As the days and hours tick down to a new kind of D-Day, a day when America won't be attacked by uniformed soldiers from a foreign nation but by Congressmen and Senators wearing business attire and earning a base salary of $174,000 per year, a largely unreported story will be the toll taken on every state whose Social Security recipients could be forced to face shrinking payments into the future, if chained CPI becomes part of any negotiated settlement or so-called Grand Bargain between the White House and House Republicans.
Grand Bargain and Chained CPI: Why it matters
As the waring sides rush pell-mell towards the historic day when America defaults on paying its debts, for the first time since the Declaration of Independence was signed 237 years ago, those who could suffer the most are heard from least.
Many Washington watchers who fear President Barack Obama and Congressional Democrats will resurrect the idea of a so-called "Grand Bargain" to appease GOP leaders to relent on forcing America into default on paying its bills, are further warning that doing so will hurt tens of millions who rely on their monthly Social Security payments and their respective state's economy.
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At a press conference with Republican leaders Tuesday, Ohio Congressman and Speaker of the U.S. House of Representatives John Boehner (R-West Chester) again pressed the president and Senate Democrats to come to the table and work with Republicans to find a path forward on government funding, the debt limit and protecting all Americans from ObamaCare, the name Republicans use instead of the Affordable Care Act, passed in March of 2010.
Speaker Boehner said Democrats’ refusal to negotiate thus far is putting our country on a dangerous path. "You know, Americans expect us to work out our differences. But, refusing to negotiate is an untenable position. And frankly, by refusing to negotiate, Harry Reid and the president our putting our country on a pretty dangerous path.
"The way to resolve this is to sit down and have a conversation to resolve our differences," the House Speaker said in prepared remarks.
Impact on Ohio
But if resolving their differences includes adding chained CPI to the mix of negotiated compromises also known as the "Grand Bargain," Ohio can expect to take an unneeded and wanted $30 billion hit to its already lackluster economy, which some estimate will take many more years of recovery to return to pre-Great Recession levels if it suffers no other dramatic impacts.
The so-called Chained Consumer Price Index (C-CPI-U) is a time series measure of price levels of consumer goods and services created by the Bureau of Labor Statistics as an alternative Consumer Price Index. The Chained CPI is not currently used but is often discussed as a possible reform to reduce the federal deficit, a major goal for Republicans but a secondary goal for Democrats.
In Ohio, there are 2,204,269 Social Security beneficiaries, including 1,379,195 retired workers, 345,170 disabled workers, 203,390 widow(er)s, 108,166 spouses and 168,348 children.
Social Security provides a lifeline to beneficiaries, their families, and the local businesses which serve them. While some in Washington claim America can’t afford programs like Social Security and Medicare, the truth is states like Ohio can’t afford to lose the economic benefits they provide to every community in the state, according to a report by The National Committee to Preserve Social Security & Medicare.
Chained CPI proponents include the Committee for a Responsible Federal Budget and the Heritage Foundation. The controversial measure has also been included in the recommendations of various bipartisan commissions designed to reduce the deficit, such as Simpson-Bowles, Domenici-Rivlin and the Gang of Six.
Opponents of chained CPI, including the AARP (American Association of Retired Persons), the American Federation of Government Employees, the AFL-CIO and Social Security Works, say it would inappropriately cut the growth in benefits under programs like Social Security and Supplemental Security Income. A central concern of these groups is that the current CPI used for the elderly understates the inflation seniors experience, primarily because the elderly purchase more medical care than younger people and medical care inflation has exceeded inflation in the rest of the economy.
Nationwide numbers from the Congressional Budget Office shows that a shift to the chained CPI would lead to reduction in benefits of $1.6 billion in 2015, $14.5 billion in 2020 and $23.0 billion in 2023, the last year in the CBO budget 10-year budget horizon.
Indeed, 74 percent of Republicans and 88 percent of Democrats agree that it's "critical to preserve Social Security even if it means increasing Social Security taxes paid by working Americans."
These statistics represent a clear contrast between what Americans say they want and changes Speaker Boehner and other Republicans want to converse about.
In another report by Time magazine, opponents of chained CPI call any rationale to use it in budget talks, as a strategy to reduce the deficit over time, a lie. Chained CPI, they say, is a cut to Social Security benefits that increases cumulatively over time and any talk denying this is wrong.
Tea Party conservatives argue that including a "mechanism" and triggers for talks on tax reform should include entitlement reforms like chained CPI and means-testing Social Security. Robert Costa at National Review Online sees the possibility of Democrats exchanging chained CPI for Republican concessions on other issues.
Cost writes: "...if Democrats start to talk about chained CPI, Republicans may budge a little on sequestration and look at trading some entitlement reform for renewed funding," Costa writes. Republicans' mention of "entitlement reform" always means chained CPI, he warns, reminding readers to not forget that the Democratic president has more than once offered up this cut to Social Security benefits without even being prompted by the Republicans.
One budget aide said these ideas have been floating around Washington for so long that staffers just "copy and paste" the language into a new bill. This is exactly what defenders of Social Security say scares them. As one pundit wrote, this means a "theoretical deal could go from handshake to signature within a couple of days. In a couple of days Congress and the president could cut Social Security."
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In a late afternoon news conference Tuesday, Speaker Boehner rehashed now familiar talking points he's used before to explain why he doesn't want to negotiate but only have a "conversation" with President Obama on spending cuts in order to re-open government.
Before Speaker Boehner spoke, President Obama spoke at the White House, accusing the speaker of walking away from restarting government if Republican demands, hardened by a Tea Party zeal to keep Obama from running the government, are not met.
Meanwhile, in separate news, a preliminary survey by the Mercer consultancy finds that employers' average health-benefit costs per employee are expected to rise by only 4.8 percent in 2014. This cost increase is way below the yearly cost increases that were standard for the healthcare industry before Obamacare was enacted. Last year, under the influence of Obamacare's managed competition rules, health-insurance costs to employers rose just 4.1 percent.
In the first decade of this century, before Obamacare became law, when health insurance companies could run their industry in the best interest of their shareholders, not their ratepayers, the cost of health insurance increased 137 percent over ten years for an average yearly cost increase of almost 14 percent.
Find out how cuts to Social Security, based on CBO projections for cuts to national spending, could affect a specific congressional district. Information provided is based on the Social Security Administration’s data on Social Security spending by congressional district.
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