CEPR - Center for Economic and Policy Research

Multimedia

En Español

Em Português

Other Languages

Home Publications Blogs Social Security Monitor
ss-monitor-logo

Letter to Senator Crapo on Chained CPI Comments Print
Written by Dean Baker   
Wednesday, 13 July 2011 09:00

The Honorable Mike Crapo
239 Dirksen Senate Office Building
Washington, DC 20510

Dear Senator Crapo:

During a recent interview, you were quoted as saying "I don’t see how anybody can argue against having accurate formulas," regarding a change to using the Chained CPI-U to make cost-of-living adjustments to Social Security benefits.

It is not clear that the chained CPI is more accurate than the current measure. The Bureau of Labor Statistics (BLS) has found that an experimental elderly index (CPI-E), that tracks the consumption patterns of people over age 62, actually shows a higher rate of inflation for the elderly than the CPI currently used for adjusting Social Security benefits.

While the CPI-E is not a full index since it does not look at the specific items bought by the elderly and the specific outlets they use for their shopping, there is no reason why BLS could not construct a full CPI-E. Given that you "don’t see how anybody can argue against having accurate formulas," it would seem that you should support having Congress instruct BLS to construct a full CPI-E. For my part, I don’t know whether this measure would show a higher or lower rate of inflation than the current CPI used for indexing benefits, but it would be a more accurate measure.

As it stands, switching to a chained CPI would undoubtedly mean a cut in scheduled benefits, regardless of whether or not it involves a more accurate cost-of-living adjustment. Using this measure of the CPI would reduce benefits for retirees by 3 percent in 10 years, 6 percent in 20 years and 9 percent in 30 years. We know that the vast majority of retirees are struggling to make ends meet already. Social Security benefit cuts of this magnitude seem like a major step in the wrong direction.

I hope that you will have the time to review the indexation issue more carefully. I would be happy to provide you additional background on the topic if it would be helpful.

 
Washington Post Blogger Should Recheck His Facts Print
Written by CEPR   
Tuesday, 12 July 2011 14:48
One of the major arguments in Washington right now surrounds the role Social Security plays in the debt. Over at the Washington Post, Glenn Kessler, who writes the Fact Checker blog, attempts to explain the connection, but as Dean Baker notes over at Beat the Press, Kessler gets some of his facts wrong. 
 
Letter to Representative Johnson on Social Security Comments Print
Written by Dean Baker   
Monday, 11 July 2011 15:29

The Honorable Sam Johnson
1211 Longworth House Office Building
United States House of Representatives
Washington, DC 20515

Dear Representative Johnson:

Recently, you were quoted in an ABCNews.com article as having said, “Social Security needs cash, and I don’t know where Treasury gets the cash to redeem the bonds. In times of this deficit, Treasury has to borrow it. Today the U.S. borrows 40 cents for every dollar that it spends, much of it from the Chinese and sends the bill to our children and our grandchildren, and part of that’s to cover Social Security.”

However, this fundamentally misrepresents the problem. The government already borrowed the money when it sold the $2.6 trillion in government bonds to the trust fund. As you know, the bonds held by the trust fund are included in the $14.3 trillion of debt subject to the ceiling. What is at issue is simply turning over bonds, something that the government does all the time, not new borrowing. If you were concerned about the government borrowing money this should have been raised at the time when the money was originally borrowed from Social Security. Rolling over these bonds requires absolutely no new debt.

Assuming that the government does not default on its debt, Social Security is fundamentally sound. The trustees’ projections show that Social Security will maintain full solvency through the year 2036. Even if Congress never makes any changes to the program, Social Security will be able to pay close to 80 percent of scheduled benefits from then on. Under the law, the bonds held by Social Security are to be treated like any other debt.

While it would be unacceptable to have benefits drop by more than 20 percent, Congress has more than a quarter century to prepare for this situation. The projected shortfall is substantial, but nonetheless considerably smaller than other budgetary changes we have seen in recent years. For example, it is more than 20 percent less, measured as a share of GDP, than the increase in annual defense spending than we have seen from 2000 to 2010.

I hope that you will be careful to present the situation more accurately in future public statements. If you would like any additional background on the program, I would be happy to assist you.

