IT’S OFFICIAL: President Obama has proposed cutting Social Security by replacing the program’s current inflation adjustment with the stingier “chained” Consumer Price Index. As I’ve discussed before, this risks undoing all the progress made against senior poverty since the passage of Medicare and Medicaid in 1965. 25 percent of seniors were poor according to official poverty line in 1968, compared to just 9.4 percent in 2006. Note, however, that the Supplemental Poverty Measure, which includes things like out of pocket health care expenses which hit seniors disproportionately, already shows a 16.1 percent rate by 2009. And our senior poverty rate, measured by the international standard of 50 percent of median income, is already 25 percent, much higher than most developed countries, more than three times Sweden’s rate and over four times as high as Canada.
Why is Obama doing this? We just rejected the candidate who wanted to cut Social Security and Medicare. Perhaps, as Paul Krugman suggests, he is chasing the fantasy of “being the adult in the room,” but this is a losing proposition. As Brian Beutler points out:
“Just like that, Chained CPI morphs from a thing President Obama is willing to offer Republicans into a thing Republicans dismiss as a ‘shocking attack on seniors.’”
We’ve seen this game before. The Heritage Foundation’s health care plan became “death panels” when President Obama endorsed it. And, as Beutler’s title makes clear, we have plenty of examples of the President negotiating with himself to bad effect, most notably in the 2011 debt ceiling battle.
If this cut really happens, Social Security benefits will steadily fall in true inflation-adjusted terms due to the magic of compounding. Moreover, with 49 percent of the workforce having no retirement plan at work and another 31 percent with only a grossly inadequate 401(k), the cuts will worsen the coming retirement crisis. The only question will then be: how high will senior poverty have to go before we do something about it?
Kenneth Thomas grew up in a middle-class family, the first to go to college full-time and the first to earn a Ph.D. The economic policies of the last 35 years have reduced the middle class’s security, and his blog, Middle Class Political Economist, is a small contribution to reversing that. middleclasspoliticaleconomist.blogspot.com