to pay retirees a higher benefit (adjusted for inflation) than what retirees get today."

On Friday however, the historical comparison is ignored, and a 4.5 average benefit cut is judged by a different measure.

written by bg, May 27, 2011 8:16
As a disabled single senior depending on SSDI & Medicare, the Post is really wrong. SocSec benefits have been frozen for 3 years but Bush Part D premiums & copay rise every year. Now my electric utility raises my bill by 50%+/ month & Verizon raises my phone/net blll.

I'm not able to pay living expenses, much less Rxs, MDs & screening bills.

I get too much to qualify for SSI & Safety Net monies, but not enough to cover expenses.

The GOP methods cover expenses, maybe in LA & MS, but not outside rural Red State territory.

it's a disgrace in the "richest country in the World"

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.