Dean Baker on Social Security and Obama

Via Truthout Dean Baker points to continuing insistent of President Obama to keep Social Security ‘on the table’. Dean Baker has a take on some numbers surrounding the politics and stories politicans offer:

While most of the DC insiders probably don’t understand the chained CPI, everyone else should recognize that this technical fix amounts to a serious cut in benefits. It reduces benefits compared to the current schedule by 0.3 percent annually. This adds up through time. After someone has been getting benefits for 10 years, the cut in annual benefits is 3 percent. After 20 years, people would be seeing a benefit that is 6 percent lower, and after 30 years their benefit would be reduced by 9 percent. (AARP has a nice calculator which shows how much retirees can expect to lose from the chained CPI.)

We can debate whether the chained CPI benefit cut should be viewed as “large,” but there is no debate that chained CPI cut is a bigger hit to the typical retiree than the ending of the Bush tax cuts were to the typical high-end earner. Social Security provides more than half of the income for almost 70 percent of retirees. This means that the 3 percent cut in Social Security benefits amounts to a reduction in their income of more than 1.5 percent.

By contrast, if a wealthy couple has an income of $500,000 a year, as a result of President Obama’s tax hikes, they would be paying an addition three percentage points in taxes, or $3,000, on the income above $400,000. That comes to just 0.6 percent of their income.

If the proponents of using the chained CPI to cut Social Security want to claim that this cut is not a big deal, then they must also believe that the tax increases on the wealthy were not a big deal. That’s what the arithmetic says, and there is no way around it.

(h/t Nancy Ortiz)

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