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Archive for Friday, July 8, 2011

Inflation change could cut Social Security

July 8, 2011

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— Once considered untouchable, Social Security is now in play in the debt-ceiling negotiations. And that could mean higher income taxes for many U.S. families in addition to shaved benefits for tens of millions of retirees as they age.

Social Security became part of the private discussions between President Barack Obama and Republican House Speaker John Boehner on coming up with “something big” to reduce deficits by $2 trillion to $4 trillion over the next decade. One option includes a new inflation measure for Social Security that could produce savings close to $200 billion through a combination of reduced benefits and higher taxes, White House officials said Thursday.

Low- and middle-income families could be hit.

The proposal would represent a reversal for Obama. In contrast to his pledge to target tax increases at the wealthy, high-income families would largely be spared from tax increases that would result from changing the way inflation is measured. And until now, the administration has been adamant that Social Security does not add to the deficit and should not be a part of deficit reduction talks.

Adopting a new inflation measure would allow policymakers to gradually cut benefits and increase taxes in a way that might not be readily apparent to most Americans. The inflation measure under consideration is called the Chained Consumer Price Index. On average, the measure shows a lower level of inflation than the more widely used CPI.

A Chained CPI assumes that as prices increase, consumers buy lower cost alternatives, reducing the amount of inflation they experience. For example, if the price of beef increases while the price of pork does not, people will buy more pork. Or, as opponents mockingly argue, if the price of home heating oil goes up, people will turn down their heat and wear more sweaters.

Comments

Ron Holzwarth 3 years, 5 months ago

"changing the way inflation is measured."

Since the abolition of the gold standard we have now become so accustomed to the inflation of the U.S. dollar, which is now only a fiat currency, that inflation is now considered to be just a fact of life.

A U.S. $20 dollar gold coin minted as recently as 1932 is now worth about $1,500 in today's dollars. That's something to think about. With a trend like that, it is only a matter of time until the U.S. dollar has almost no value at all, as have countless fiat currencies before it.

"By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some." - John Maynard Keynes

Ron Holzwarth 3 years, 5 months ago

But on the bright side, once the U.S. dollar has almost no value the national debt won't be a problem, since it's measured in dollars!

Ron Holzwarth 3 years, 5 months ago

It would need to be in very good condition to be worth that, and if you consider its intrinsic value, that is its melt value, the situation would be very different. A very well worn and dented 1932 $20 gold coin is still worth $1,500.

And, a 1932 $20 gold coin in very good condition would be worth well over $1,500.

Ron Holzwarth 3 years, 5 months ago

I doubt that the price of gold will ever drop to $20 per troy ounce. It simply has to many industrial uses as well as its use in jewelry for that to occur.

And you know how women love jewelry,,,

And, the world supply of gold is actually quite limited. If all the gold ever mined since antiquity were to be molded into a cube, it would only be about 70 feet on each edge.

There's another issue also, and that's that at anywhere near the current price of gold, the amount of U.S. dollars in circulation could buy the entire world supply many times over!

Ron Holzwarth 3 years, 5 months ago

But probably not a 2000% increase in value, though.

usnsnp 3 years, 5 months ago

One question, is Congress going to be put under the same system for their cost of living raises, I doubt it. I keep seeing the phrase " shared sacrifice", but the sacrifice seems to be directed to only one portion of the population.

Ron Holzwarth 3 years, 5 months ago

The answer to your question? Of course not.

"Let them eat cake." "Qu'ils mangent de la brioche." - Commonly attributed to Queen Marie Antoinette, but there is no record of these words ever having been uttered by her.

or,

"An ancient Chinese emperor who, being told that his subjects didn't have enough rice to eat, replied, 'Why don't they eat meat?'"

Ron Holzwarth 3 years, 5 months ago

"underestimates inflation"

Anyone that buys food at the grocery store or buys gasoline certainly knows that.

Ron Holzwarth 3 years, 5 months ago

Price increase = Devaluation of the Dollar = Inflation.

Katara 3 years, 5 months ago

No, thank you. I don't think I want to see a bunch of naked baby boomers.

just_another_bozo_on_this_bus 3 years, 5 months ago

The rich say we're broke, so the poor and middle class must pay. One way to finance tax cuts to the wealthy (and the wars they find so profitable) is to raid the social security trust fund. And that's just what they've been doing.

beatrice 3 years, 5 months ago

Since when is paying for wars looked upon as taking care of people?

Ron Holzwarth 3 years, 5 months ago

The wars are not being paid for, they are being borrowed for.

jafs 3 years, 5 months ago

Lack of civility and ad hominem attacks, combined with obfuscation and diversion, are common practices for politicians, regardless of party affiliation.

You should be able to recognize that.

jafs 3 years, 5 months ago

Ok - I guess I'll have to lower my expectations that you are interested in seeing things clearly and without bias.

I have seen at least as much lack of civility, etc. from both sides of the aisle, both in Washington and outside of it.

Comparing groups like the Weathermen to the T-party is a strange comparison - you'd be better off comparing them to groups like the KKK, or the American Nazi party, etc.

