President Barack Obama claims he will be cutting Social Security, but he is actually defending a proposal to adjust the formula for calculating the yearly increase Social Security recipients receive based on the rate of inflation. The formula ensures benefit checks coincide with increasing market prices. It only seems like a cut because everyone’s Social Security checks will be increased by smaller — some say more market-reflective — amounts.
The fundamental change would be to the Consumer Price Index, which is used to determine the magnitude of inflation. Obama proposes to shift to the so-called chained-CPI, which would lower the cost adjustment by about 0.3 percent. Although it appears negligible, Social Security income cuts would not increase by as much every year.
Reasonably, there has been fierce outcry about the proposed shift. Many Republicans claim it is evident that the Obama Administration isn’t willing to negotiate across the aisle while Democrats are wringing their hands over the potential cuts to the nation’s largest and most successful social program.
Despite the political parity that follows the topic, Social Security needs reform. The program works at the moment — people pay in, get the retirement they deserve and the disabled get relief, too.
However, longer life expectancy of retirees along with the disjoint in the population of those paying in and those reaping the benefits are going to make Social Security financially unsound in the years to come.
Despite the system’s flaws, we cannot simply abandon Social Security. The nation has rightly assumed the responsibility of protecting the elderly and disabled from poverty since the Great Depression. Leaving them to fend for themselves is not an option.
The option of starting from scratch with a new private sector plan is not plausible, either. The costs of dropping Social Security for an alternative would greatly outweigh the benefits.
Money would be wasted attempting to wean citizens off the old, government-sponsored system while starting the new one. This would also result in taxpayers investing in a program from which they would never receive benefits. Considering the volatility of the stock market and the 2008 crash, can anyone honestly say they’d want their retirement further linked to stock prices and market performance?
So, for the time being, we are invested in a flawed program doomed to be a financial disaster without action, yet any attempts at reform are met with political stalemate.
Something has to give and inflation adjustment is as good a place as any.
The adjustment might not be the best move. Neither is it a silver bullet.
Our nation should strive to provide retirees with all the compensation they could possibly need. Cutting their benefits to reduce the deficit is something we might not be willing to do.
Perhaps indexing Social Security payments to wages for earners making more than $106,000 annually and ensuring everyone pay a fair proportion of his income to the program would put Social Security on sound fiscal footing. Currently, $106,000 is the cap on payroll-taxable income.
Whatever the solution, Social Security in its current form is unsustainable. If the government doesn’t fix the system now, the problems will worsen. Reform now is better than collapse later.
By all means, politicians should be seeking other proposals, as this one is far from perfect. But they seem to lack the political guts. So for now, Congress will have to swallow its political pride, accept the inflation adjustment and deal with the fallout.