Speaker Pelosi pointed to three studies showing that the plan for Social Security preferred by Republicans – both privatization and progressive price indexing, a feature that the deficit commission has reportedly toyed with – would slash benefits for middle-income retirees.
The Joint Economic Committee, chaired by Rep. Carolyn Maloney (D-NY), took on both privatization and progressive price indexing, finding not only wild swings in benefits depending on the stock market, but that PPI would result in benefit cuts for those with average lifetime income.
Progressive-price indexing would adjust middle-income earners’ wage histories based on a mix of changes in prices and wages, and would adjust higher-income earners’ wage histories based on changes in prices, eroding the current relationship between workers’ contributions to Social Security and the benefits received in retirement income. Because prices typically grow slower than wages, this change would result in steep reductions for middle-income retirees, and even steeper reductions for retirees with higher earnings.
Although benefit cuts would be smaller for middle-income retirees, progressive price indexing would undoubtedly have a larger impact on the economic well-being of middle-class retirees who depend on Social Security for more than three-fourths of their income, compared to high-income retirees who depend on Social Security for only one-quarter of their income […]
Benefit cuts from progressive price indexing would grow deeper overtime. According to the Center on Budget and Policy Priorities, a new retiree in 2050 with average earnings would receive benefits 17 percent lower than under current law. By 2080, a new retiree with average earnings would receive a 28 percent reduction in defined benefits.
The Center for Budget and Policy Priorities, mentioned above, also saw steep benefit reductions under the Ryan Roadmap privatization plan, along with increases in the retirement age.
But the most interesting response came from the independent chief actuary of Social Security, requested by Rep. Earl Pomeroy, who oversees Social Security in the House. As he says, the results showed even bigger benefit cuts for the middle class. [cont’d.]
Under progressive price indexing, the chief actuary says, benefits for middle income workers would be cut up to 42% for an individual born in 2015, and up to 25% for one born in 1985. Increasing the retirement age slashes benefits up to 20% across the board. And cutting the cost of living adjustment, or otherwise tweaking it, reduces benefits gradually but consistently over time.
“There’s been a lot of discussion about how easy it would be to cut Social Security in order to save it,” said Chairman Pomeroy. “I asked the experts to analyze the proposals being made because I felt that much of this discussion lacked substantive information. The truth is that none of the cuts being proposed are easy on anyone and in fact, all of them will hurt middle class seniors and their retirement security. I don’t think the average American worker could afford to lose 30 percent of their Social Security, which is what would happen under the Republican proposal. That’s not what I’d call ‘saving’ Social Security.” […]
“The new analysis reveals that these proposals result in benefits cuts ranging from ten percent to as high as 50 percent,” continued Pomeroy. “As I talk to seniors today about stretching their Social Security benefits with no cost of living adjustment in sight, they would not agree with describing cuts of this magnitude as ‘modest’.”
Dick Durbin told MSNBC that it’s become “extremely difficult” to find any consensus on the cat food commission. I’m sure this pressure from the House leaders makes it even harder.