It is unfortunate that you choose to believe there is some sort of war going on, and that liberals are the enemy. Despite the obvious fact that you are much more conservative than I am, I have never perceived you to be an enemy.

The economy has suffered under both parties, neither of which has shown itself to be financially sound for the most part (pace Clinton).

Traditional beliefs (which you have yet to identify) are not shared by all, and never have been. And, of course, as societies change, beliefs change as well. Black people being enslaved, women not having the right to vote, etc. are part of our "tradition", and beliefs at the time were that those things were acceptable.

I don't know what you mean by phrases like the "fabric of our nation" - sounds a bit lacking in content.

jafs 3 years, 5 months ago

You managed to completely miss my point.

I was suggesting that you compare violent '60's radicals to groups like the KKK - a violent conservative group.

Apples to apples.

But, given your newly "radicalized" perspective, I suspect it will be hard to communicate effectively with you.

beatrice 3 years, 5 months ago

BAA: Another in a long string of attacks from you against the "Party of Atheists." It is hard to take your cry for civility seriously when you come at it by attacking others and even question the religious beliefs of those who don't agree with you. Just fyi.

By the way, what exactly do atheists have to do with cuts to Social Security in the first place? Are you suggesting that God wants the tax cuts to the wealthy to remain in place and that the elderly should just suck it up and pay more? Honestly, what does this God of yours have to do with the national dept, Social Security, and tax cuts for the wealthy?

MyName 3 years, 5 months ago

No he's saying your "point" is useless sophistry as the last time unemployment was that high was the Great Depression, which was when FDR was elected and then reelected, and then reelected again, and then unemployment was finally manageable and he was reelected again...

beatrice 3 years, 5 months ago

Shovel, no President ever took office just months after the world economy came crashing down, either. I am curious, how quickly do you believe McCain and Palin would have turned around the economy? Think you can answer an honest question honestly without it just being a partisan attack against the other "side"?

Ron Holzwarth 3 years, 5 months ago

The name Franklin Delano Roosevelt just popped into my mind for some reason.

Well, maybe it was a bit more than months, he took office March 4, 1933.

Richard Heckler 3 years, 5 months ago

By Doug Orr

The opponents of Social Security will stop at nothing in their long crusade to destroy the most efficient retirement system in the world. Opponents have taken two tracks to attack Social Security.

The first is to claim the system as it is will fail, and the second is to claim that privatization is a better way to provide for retirement security. The first claim was the favorite from 1935 to about 2001.Then the privatization claim became the vogue. Now the first is back on the table.

With corporations routinely defaulting on their pension promises, more and more workers must rely on their individual wealth to make up the difference. The stock market collapse at the turn of the millennium wiped out much of the financial wealth of middle class Americans, and the collapse of the housing bubble has wiped out much of their remaining wealth.

Making any cuts to Social Security now, either by raising the retirement age or cutting benefits, would have a huge impact on their remaining retirement income and are not necessary to “save the system.” In fact, to make the most of the modifications currently being proposed by Obama's commission would be the height of folly.

More info and less rhetoric: http://www.dollarsandsense.org/archives/2010/0111orr.html

gphawk89 3 years, 5 months ago

Fine... whatever... I've got 20 years to go before retiring, started contributing to SS about 20 years ago, and I have NEVER counted on getting a dime from SS at retirement. That writing has been on the wall for a long time. I deal with this by considering the SS deductions on my paycheck a way of funding my parent's retirements, nothing more.

jhawkinsf 3 years, 5 months ago

The first recipients of social security did not pay into the system. They could't since the system didn't exist. The system was designed for current workers to fund the retirement of the generation before them. Your feeling that you are funding your parents' retirement is exactly what was supposed to happen. Your children are supposed to fund your retirement.

Now the problem is that when social security began, there were 13 workers for every retiree. That number is now less than 3 and quickly heading towards two. In a nutshell, that's not sustainable. We can raise the age of retirement, lower benefits, raise employee contributions, or we can cut spending elsewhere and put it into social security. That has yet to be determined. But we need to get the notion out of our heads that the money we get from social security is the money we put in. It's always been this generation funding the retirement of the last generation.

Ron Holzwarth 3 years, 5 months ago

jhawkinsf, I think there's something that you don't understand about the SS system.

I'm sure Bernie Madoff will be happy to explain your misunderstanding to you.

jhawkinsf 3 years, 5 months ago

We frequently pass on costs to our children. Just look at our looming debt. Whether or not you think that is good or not is a discussion for another day. I'm just saying that we need to rid ourselves of the notion that social security is like a forced savings account and that in the end, I will get out what I put in. It was never set up that way and it is not now set up that way.

Ron Holzwarth 3 years, 5 months ago

That's not the way Bernie Madoff explained it.

jhawkinsf 3 years, 5 months ago

Bernie didn't have the full faith of the government of the U.S. to back up his scheme. Ultimately, the U.S. will have to raise the retirement age, lower benefits, increase contributions, raise taxes, etc. in some combination to make the system solvent. If they don't, then it will collapse, just like Bernie's scheme. But that simply won't happen because no matter how little we think of our leaders, even the most foolish amongst them knows that simply allowing the social security system to collapse is not an option. It's no more probable that if a liberal were to get elected and say something like "let's dismantle the military industrial complex". That may be fine, but it ain't gonna happen.

