JustCare

Tag: Chained CPI

  • President Trump calls to reduce payroll contributions, threatening Social Security

    President Trump calls to reduce payroll contributions, threatening Social Security

    Last week, President Trump called for a reduction in payroll contributions–lower employee and employer Medicare and Social Security payments. Of course, this would mean less money in the Medicare and Social Security Trust Funds. It would deplete their reserves and their ability to pay out people’s benefits at the level they do today.

    Nancy Altman, President of Social Security Works, commented that President Trump’s insistence on reducing payroll contributions is not an appropriate response to the coronavirus pandemic. It’s inefficient and does not help anyone who has been laid off from work, the people who need money most.

    In fact, President Trump now says he supports reducing payroll contributions permanently. In his words, “The payroll tax cut would be a great thing for this country.” He wants a way to justify cutting Social Security benefits.

    Trump’s proposal jeopardizes Social Security. Social Security is self-financing, not adding any money to the deficit. It depends on payroll contributions to support itself. Workers pay in to protect themselves against lost wages after they retire, or leave their jobs because of disability, or lose a spouse.

    In the words of President Franklin D. Roosevelt, “We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.”

    Over several decades, politicians have tried unsuccessfully to privatize Social Security. They’ve tried cutting benefits through a chained CPI and means testing. Today, the Trump administration is trying to deprive it of needed funds, “starve the beast.”

    Right now, the federal government should be working as hard as possible to get people money, not finding ways to deprive them of their long-term financial security.

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  • GOP tax bill has hidden middle class tax hike

    GOP tax bill has hidden middle class tax hike

    Michael Hiltzik reports for the LA Times on a GOP middle class tax hike hidden in the House and Senate tax bills. Beyond the you may have read on Just Care and other media outlets about how the bill hurts the middle class and working people, the GOP tax bills include a way to calculate inflation that relies on what is called the “chained consumer price index” (CPI). Any measure of inflation is based on a basket of goods and makes assumptions about people’s consumption patterns; a switch to the chained CPI is projected to lower the inflation adjustment from one year to the next.

    Over the last many years, the chained CPI has been in the news, largely as a proposed method for setting Social Security benefit increases. And, fortunately, it has not taken hold. It would reduce people’s Social Security benefits. The chained CPI does not accurately take into account cost-of-living adjustments for older people and people with disabilities receiving Social Security benefits. In fact, the best measure would be the CPI-E, which relies on the basket of goods older people typically use.

    Now, Congressional Republicans intend to make inflation adjustments for tax rates based on the chained CPI and not the standard CPI. Typically, the chained CPI will find a 0.3 percent lower inflation rate than the standard CPI. And, over time, that represents real money out of the pockets of the middle class, three percent less in ten years and more than six percent less in 20 years.

    In practice, if people see wage increases that are in sync with the standard CPI–effectively no income increase–they might find that the chained CPI treats the increase in their wages as an income increase and puts them in a higher tax bracket sooner. Similarly, use of the chained CPI means that increases in the standard deduction and earned income tax credit would be lower than if the standard CPI were used. This would be true for personal exemptions and the alternative minimum tax as well, but as of now the tax bill is set to repeal them.

    The Tax Policy Center reports that the switch to the chained CPI would take another $128.2 billion out of middle income earners’ pockets through higher tax rates over the next ten years and another almost $500 billon in the following ten years.

    The tax bill does not address CPI calculations for Social Security or government assistance programs. If the GOP next votes to switch out the standard CPI for the chained CPI for these programs, it would reduce Social Security benefits and cut many people out of eligibility for safety net programs, which are linked to the federal poverty level.

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  • Five ways Congress could weaken Social Security

    Five ways Congress could weaken Social Security

    Of all the federal government programs in the U.S., Social Security is perhaps the most treasured. Democratic and Republican voters alike value Social Security deeply. But, Republican leaders in the House and the Senate want to end Social Security as we know it. What keeps me up at night? If Trump becomes President, here are five ways Congress could weaken Social Security.

    1. Republicans in Congress want to privatize Social Security: Privatizing Social Security means investing Social Security monies in the stock market. Stock market dips, drops or crashes would mean cuts in people’s benefits. The amount of their monthly Social Security benefits would no longer be guaranteed each year.
    2. Republicans in Congress want people to get smaller Social Security checks, not guarantee them what they currently get or increase their checks: They tend to claim that the way to “save” Social Security is to reduce its benefits. They do not see lifting the cap on Social Security contributions or otherwise raising additional revenue for Social Security as an option. They do not want the wealthiest Americans to contribute more to Social Security.
    3. Republicans in Congress want to make people wait longer to receive their full Social Security retirement benefits: Today, the full Social Security retirement age is 66 for people born between 1943 and 1954, up from age 65. And, it is going up further to age 67. Raising Social Security’s retirement age means fewer benefits for everyone in retirement. And, it does particular harm to people with lower incomes, people who likely had no choice but to retire early because of work-related health conditions. It is unfair and inequitable. People who claim benefits at age 62 receive a 25 percent cut in their monthly check and, because they are more prone to serious health conditions, they tend to have shorter life expectancies than others.
    4. Republicans in Congress want to limit Social Security benefit inflation adjustments.They support a “chained CPI,” which effectively would keep benefits from increasing in tandem with inflation because of the way the Social Security cost-of-living adjustment is calculated. Already, Social Security benefits do not increase in tandem with the increases in total expenses for older adults because they do not take account of the larger amount older adults spend on health care relative to younger adults; health care costs are increasing much more quickly than other household expenses. For this reason, it’s likely that Social Security checks will not increase in 2017.
    5. Republicans in Congress want to “means test” Social Security benefits: They want to take away from wealthier Americans their earned Social Security benefits, arguing that Social Security should be for people who lack adequate means or “means-tested.” But Social Security is not a welfare program, it’s insurance. As with any insurance, people who pay in receive benefits when triggered, regardless of need. With Social Security, they receive benefits upon disability, death, or retirement. Means-testing benefits also will increase Social Security’s administrative costs.  Social Security is now the most efficient insurance around, with administrative costs of less than one percent. More than .99 cents of every Social Security dollar is paid in benefits. Means-testing benefits makes no sense.

    The U.S. is facing a retirement security crisis. Americans do not want to see benefits cut. They believe that they are too modest. In response, the 2016 Democratic Party Platform, in sharp contrast to Republican policymakers, focuses on expanding Social Security benefits, while requiring the wealthiest to pay their fair share. Sign this petition if you support expanding Social Security benefits.

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  • Chained CPI reduces Social Security benefits and income

    Chained CPI reduces Social Security benefits and income

    Fact: A chained CPI (“consumer price index”) is a way of calculating cost-of-living adjustments to Social Security benefits that does not keep up with inflation for older adults.  It would therefore effectively cut Social Security benefits for everyone receiving them today and in the future, including retired and disabled veterans.

    Fact: People receiving Social Security benefits at 65 would lose $658 in benefits at age 75, $1,147 at age 85, and $1622 at 95, a 9.2 percent cut.To learn more, go to Social Security Works.