At the core of the administration’s proposal is a false equivalence: the idea that if tax loopholes are closed for the super wealthy and corporations it is only fair to cut the benefits of an average Social Security recipient, who receives about $1,200 a month (and pays a good portion of that for out-of-pocket health care costs).
The average annual benefit for Social Security is roughly $15,000 a year. More than half of all older Americans rely on Social Security for 50 percent or more of their family income. For nearly one in four people 65+, it represents at least 90 percent of their income.
Social Security was designed as part of a three-legged stool, along with pensions and personal savings. It has become even more vital as pensions have disappeared, savings have shrunk, and health care costs continue to rise. Half of the workforce has no private pension coverage.
Social Security will become even more important, to more people, as these trends continue, especially for our children and their children.
Given this bleak landscape for the retirement security of current and future generations, it is especially harmful to cut Social Security benefits. Reducing the already tightly-stretched budgets of seniors would take an immediate toll on younger family members as well. Today there are about six million children in America living in their grandparents’ homes. About 42 million Americans are informal caregivers, principally taking care of older adults in their families. This interdependence of generations, instinctively understood by millions of American families, seems to have escaped the notice of those pushing chained CPI.
Virtually ignored in the debate is the problem that a chained CPI does not reflect the spending patterns of older Americans. It is premised on the theory that when the cost of an item goes up, the consumer will simply substitute a lower cost product. In the real world, many seniors spend much of their money on prescription drugs, utilities, and health care — items that do not have lower cost substitutes and are rising faster than inflation. Simply stated, lowering benefits ignores the fact that people’s basic needs do not disappear.
Under a chained CPI, older veterans would be hurt twice, as both Social Security and veterans’ benefits would be cut. So much for the administration’s claim to protect the vulnerable. Permanently disabled veterans who started receiving disability benefits from the Veterans Administration at age 30 would see their benefits cut by more than $1,400 a year at age 45, $2,300 at age 55, and $3,200 a year at age 65.
Social Security is a self-financed system that people pay into through a lifetime of hard work. Instead of turning Social Security into a piggy bank for deficit reduction, we need a separate conversation about retirement security generally -- and how to strengthen it for millions of working Americans. This conversation should encompass not only Social Security, but also pensions and retirement savings.
The hard-earned benefits of seniors and veterans should not be turned into bargaining chips on the federal budget. President Obama needs to rethink chained CPI, and Congress needs to reject it.
Romasco serves as president of AARP.