Ron Holzwarth 3 years, 5 months ago

Yes, that's all true.

But it seems to me that the whole monetary system of our present government is not all that different than what Bernie Madoff was presenting to his "investors", in the grand tradition blazed by Charles Ponzi.

jhawkinsf 3 years, 5 months ago

Ponzi schemes ultimately fail because they run out of steam. They can't get enough new investors to keep paying off the old investors. Of course, the traditional ponzi scheme does not have the ability to compel new investors nor can they unilaterally change the terms of the investment. The government can compel new investors. In fact, they can compel everyone to invest. And they can change the terms of the agreement by raising the retirement age, lower payments, etc. In reality, the only way social security resembles a ponzi scheme is that it has one generation supporting the previous generation. But the government has been transparent about that from the beginning. I think we the people have forgotten that. We just need a gentle reminder.

Ron Holzwarth 3 years, 5 months ago

Well, I don't mean only the SS system. The US gov't is borrowing so much money just to keep going that it does not appear to be sustainable.

I've been told, but I don't know for sure, that the US gov't is now borrowing 40 cents for each dollar it spends.

I know I couldn't do that for very long! It's very much like how I got behind on my credit card, and started to think of my interest payment as simply servicing the debt. But then I was bailed out by my Dad.

Thanks, Dad!

But the US gov't doesn't have a Dad to bail it out.

joshua1532 3 years, 5 months ago

To use an overused analogy...why participate in a "game" when the rules continually change (the way inflation is measured, etc.)? So, we "save" $200 million by changing the way inflation is measured? That's absurd. It's about the same as if we said we are no long an obese nation because we are measuring weight in kg now instead of lbs. I'm ready to opt out whenever it's an option.

Ron Holzwarth 3 years, 5 months ago

For years I've been talking about a way to immediately drop the outrageous price of gasoline by about one fourth.

Just start selling it by the liter!

joshua1532 3 years, 5 months ago

No more 1/2 gallon ice cream either...they are getting smaller. :)

beatrice 3 years, 5 months ago

The major problem I see with the argument for cuts to Social Security is that Social Security isn't what has driven up the debt.

If we want to make cuts, we need to seriously look at our military budget. Do we really need to spend more than the next 19 countries combined on our military, especially when all 19 other countries are now considered friendly nations? Want to save more than $200 billion a year -- then only spend as much as just the top eight other nations combined.

With such excessive spending going to the military, I find it hard to believe that the place we need to start making cuts is on our elderly.

gogoplata 3 years, 5 months ago

Right on. Our military empire will be the main cause of our fall. War is a racket. The military industrial complex is real and it is powerful. The Federal Reserve will continue to weaken the dollar and steal from the people until the people rise up and put an end to the Federal Reserve. Without the Fed this country could not sustain its empire or the welfare state. We should get rid of the Fed and make drastic cuts to the military budget.

BTW, there is a man you can vote for president who will get this done. It's not a woman and it's not Obama or Romney.

Flap Doodle 3 years, 5 months ago

The wagon of love breaks under the baggage of life: "...Dear MoveOn member, News just broke that President Obama is offering to cut Social Security as part of the debt deal they're working out in Washington right now. And reports say he's stopped pushing to eliminate the Bush tax cuts for millionaires in these negotiations. If both these things are true, it's an absolute outrage. When asked, 75% of MoveOn members said that if a deal like this were to go through, they'd be less likely to donate to or volunteer for President Obama's re-election campaign. . . . Here's the text to copy into your Facebook status when you share this graphic: "If Barack Obama cuts Social Security to pay for the Bush tax cuts for millionaires, I won't ever give his campaign another dime. Repost and reshare this image if you agree." . . ." http://spectator.org/blog/2011/07/08/moveonorg-threatens-boycott-of

beatrice 3 years, 5 months ago

I'm sorry, but didn't you intend to post a criticism of merrill's use of copy and paste here?

Flap Doodle 3 years, 5 months ago

Wait until I've posted that same text 100 times & then you can hang a merrill tag on me. Until then, not so much.

George Lippencott 3 years, 5 months ago

Told you it was coming (last fall). Really not rocket science. I wonder when we substitute dog food for hamburger that will be considered a change not reflecting an inflatiuonary increse in the cost of hamburger,.

just_another_bozo_on_this_bus 3 years, 5 months ago

"Told you it was coming (last fall)."

What is "it?"

jhawkinsf 3 years, 5 months ago

It depends on what the meaning of "is" is.

jafs 3 years, 5 months ago

Cuts in Social Security benefits, I imagine.

Richard Heckler 3 years, 5 months ago

Social Security Insurance and Medicare Insurance need to be left alone. These insurance programs pump a ton of insurance dollars into our local economies. These are not "free entitlements" not by any means. This insurance is paid for no question about it.

Medicare Insurance dollars impact all of us believe me. Medicare Insurance dollars also pay for critical elements of the health care system apart from direct care.

Medicare Insurance dollars fund much of the expensive equipment hospitals use, for instance, along with all medical residencies.

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