 
CPI Change: 'More Accurate' or Another Method for Cutting Benefits? Print
Written by CEPR   
Friday, 08 July 2011 13:30
According to the New York Times, Oklahoma Senator Tom Coburn and other Republicans are concerned about the growth of programs like Social Security and support "the idea of an alternative measure of inflation, known as the chain-weighted version of the Consumer Price Index," because they believe it is "more accurate." On Beat the Press, Dean Baker points out we have no way of knowing what Coburn actually believes. As Dean noted this morning in a statement, unless the Bureau of Labor Statistics constructs a full elderly index that could take account of actual purchase substitution patterns among elderly consumers, "simply switching to the C-CPI-U without undertaking this research is consistent with a desire to cut Social Security, not make the [cost-of-living adjustment] more accurate."
 
Third Way's Proposed Social Security Cuts are the Wrong Way Print
Written by CEPR   
Friday, 08 July 2011 10:25
The business-backed "progressive" group Third Way is going after Social Security again with some pretty deceptive language, tossing around phrases like "deep financial trouble" and "an escalating leakage of dollars." As Dean Baker notes on Beat the Press, recent projections from the Social Security trustees suggest otherwise and Third Way's proposed cuts to solve this imaginary problem would "have a larger impact on the living standards of low and middle income retirees" than the wealthy retirees they supposedly target.
 
Letter to Senator Conrad on Deficit Reduction Comments Print
Written by Dean Baker   
Wednesday, 22 June 2011 14:45

The Honorable Kent Conrad
United States Senate Budget Committee
624 Dirksen Senate Office Building
Washington, DC 20510

Dear Chairman Conrad:

In your statement today on the Congressional Budget Office’s new long-term budget outlook, you emphasize your support for the “deficit reduction plan produced by the President’s Fiscal Commission.”

With all due respect, the plan that you are referring to was only a proposal put forth by the Fiscal Commission co-chairmen.  As you may recall as a member of the Commission, you and your fellow members did not even vote on a final report because there was not enough support for the co-chairs’ proposal to enable the Commission to report out.

Your statement also indicates your support for the inclusion of “entitlement changes” in the co-chairs’ proposal.  These changes include cuts to Social Security, which under the law can only spend money that came from its designated tax or the interest on the bonds held by the Social Security trust fund. It has no legal authority to spend one dime beyond this sum. In that sense, Social Security cannot contribute to the deficit.

As the discussion over deficit reduction continues, I hope you and your staff will have the opportunity to review the other legitimate plans, such as the Congressional Progressive Caucus’ People’s Budget. In addition, last week I published an analysis that you may find useful: “7 Things You Need to Know About the National Debt, Deficits, and the Dollar.”

If you would like any additional background on these issues, I would be happy to assist you.

 
(Insert Something Here) is Bankrupting Our Country Print
Written by CEPR   
Wednesday, 22 June 2011 13:15
Thomas Friedman is warning his readers that Social Security is bankrupting the country. As Dean Baker points out over at Beat the Press, you could make the same claim about the Commerce Department. Sure, Commerce's budget is less than 0.3 percent of total spending, but it's fun to point at any government spending and make that claim without backing up your argument with evidence. Try it! 
 
Letter to Senator Graham on Social Security Comments Print
Written by Dean Baker   
Friday, 17 June 2011 11:46

The Honorable Lindsey Graham
290 Russell Senate Office Building
United States Senate
Washington, DC 20510

Dear Senator Graham:

The Congressional Quarterly recently reported that you stated, “Social Security’s going to go broke.  We should put it on the table to save it from bankruptcy.”

However, this is not the case. The Social Security trustees’ projections show that Social Security will maintain full solvency through the year 2036. Even if Congress never makes any changes to the program, Social Security will always be able to pay close to 80 percent of scheduled benefits from then on. This means that when you retire in 2021, you will receive $33,120 a year (in 2010 dollars). After 2036, you would still receive $24,840 a year in Social Security benefits for the rest of your life.

From the context of the article, “the table” that you’re referring to is negotiations over the national debt and budget deficits.  In terms of Social Security and the deficit, under the law it can only spend money that came from its designated tax or the interest on the bonds held by its trust fund. It has no legal authority to spend one dime beyond this sum. In that sense it cannot contribute to the deficit.

