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Labor Headlines

US labour news headlines from LabourStart

Mr President, Please Define ‘Slash’
Updated On: Mar 22, 2013

Mr. President, Please Define 'Slash'

Posted: 03/21/2013 6:09 pm

The Huffington Post

By Max Richtman
President and CEO, National Committee to Preserve Social Security and Medicare

When I met with President Obama and other allied groups at the White House just after his reelection, his commitment to carry out the promises made during the campaign seemed clear and unambiguous. The president acknowledged Social Security should not be a part of the deficit debate. This was especially important to millions of American families still struggling in this economy who depend on Social Security's modest benefit -- the benefit they've contributed to throughout their working lives. Unfortunately, within months, President Obama's unambiguous statement has taken a 180 degree turn and a proposal cutting Social Security benefits for both current and future retirees has once again become a deficit debate bargaining chip. However, as a consolation, the president promises he won't "slash" benefits.

Mr. President, please define "slash."

The Stealth Benefit Cut

There's a political calculus behind cutting benefits to millions of seniors, veterans, people with disabilities and more by reducing the federal cost of living allowance. Cutting the COLA is being pitched as a simple "technical tweak" or "formula adjustment" that's more accurate than the current COLA formula. Sounds reasonable, right? However, claims that the current COLA is too generous are demonstrably false. So much so, the White House is considering "protecting" millions of low-income Americans, some veterans and "older" beneficiaries from this COLA cut. If the chained-CPI really is a more accurate formula, why the exemption?

The Social Security COLA has averaged just over 2% over the past five years with 0% for two of those years, far below the largest expenditure increase for most seniors, health care. If accuracy, not cutting benefits, is the goal then we should be talking about the elderly formula (CPI-E) which factors in seniors' health care costs and has been under review by the federal government for decades. However, that won't happen because there's no guarantee the CPI-E will cut benefits. The chained CPI, on the other hand, will. This COLA change is nothing more than a stealth benefit cut Washington politicians hope will fly under the radar of the millions of American families it targets. On behalf of the National Committee to Preserve Social Security and Medicare's millions of members and supporters I've written to the president about his COLA proposal:

"The 'chained CPI' is not a 'technical tweak,' and no amount of rationalization can make it so. In reality, the chained CPI is a benefit cut for the oldest and most vulnerable Americans who would be least able to afford it. To offer to trade it away outside the context of a comprehensive Social Security solvency proposal ignores the fact that Social Security does not even belong in this debate because it does not contribute to the deficit. Cutting Social Security benefits to reduce the deficit is unacceptable to the vast majority of Americans across all ages and political affiliation."

Slash? You Decide

Cutting benefits by adopting the chained CPI, as proposed by the White House, would cut the COLA by 3% for workers retired for ten years and 6% for workers retired for twenty years. This translates to a benefit cut of $130 per year in Social Security benefits for a typical 65 year-old, including today's retirees. The cumulative cut for that individual would be $4,631 or more than three months of benefits by age 75; $13,910 or nearly a year of benefits by age 85; and $28,004, more than a year and a half of benefits by age 95. Losing three months up to more than a year and half of income would count as "slashing benefits" by anyone's standards, especially for America's oldest retirees, veterans and people with disabilities living on modest incomes. These chained CPI cuts also deliver a larger percentage cut to seniors' annual income than the tax increases on the wealthiest Americans passed earlier this year deliver to our nation's millionaires. An analysis by Dean Baker with the Center for Economic and Policy Research shows the after tax income for wealthy Americans was reduced by less than 0.7 percent after January's tax hike. By comparison, the percentage of income Social Security beneficiaries will lose would be three times as much if the chained CPI is adopted.

So Much for "Shared Sacrifice"

Requiring benefit cuts to Social Security, Medicare and Medicaid in the name of deficit reduction has always been the goal of the billion dollar corporate and Wall Street backed crisis campaign driving Washington's deficit hysteria. These millionaires, billionaires and their supporters in Congress have used the economic recession to fuel their anti-Social Security and Medicare mission. The Obama administration and some Democrats in Congress have bought into the flawed idea that they must trade away middle-class benefits just to get Republicans to the table and further, if a millionaire loses a tax break then the middle class and poor most also lose their modest benefits in Medicare or Social Security. There's nothing balanced about this type of deal. But it does explain how the deficit reduction passed since 2011 includes 75% cuts (mostly to programs serving the poor and middle-class) and only 25% revenue increases (not just from the wealthy). This mythological "shared sacrifice" continues as President Obama has now told Congress he's "willing to back $2 in spending cuts for every $1 in tax revenue" in any future deal. Even that isn't enough for Republicans who expect average Americans to foot the entire deficit reduction bill through program cuts rather than closing the trillion dollars of wasteful millionaire and corporate loopholes and tax breaks.

"In addition, we should not fool ourselves that your negotiating partners will be satisfied with lowering Social Security COLAs or raising the Medicare eligibility age. Each debt limit increase, Continuing Resolution or sequestration will give them a second, third and fourth 'bite at the apple.' In November, you won the confidence of the American people by defending the middle class. I urge you not to let them down now by supporting a deal that undermines the last remaining retirement security pillars for middle-class Americans." Letter to President Obama, March 20, 2013

Americans Won't Be Fooled

Inside the Beltway, members of Congress might also be able to kid themselves that middle-class families won't notice a Social Security benefit cut here and a Medicare benefit cut there. However, they will find a very different truth when they go home to their Congressional districts. Not because America is a nation of "takers" or "greedy geezers" but because Americans understand the difference between harmful benefit cuts to the poor and middle-class and reasonable reforms, such as lifting the Social Security payroll tax cap and allowing Medicare to negotiate for lower drug prices. They don't believe a dollar in millionaire taxes is the same as a dollar cut from the average annual $14,000 earned Social Security benefit. Most importantly, the American people are willing to pay to preserve and even strengthen these vital benefits. They've said this over and over again, most recently at the polls in November.

Will Congress listen now that the election is over? If not, they shouldn't be surprised that voters deliver the same message when they return to the polls next time

Follow Max Richtman on Twitter: www.twitter.com/maxrichtman



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