PoliGraph: Ellison Social Security claim inconclusive

Will there be a deal in Washington by the end of the year to avoid automatic spending cuts and tax increases? Call it a fiscal cliffhanger.

The details of a possible deal are changing by the hour, but there’s a chance a plan to slow the growth of spending on Social Security benefits will be part of the final package, a proposal President Barack Obama has put on the table.

Minnesota’s Fifth Congressional District Rep. Keith Ellison isn’t hot on the idea. As co-chair of the House Progressive Caucus, he says the proposal will mean big cuts to benefits.

“The current average earned benefit for a 65 year old on Social Security is $17,134,” Ellison said in a statement. “Using chained CPI will result in a $6,000 loss for retirees in the first fifteen years of retirement and adds up to a $16,000 loss over twenty-five years.”

Seniors will see smaller benefits under the proposed Social Security plan – the administration estimates its proposal would save about $122 billion – but it’s difficult to say exactly how much of a cut that would mean per beneficiary.

The Evidence

Currently, Social Security benefits fluctuate with the price of goods. When the cost of goods goes up, so does the benefit.

Obama has proposed switching to the chained-CPI, an inflation measure that assumes beneficiaries buy less or stop buying a product when its price goes up. For instance, when the price of beef increases, the chained CPI assumes people buy chicken, which is cheaper, instead.

That means benefits would continue to go up, but at a slower rate. As a beneficiary gets older, benefits would get smaller compared to current law.

Among other prominent fiscal experts, the chained CPI is favored by Erskine Bowles and Alan Simpson, co-chairs of Obama’s Deficit Commission, as well as some conservative groups.

Ellison is among those who say says using the chained CPI it will mean big cuts to Social Security benefits.

Most agree that beneficiaries will see smaller Social Security checks. But estimates vary partly because they include different assumptions about how much the chained CPI index would increase annually, partly because different groups look at different time frames, and partly because some estimates, including the one Ellison is relying on, look at the cumulative loss over time rather than annual losses.

Ellison’s numbers come from Social Security Works, a group that wants to increase benefits for the elderly and is supported by an array of labor and liberal groups, including MoveOn.org. It looks at the cumulative loss in benefits over different time periods to come up with that estimate.

AARP, which also opposes switching to the chained CPI, estimates that benefits would be 2.9 percent lower than current law after 10 years in the program, and 8.4 percent lower after being in the program for 30 years.

Meanwhile, Marc Goldwein, who is Senior Policy Director, Committee for a Responsible Federal Budget for the Committee for a Responsible Federal Budget, a group that supports the chained CPI and that Simpson and Bowles are both involved in predicts that, over 10 years, the average Social Security earner would see his or her benefits go up $4,000 under current law but only $3,400 under the chained CPI plan, which is about a $600 loss in year 10.

Goldwein also points out that many chained CPI proposals, including the Simpson-Bowles plan, include a benefit “bump” for those who have been in the program long enough, which helps offset some benefit losses.

The Verdict

There are a variety of estimates that use a variety of assumptions to predict how dramatically the chained CPI would affect Social Security benefits. Ellison’s comes from a group that opposes switching to the chained CPI and is backed by partisan organizations.

But that’s not to say that seniors won’t see smaller benefits under the new plan. The question is just how much smaller.

As a result, this claim is rated inconclusive.

SOURCES

Social Security Works, Social Security COLA Cut: A Benefit Cut Affecting Everyone, accessed Dec. 18, 2012

The Washington Post, Everything you need to know about the chained CPI in one post, by Dylan Matthews on December 11, 2012

The Social Security Administration, Monthly Statistical Snapshot, Nov. 2012

Politico, What is chained CPI?, by Ginger Gibson, Dec. 18, 2012

The Social Security Administration, letter to Rep. Xavier Becerra, June 2011

The Committee for a Responsible Federal Budget, Measuring Up: The Case for the Chained CPI, by Adam Rosenberg and Marc Goldwein

The Heritage Foundation, Social Security’s COLA needs to be more accurate, by David John, July 11, 2011

Email exchange, Jeremy Slevin, spokesman, Rep. Keith Ellison, Dec. 18, 2012

Interview, Marc Goldwein, Dec. 18, 2012

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  • Denny

    This is outrageous enough, but the pain to seniors will be far greater if we hit a period of inflation–which is almost a certainty in the next ten years. Obama is financing tax cuts for the wealthy by taking from senior citizens.