Debate Club

Obama Gives the GOP What It Hasn't Asked For

By + More

The President's budget calls for reducing future Social Security payments by using a formula for adjusting for inflation that's stingier than the current one. It's called the "chained" consumer price index.

It's a bad idea that will unnecessarily hurt the nation's seniors.

The White House reasons that when the price of certain goods goes up, consumers typically switch to lower-cost substitutes. If the price of steak rises, they switch to hamburger. That means Social Security payments can be reduced by over $100 billion in the next ten years if seniors simply choose less expensive items.

[See a collection of political cartoons on the budget and deficit.]

But the elderly spend a much larger share of their incomes on healthcare than the rest of us. And when prices go up on some aspect of healthcare, seniors can't readily switch to cheaper substitutes. If a doctor orders a particular test or procedure, they're not going to argue.

In addition, the costs of healthcare have been rising faster than inflation. So it's likely that Social Security's current adjustment for inflation already understates the true impact of inflation on seniors. There's no reason to compound the damage by reducing the inflation adjustment further.

Social Security benefits are already meager for most recipients. The median income of Americans over 65 is under $20,000 a year, and most depend on Social Security for more than half of it. The average Social Security benefit is less than $15,000 a year.

Besides, Social Security hasn't contributed to the federal budget deficit, and it's not in serious trouble. The Social Security trust fund is flush for at least two decades.

[Check out our editorial cartoons on President Obama.]

If we want to ensure its solvency beyond that, we don't need to hurt current or future beneficiaries. A better fix would be to raise the cap on income subject to Social Security taxes, which is now $113,700. Or fully tax the payout for wealthy beneficiaries, who are now taxed on only 85 percent of their benefits.

A chained CPI for Social Security doesn't even make sense as a negotiating strategy. The Republicans haven't asked for it. Not even Paul Ryan's draconian budget includes it.

Democrats invented Social Security and have been protecting it for almost 80 years. The president shouldn't be leading the charge against it.

Robert Reich

About Robert Reich Professor of Public Policy at the University of California-Berkeley

Tags
federal budget
Obama, Barack
deficit and national debt
politics

Other Arguments

#1
22 Pts
Obama Accepts the Agenda of Misguided Washington Elites

Yes – Obama Accepts the Agenda of Misguided Washington Elites

Dean Baker Codirector of the Center for Economic and Policy Research

#2
6 Pts
Obama's Budget is Bad Policy and Bad Politics

Yes – Obama's Budget is Bad Policy and Bad Politics

Andrew Fieldhouse Federal Budget Policy Analyst at the Economic Policy Institute

#4
-2 Pts
More Smoke and Mirrors From Obama's Latest Budget

No – More Smoke and Mirrors From Obama's Latest Budget

Douglas Holtz-Eakin President of the American Action Forum

#5
0 Pts
The President's Budget Is No Move Toward the Center

No – The President's Budget Is No Move Toward the Center

James Capretta Fellow at the Ethics and Public Policy Center

You Might Also Like


See More