The AARP organization is asking for people to sign a petition addressed to President Obama and their representatives in Congress to not change the way the cost-of-living adjustments (COLAs) are made for Social Security. President Obama has said he would be willing to accept using what is called the “chained” consumer price index to calculate the COLAs in the future.
I’ve read a few descriptions of why the COLAs should be changed. One is that retired people don’t have some of the expenses involved in standard inflation calculation. For example, retired people typically aren’t looking for a new home, so an increase in the price of housing doesn’t need to be used to calculate their new benefit. Another reason is that people can shop around and buy a less expensive substitute. An AARP explanation of chained CPI gives the example that if beef prices go up people can buy more chicken.
AARP wants no part of anyone considering reducing the amount of Social Security benefits regardless of whether the new method of calculation is a more accurate measure of true inflation experienced by its members. They want their members to get as much in benefits as can be wrung out of the program. They say that the average retiree would lose $14,076 by the time they reach 90 if chained CPI is used to calculate COLAs. They don’t mention that the “average retiree” doesn’t live that long, so that number is inflated. They also don’t mention that the reduction in benefits would average about $500/year for that 90 year old person. That isn’t trivial, but that number probably wouldn’t create as strong an emotional response as $14,076.
AARP makes the argument that the proposed change in calculating COLAs “…is simply an attempt…to unjustly balance the federal budget by taking from the benefits we have paid for through decades of hard work.” They neglect to mention that COLAs weren’t included in FDR’s signature legislation. COLAs were added to Social Security in 1975, and that is one of the reasons the program will eventually not be able to pay the promised benefits. Of course a big reason is that the numbers of workers and their employers paying Social Security taxes is steadily shrinking while the number of people drawing benefits is increasing.
I won’t be signing a petition to protest changing how the COLAs are calculated. I believe the change is completely fair, and I understand and accept that my future benefits will be reduced. Eating chicken instead of steak doesn’t seem to be that much of a hardship. I want this to be the first step in putting Social Security on a better financial footing. Perhaps that would lead us to reforming the program so that benefits will be available to our children and grandchildren when they retire after years of paying into the program.
I understand there are people who have no income other than Social Security who would be hurt by the change, and I don’t want that. Some clever legislator needs to come up with a “means testing formula” that will prevent hurting people at or below the poverty level. I’m not against the needy people; I’m only against the greedy people.