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Social Security beneficiaries will get a 1.7% cost of living adjustment in 2013.
The COLA is calculated by a measurement of inflation, which has risen slowly over the past year. However, the inflation calculation used currently, the Consumer Price Index for Wage Earners or CPI-W, may not take in the rise in cost of living for seniors, which most strongly depends on rising health care costs (a separate measure, the Consumer Price Index for the Elderly or CPI-E, accounts for this much better).
The cost of health care has risen well beyond the rate of inflation over the years, particularly for seniors. Indeed, Medicare premium increases could eat up the entire COLA this year, and those come directly out of Social Security checks. So the net result may be flat.
Despite this, last year Congress and the President toyed with changing the COLA calculation to a chained CPI, on the grounds that the cost of living adjustment was too generous to seniors. This would have resulted in a net benefit cut for millions of Americans, and it’s still on the table as part of the menu of changes to deal with a long-term funding gap in Social Security.
Over 56 million seniors will see the 1.7% boost, as well as 8 million Americans on Supplemental Security Income. The average Social Security benefit is around $14,800 a year, and this is often the sole source of income for the individual. Retirement security has lessened over the past few decades, with the elimination of most defined benefit pensions and the rise of 401(k)-style plans, as well as cuts to the personal savings rate. Retirees used to have a multi-legged stool, and now many of them have only Social Security.
The COLA law is statutory, signed by President Nixon in 1972. Beneficiaries must receive a cost of living adjustment calculated using inflation. Unfortunately, inflation has been so low through the Great Recession that beneficiaries received no COLA in 2010 and 2011. Benefits increased 3.6% in 2012. The Recovery Act did provide a $250 one-time payment to beneficiaries in 2009.
So the last four years of COLA increases have increased benefits for seniors by less than 6%. Despite this, we have continued discussion of the need to make changes to the program, including cutting benefits, to satisfy an actuarial projection 30 years down the road. That includes proposals to increase the retirement age, the least courageous thing a politician can say.
This is one of Washington, D.C.’s more disagreeable conceits. The people wandering around calling for a higher retirement age will never feel the bite of the policy. Think tankers and politicians and columnists don’t retire at age 62, or even age 65. They love their work, which mostly requires sitting down in air-conditioned rooms. They stick around pretty much until they’re about to die [...]
Meanwhile, you could do more to erase Social Security’s shortfall by simply lifting the payroll tax cap. A lot more. According to the Congressional Budget Office, raising the federal retirement age to 70 would solve about half of Social Security funding problem, while lifting the payroll tax cap would solve all of it.
As it happens, lifting the payroll tax cap would also end up costing eminent think tankers and journalists and lobbyists and politicians a whole lot of money. Perhaps consequentially, it’s a rather less popular policy idea in this town. Many consider it an easy way out, even though it would be much harder on them. Courage and sacrifice for thee, but not for me.
Indeed. More here.
Image by DonkeyHotey under Creative Commons License
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Something does not make sense here.
I would think that corporate masters would be dead against raising the retirement age. Older workers usually are paid much higher wages, and their health insurance costs WAY more as they age. I had a 64 year old employee that cost me $900/mo for his health insurance plan, whereas my own when I was 50 cost about $330/mo. Now he was very good at his job, but someone in their 40′s or 50′s was just as good. At some point the benefit of experience evens off. 25 years on the job, a worker gets to really know it. At some point seniors are paid more out of respect, then out of superior value. This mattered to me. I doubt it matters to corporate america.
So why do the MOTU’s seem to be pushing later retirement ages? Aren’t they just putting the cost of senior citizens back upon themselves? Plus they have to keep paying 7.5% of their social security to the government, instead of shifting that cost to the government through earlier retirement.
The Democratic party has lost my vote due to their incoherence on Social Security and Medicare. If they cannot even stand up for these two core programs they’ve become utterly useless. The Republicans wave vouchers and privatize and Democrats seem to believe they have a mandate to do everything else – COLA cuts, raise eligibility age…
The MOTUs only have to raise the retirement age. They don’t have to employ them. They’ll be laid off well before SS kicks in.
The Chained CPI adjustment has about a 99.9% chance of happening. It’s an easy sell for politicians: “everyone still gets a COLA, we’ll just slightly change the formula”. Generally nothing bores Americans more than math, so this one can slip through fairly easily. The retirement age will take a little more work, but they’ll ease into that one over a number of years. For the MOTUs, there are effective tactics for their desired strategy.
They can and do lay off ‘ overpaid’ older workers.
Good summary.
Pretty tough to counter the consensus narrative though.
Younger folks seemed pretty tuned out, having, I believe, basically interpreted the ongoing drama to mean that that SS isn’t going to “be there” when they get ready to retire anyway.
Why doesn’t any significant segment ever object to obscene defense spending? Quintessential ‘nevermind’.
I’m beginning to think that Obama’s lack of fire and enthusiasm for being re-elected is because he will have accompblished his ‘historic mission’ of gutting social security. If there is ecer a Nobel Prize for conmanship, he will be the winner hands down. Who pulled him out of nowhere in 2004 to give the opening address to the Democratic Convention? He was picked to do this from the get go. He really doesn’t have a second act, and it is only pride at this point that is making him show a simulacrum of a campaign.
American workers are essentially forced into “retirement” (but with NO INCOME WHATSOEVER!) absolutely by age 50.
