Freeing up an enormous nest egg
The question of the consequences of cutbacks was explored by the AARP Public Policy Institute’s study of Social Security’s economic benefits. The study warns that the positive economic impacts of retiree spending (like those described by Fagan) would be jeopardized by a benefits-cutting policy. This approach “ignores the reality” of what failing to bolster Social Security’s finances would mean. If cuts projected to be required in 2033 in the absence of congressional action were to occur now, the study says, that could “cost the U.S. economy about 2.3 million jobs, $349 billion in economic output, about $194 billion in GDP, and about $93 billion in employee compensation.”
Joe Caldwell, director of Long-Term Services and Supports Policy for the National Council on Aging, acknowledged that the austerity-minded political environment has forced organizations like his to adopt defensive postures, limited to protecting existing benefits rather than proposing ways to expand them. Koenig, of AARP, agreed, citing the chained CPI proposal for Social Security as a prime example of the ways in which the discussion in Washington is fundamentally skewed.
“The reason we’re talking about the chained CPI is because the whole conversation is about budgets,” Koenig said. “If we were talking instead about retirement security… we would be having a completely different conversation.”
Promoting a different kind of fiscal cliff?
During last year’s fiscal cliff fiasco, President Obama floated the idea of a so-called chained Consumer Price Index, ostensibly as a means to measure more accurately how much the costs of retirees rise each year. The idea has come up repeatedly since then. The proposal would result in lowering the cost-of-living adjustments seniors receive each year. Social Security Works, a coalition of groups opposing cuts, argues that chained CPI, among other things, understates the role of medical costs in the budget of retirees and calculates that the average retiree would lose $14,000 between age 65 and 85.
The proposal, however, has been backed by several think tanks on the center and center-left, including Third Way, the Center for American Progress and the Bipartisan Policy Center. Some of these think tanks also support other ways of scaling down senior benefit programs, like expanding means-testing for Medicare, often on the premise that such measures would affect only wealthier seniors. Remapping Debate contacted these three think tanks (along with No Labels, a Michael Bloomberg–funded “non-partisan” group) to discuss the broader economic and social consequences of such plans. All either declined to comment or did not respond to requests.
The idea that benefit programs are the prime culprit in a reckless drive toward unsustainability is the bedrock of so-called bipartisanship. It is central to the philosophy of the Simpson-Bowles commission and its advocacy offshoot, Moment of Truth Project, which wrote in an August letter to the House Ways and Means Social Security subcommittee: “We strongly believe in the importance of bringing long-term entitlement spending under control.” The premise also has an adherent in President Obama. At a press conference shortly before the president introduced a budget proposal in April, for example, he said (citing Medicare specifically) that he was “prepared to take on the problem where it exists: on entitlements.”