As the discussion over Social Security continues, I hope you and your staff will have the opportunity to further review the design and finances of Social Security. This week I published a primer that you may find useful: “7 Things You Need to Know About the National Debt, Deficits, and the Dollar.”  If you would like any additional background on the program, I would be happy to assist you.

 
Letter to Rep Johnson on Social Security Comments Print
Written by Dean Baker   
Friday, 17 June 2011 10:30
The Honorable Sam Johnson
1211 Longworth House Office Building
United States House of Representatives
Washington, DC 20515

Dear Mr. Johnson:

The Congressional Quarterly recently reported that at a hearing earlier month you stated about Social Security, “The system is broke and you know it.”  In reference to the Treasury bonds held by the Social Security trust fund, it was reported that you said, “Sure they’ve got pieces of paper over there, but that’s not real.”

With all due respect, these assertions are mistaken. The recommendations of the National Commission on Social Security Reform in 1983 led to the growth of a large surplus in Social Security. The surplus has always been used to buy bonds. Currently, Social Security will be able to pay full benefits through the year 2036, and close to 80 percent thereafter. This is a far cry from broke.

The Social Security trust fund now holds more than $2.6 trillion in government bonds that are honored by the “full faith and credit” of the U.S. government, the same credit that gives the dollar bills in our wallets their value.  These bonds a part of the $14.3 trillion federal debt covered by the debt ceiling. About two-thirds of this debt is held by the public, made up of both American and foreign investors. The remaining one-third is held by government entities, including Social Security, the U.S. Military Retirement Fund, and the U.S. Civil Service Retirement Fund.

Under the law, the bonds held by Social Security are to be treated like any other debt. In assessing the prospects for Social Security it seems that we have to work from current law, since none of us can really know how the program will be changed in the future. And under current law, the program is projected to be fully solvent for more than a quarter century with no changes whatsoever.

As the discussion over Social Security continues, I hope you and your staff will have the opportunity to further review the design and finances of Social Security. This week I published a primer that you may find useful: “7 Things You Need to Know About the National Debt, Deficits, and the Dollar.”  If you would like any additional background on the program, I would be happy to assist you.

 
Letter to Senator Hutchison on Defend and Save Social Security Proposal Print
Written by Dean Baker   
Thursday, 16 June 2011 16:00
The Honorable Kay Bailey Hutchison
284 Russell Senate Office Building
Washington, DC 20510-4304

Dear Senator Hutchinson:

Today you held a press conference to announce a new proposal, the Defend and Save Social Security (DSSS) Act, that both raises the Social Security normal retirement age to 69 and cuts cost-of-living adjustments for Social Security beneficiaries. While you say that your proposal will not cut “any core benefits”, this is not the case.

The DSSS Act would reduce the annual cost-of-living adjustment for Social Security beneficiaries by 1.0 percentage point. This is a benefit cut both measured against current law and in real terms. If enacted, a 1.0 percentage point reduction in the COLA for beneficiaries would result in a benefit cut of 12 percent for a retiree at age 75 and a cut of more than 20 percent for a retiree at age 85.

You also propose raising the normal retirement age for Social Security to 69 by the year 2027. As can be seen from the Social Security trustees’ report, the normal retirement age for Social Security has already been raised to 66 and is scheduled to increase to 67. Raising the retirement age further would amount to another cut in benefits with each successive increase in the retirement age. While the intention may be to have people work later into their life, our research shows that nearly half of older workers are employed in physically demanding jobs in which working to age 69 will be difficult. For workers who are unable or unwilling to work at older ages, this proposal would result in a 4 percent reduction in future benefits for workers currently between the ages of 54 and 58 and a 10 percent reduction for workers between the ages of 44 and 48.

Finally, the Trustees report projects that Social Security will remain fully solvent through 2036 and will be able to pay almost 80 percent of benefits for many decades past this point. It is also worth noting that the necessary increases in funding to maintain full solvency are relatively small compared to items like the rise in defense spending over the last decade, so there certainly are not major economic obstacles to maintaining full funding for Social Security.

As a sitting Senator responsible for authoring and voting on legislation that affects millions of Americans, I hope that you will be careful to present the situation more accurately in the future. If you would like any additional background on the program, I would be happy to assist you.

 
<< Start < Prev 1 2 3 4 5 6 7 8 9 10 Next > End >>

Page 8 of 13

CEPR.net
Support this blog, donate
Combined Federal Campaign #79613