MY VIEW: Marc Goldwein July 2013
Should Social Security cost-of-living adjustments (COLAs) be trimmed? In a recently released CQ Researcher Report focusing on government spending, CRFB Senior Policy Director Marc Goldwein answers yes, if that means that COLAs better reflect inflation.
In his op-ed, Goldwein explains that the chained CPI is supported by economists across the political spectrum since it is a more accurate measure of inflation.
The so-called chained Consumer Price Index (CPI), a far more accurate inflation index than the one used now, would better reflect retirees’ actual spending patterns and the cost increases they encounter. Economists from the left, right and center broadly agree on that, and their view is affirmed by the nonpartisan Congressional Budget Office (CBO) and the Bureau of Labor Statistics. Adopting this improved measure would also generate more tax revenue, slow government spending growth and strengthen the Social Security system.
Goldwein continues by addressing some of the potential concerns with the reform.
So how can anyone oppose this change? Some special-interest groups do so for their own financial benefit, while others argue that seniors face faster price growth or the most vulnerable would be hurt by this change. Yet alternative measures that purport to show seniors spending more are highly flawed — including in the ways they measure housing and health care — to the point that the CBO has concluded, “It is unclear...whether the cost of living actually grows at a faster rate for the elderly than for younger people.”
Even if a better measure were produced for measuring cost increases affecting only retirees, adopting it would raise serious fairness concerns. Should the one-third of Social Security beneficiaries who are not retirees receive smaller cost-of-living adjustments so seniors can receive larger ones? Should New Yorkers, with their high cost of living, receive a higher percentage than Detroiters? Should each government program get its own index or only those backed by powerful interest groups?"
Social Security will need to be reformed if the program is to survive and switching to the chained CPI is one of the easiest choices lawmakers can make. This should be the first step in reform to ensure the program can remain solvent for future generations. Goldwein concludes:
Ultimately, the best thing we can do for the most vulnerable in society — at least within Social Security — is to make the program sustainable and solvent and avoid the 23 percent across-the-board benefit cut currently scheduled for when the program’s funds dry up. If we can’t even measure inflation correctly, how can we hope to make the hard choices necessary to keep Social Security funded for future generations?
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"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the committee.