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Social Security And The Fiscal Cliff

A controversial fiscal cliff: peg social security payments to a lower inflation gauge  — the “chained CPI.”  We’ll look at the impact.

 President Barack Obama, accompanied by House Speaker John Boehner of Ohio, speaks to reporters in the Roosevelt Room of the White House in Washington. President Barack Obama’s re-election has stiffened Democrats’ spine against cutting popular benefit programs like Medicare and Social Security. (AP)

President Barack Obama, accompanied by House Speaker John Boehner of Ohio, speaks to reporters in the Roosevelt Room of the White House in Washington. President Barack Obama’s re-election has stiffened Democrats’ spine against cutting popular benefit programs like Medicare and Social Security. (AP)

“Chained CPI” sounds like some kind of high-tech torture.  In fact, it’s a way of calculating inflation that may be on its way to cutting Social Security payments.  In the big arm-wrestle of negotiations over the fiscal cliff, “chained CPI” is in the mix.

President Obama wants higher taxes on the wealthy.  Republicans want to rein in entitlements.  Here’s a way to do it.  Whittle back Social Security payments.  Seniors don’t need beef.  They could eat chicken.  Or goat.  Or something cheaper.

This hour, On Point:  Social Security, the “chained CPI,” and how we’ll live beyond the fiscal cliff.

-Tom Ashbrook

Guests

Henry Aaron, senior fellow of economic studies at the Brookings Institution.

Robert Kuttner, co-founder and current co-editor of The American Prospect. Here’s his recent article on Social Security and the fiscal cliff.

Jason Fichtner, senior research fellow at the Mercatus Center at George Mason University.

From Tom’s Reading List

Los Angeles Times “Conservatives argue that Washington never cuts programs, it just increases spending on them more slowly than planned. But to recipients of federal benefits, that type of “cut” can seem just as painful. That’s why there is an intense battle looming over a proposal to reduce the cost-of-living adjustments applied to numerous federal programs, including Social Security. The change is billed as a more accurate way to calculate the effects of inflation, but it’s really just a way to make Washington’s financial picture marginally brighter.”

Washington Post “The fiscal cliff deal is finally taking shape, and from the looks of it, it’s likely to include the adoption of “chained CPI” as the government’s preferred measure of inflation. As I explained last week, that measure mainly matters for taxes — where the income cutoffs for various brackets are indexed for inflation — and Social Security, in which benefits are raised annually to keep pace with inflation. Adopting chained CPI would, in effect, cut Social Security benefits and raise taxes.”

Christian Science Monitor “Mr. Obama’s move is an overture to Republicans who support the idea, as the two sides try to broker a deal that reduces future federal deficits with a mix of tax hikes and spending cuts. So what is the “chained CPI,” the revised consumer price index that Obama says could replace the current system?”

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