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Groundswell Challenges President’s Social Security Cuts

April 12, 2013

Labor unions and progressive activists are speaking out and organizing in opposition to President Obama’s proposal to reduce Social Security benefits as part of his budget proposal announced on April 10. 

President Obama says the changes in how annual cost of living adjustments (COLA) are made for Social Security recipients will help Democrats reach a budget agreement with Republican members of Congress, as well as reduce the federal deficit.

But millions of Americans are signing petitions protesting the move as one that will hurt economically vulnerable seniors, the disabled, veterans and their families, and set back economic recovery by reducing the spending power of those groups.

International President Edwin D. Hill says:

The IBEW strenuously opposes any proposal to reduce benefits that are earned by workers who pay into the Social Security system over the course of their working careers. While most IBEW members are fortunate and have a pension, many other Americans do not. Cutting Social Security would have a negative impact on IBEW members, senior citizens, veterans, and the families of deceased individuals. This measure is absolutely the wrong way to address the budget deficit.

Currently, Social Security benefits are calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

The “chained CPI” is a lower-indexed calculation. It is based upon the assumption that consumers can substitute lower-cost items for others that have seen an increase in prices.  For example, if an apple is in the sampling and the price of apples rises, the apple would be replaced with a lower-cost fruit.  Using the lower index figure would result in a lower COLA payment to beneficiaries.

Progressive and labor-oriented economists counter that seniors devote a substantial portion of their income to costs associated with medical care, housing and utilities. These costs do not have lower-priced alternatives. Using chained CPI in place of CPI-W would result in lower yearly COLAs, resulting in reduced benefits over time.  A beneficiary receiving $20,000 a year in benefits would see their benefit reduced by $2,000 over 10 years.

A Bloomberg Businessweek article entitled “Why Chained CPI Rattles the Elderly (and Soon to Be)” reports:

[Chained CPI] is presented as a technical, politically neutral fix, but make no mistake: The Obama administration’s proposal to change the basis for Social Security raises to ‘chained CPI’ is all about saving money by slowing the growth rate of benefits.  Whether you think that’s a good thing or a bad thing depends on whether you believe workers have been paying too much to support their elders.

International President Hill urges all IBEW members to sign the electronic petition to the White House to stop chained CPI and any other reduction of Social Security benefits. 

Photo courtesy of National Committee to Preserve Social Security and Medicare