Dec. 12, 2012
There’s one deficit-reduction idea in Washington that sounds like a no-brainer. It’s a single tweak that could raise about $72 billion in tax revenue and cut spending by about $145 billion through 2021, according to the Congressional Budget Office’s 2011 calculations. It could be enacted quickly, and would ramp up so slowly that it could be 10 years before anyone notices they’ve been hit by both a tax increase and a benefit cut.
But in Washington, no solution is ever that simple—particularly when it involves Social Security. Tying parts of the tax code and certain federal benefit programs to a new consumption metric, called the “chained CPI,” is an idea that almost everyone supports in theory but hardly anyone is willing to risk in practice...
Social Security’s annual cost-of-living increases have a history of inflaming partisan passions. In 1985, Senate Republicans passed a bill that would have capped the cost-of-living increase in Social Security. Democrats used the vote to brand GOP senators as a threat to the program. “That’s why we lost control of the Senate in 1986,” said Steve Bell, senior director of economic policy at the Bipartisan Policy Center.
During current deficit-reduction negotiations, the Obama White House and Senate Democrats have been emphatic that Social Security must remain off the table. “Social Security is not currently a driver of the deficit. That's an economic fact,” White House press secretary Jay Carney said last month. AARP and other advocacy groups have been making the rounds on Capitol Hill, reminding lawmakers of their campaign promises not to touch entitlements for current retirees.
“This, to me, is symbolic of how attached people are to the status quo,” Bell said. Social Security checks would still go up every year if the chained CPI was used to calculate them—just not by as much. The fact that lawmakers can’t even find a way to address the growth rate of benefit payments is symptomatic of a larger problem, he said.
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Economic Policy Project