Especially the way wages and benefits have been continually REDUCED over the last five decades, while inflation and prices have risen (particularly for recurring housing, energy and utility costs;) there is NO WAY anyone could have “saved” for that last 15 years of nonexistent earnings before SS eligibility! (You have no idea what that does to your sense of self worth – even with a stellar record and career. But you WILL find out.)
And early retirement (collecting less) is a GIVEN in such an environment. Try living on $1k/month TOTAL. You WILL have to do so sooner or later. And like us, you WILL wind up with a junked car in your yard, which you are unable to afford to maintain in running condition.
“bittersweet” ‘s post above proves it, and gives the reasons. (PROFIT uber Alles)
If you REALLY want to be upset, read websites like VA’s state website for Employers, which even give them a procedure to plan and set up a year-long checkoff agenda for ageist layoffs, avoiding legal charges of Age discrimination.
Tnis is one of the very many evidences America has become a Fascist country, where government takes the money we agreed to pool (“taxes”) to protect each other FROM business, and HELPS them against the individual. They even give them some of that money directly in “subsidies!”
There is absolutely no need for any cuts. Social Security is projected to stay steady as a percentage of GDP: See chart #19 at this CBO graphics link.
Defense spending is what is driving all of this. The consensus among the PTB is th at the United States has the (literal) God-given right to hegemonic power over the rest of the world. This is so deeply engrained it never comes up for discussion despite a sequence of failed wars asserting that hegemony. The wayx they see it, the cost of honoring the SS debt to Americans is weakening that hegemony. Something’s got to give: guess who?
Have you heard of sequester?
Unless something is done before then (and there probably will be), about $50B is going to be cut from the defense budget in 2013. This report projects that doing just that much would result in the loss of a million US jobs.
The Economic Impact of the Budget Control Act of 2011
Cutting military spending has costs too.
I agree that chained CPI is the direction they will take. It’s the easiest way to cut, and for these clowns: the easier, the better. It’s also more politically palatable, in that most people know that raising the retirement age really screws the worker with a physically demanding job.
You need to look at page 6 of your link. In 2037 (now projected to be 2033) the trust fund expires and benefits are cut to 76%. People are complaining about Chained CPI which amounts to 0.3%. Wait till they find out they’re getting a 25% cut.
Nope. We are lifting the cap to adjust to close the gap in the projected deficit. Paying more taxes to fund Social Security is actually something that people agree on. Reducing benefits, now or in the future is not popular.
http://pewresearch.org/pubs/2051/medicare-medicaid-social-security-republicans-entitlements-budget-deficit
I’m beginning to think that Obama’s lack of fire and enthusiasm for being re-elected is because he will have accompblished his ‘historic mission’ of gutting social security.
Just a minor point to ponder. I assume everyone knows that the president who ever he is cannot cut SS and Medicare. It is an act of congress. The only he can do is sign the legislation. I would watch who gets defeated in Congress and follow the money to see if they are offered a position after their term. Those who are defeated will be the ones to vote for cutting SS etc. Just my 2 cents.
“Cutting military spending has costs too.”
I understand that, too. But transferring productive capacity to non-defense needs is a possible choice for this society, though it requires some lead time, retooling, etc., to achieve. The question becomes why is what is possible not part of this discussion, which has more to do with the current nature of our society than with actual possibilities. I don’t buy the argument that military costs are just a marginal and necessary allocation of resources in a rich society; we pay the price in tradeoffs simply by proscribing the parameters of the discussion.
Ok.
Too many people squeal “No Cuts” but don’t want higher taxes to pay for it. If you’re fine with that it’s reasonable.
I found this interesting:
The infrastructure is literally falling apart, but we still need a military that outspends the rest of the world put together? Soon there will be nothing left worth defending but the assets of the military itself. I have heard other people say they believe that corporate, private America is waiting for the government to go broke so what's left can be bought at fire sale prices; imagine a privately run Grand Canyon or Yosemite.
You heard other people say they believed that?
According to NPR we’re spending about as much on infrastructure as we did 50 years ago (as a percent of government spending) and about half as much on defense.
http://www.npr.org/blogs/money/2012/05/14/152671813/50-years-of-government-spending-in-1-graph
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So the pie has gotten bigger. And this is a reason for not examining the assumptions behinds a bloated defense budget versus taking a microscope to safety net programs why? Does a growing, aging population, a radically skewed distribution of wealth and an increasingly predatory financial sector play into appropriate reasoning anywhere? Should “trust us” be sufficient grounds for deflecting consideration of the many, often secret, aspects of the defense economy?
. . . oh yeah, and the end of the Cold War and the collapse of the Soviet Union, the only defacto military threat justifying the gigantic military arsenal. How convenient that “terror!” can now be substituted for “Communist threat” to keep from redirecting apparently scare resources (since we can’t afford medicare, medicaid, SS) toward domestic needs.
The pie has gotten bigger but it’s sliced into the same number of pieces, and defense is getting a smaller and smaller percent of the total (I’ll admit they’re still getting a lot of pie).
If we’re talking about SS and not “other safety net programs”, defense has nothing to do with it. Defense is funded from the General Fund and SS is funded from payroll taxes. As I indicated in #11, if you cut $45B in defense spending next year the only impact it would have on SS is that a million workers would be out of jobs and not paying any payroll taxes. Cutting military spending cuts SS income.
Actually many do believe we spend too much on defense.
http://www.stimson.org/spotlight/what-kind-of-defense-budget-would-the-american-public-make/
Congress, as usual, just isn’t listening.
I haven’t found a single rational human being (even among the conservative set) that think we should be spending more money than the 10 nations underneath us combined including India, China, and Russia.