Obama backs off from proposing Social Security cuts (updated)

Small but important victory: White House officials revealed yesterday that President Barack Obama's proposed budget for the 2015 fiscal year will not include Social Security cuts he proposed last year. The president had hoped Congressional Republicans would agree to small tax increases in exchange for using the "chained Consumer Price Index" to calculate annual cost of living adjustments for Social Security recipients. It's a terrible idea that never should have emerged from a Democratic administration.

Maybe Obama recognized that in an election year, he was never going to get any real Republican concession in exchange for cuts that would inflict real pain on seniors who rely on Social Security. Democrats may need to fight this battle again before the end of Obama's presidency, though.

[White House] Spokesman Josh Earnest said the decision to move away from chained CPI was motivated partially by the "substantial progress in reducing the deficit." [...]

Earnest repeatedly insisted that Obama would still consider chained CPI as part of a grand bargain on the debt, and that the move "does not reflect any reduction in the president's willingness to try to meet Republicans in the middle."

For now, Congressional Democrats are celebrating. Senators including Iowa's Tom Harkin had strongly urged the president to abandon the "chained CPI" proposal. More than 100 House Democrats, including Iowa's Bruce Braley (IA-01) and Dave Loebsack (IA-02), sent a similar letter to Obama this week. After the jump I've posted press releases from Harkin and Braley about the issue. UPDATE: Added a comment from Loebsack below.

Press release from Senator Tom Harkin, February 20:

Harkin Welcomes President's Decision to Eliminate Chained CPI From Budget Proposal

WASHINGTON, D.C.-U.S. Senator Tom Harkin (D-IA) released the following statement today praising President Obama's decision to eliminate the "chained CPI" from his upcoming Fiscal Year 2015 budget proposal.  Last year, Harkin led a group of Senators in sponsoring a resolution expressingthe sense that the Senate should not use the chained CPI to calculate cost-of-living adjustments for Social Security or benefits to disabled veterans or their families.  He is also the author of the Strengthening Social Security Act of 2013, a bill to increase Social Security benefits by approximately $65 per month for future beneficiaries, ensure that cost-of-living adjustments (COLA) reflect the actual costs faced by seniors, and extend the life of the Trust Fund through 2049 by ensuring that payroll taxes apply fairly to every dollar of wages.

"Using chained CPI to calculate Social Security benefits amounts to nothing more than a benefit cut for those who need it most, so I applaud President Obama for removing chained CPI from his budget proposal," Harkin said. "Social Security does not contribute to the federal budget deficit and has no place in proposals to reduce the deficit. In fact, Congress should explore ways to expand Social Security and ensure that cost-of-living adjustments accurately reflect the true costs of living faced by seniors, like higher health care costs.

"Social Security is one of the cornerstones of a secure retirement: it helps lift more than one-third of retirees above the poverty line, and many seniors rely on Social Security as their sole source of income," Harkin added. "Social Security is a critical part of ensuring that our seniors can enjoy their golden years after a lifetime of work, and I am pleased that chained CPI is off the table in this year's budget proposal."

Today, half of Americans have less than $10,000 in savings, and only 14 percent are "very confident" they will have enough money to retire, according to the Employee Benefit Research Institute.  Nationally, Social Security lifts more than one-third of retirees from poverty, and the impact in Iowa is even more dramatic:  three in 10 Iowans over the age of 65 rely on Social Security as their only source of income, provides a modest benefit, an average $14,000 per year, to approximately 400,000 seniors across Iowa.

Press release from Braley's office, February 20 (emphasis in original):

Following Braley Push, Administration Drops Social Security Cut

Washington, D.C. - Rep. Bruce Braley (IA-01) today issued the following statement after reports that the Administration had dropped a proposal that would have cut Social Security benefits for current and future seniors by using the controversial 'Chained CPI' formula to calculate cost of living adjustments:

"This is a win for Iowa's seniors, veterans and disabled individuals," Braley said. "I look forward to continuing my work to reduce the deficit, but slashing benefits for America's seniors was never the right thing to do-and I'm glad to see the Administration agrees."

Just yesterday, Braley joined other lawmakers in urging President Obama to exclude cuts to Social Security in his budget proposal.

A previous administration budget had proposed moving to a system that uses the "Chained CPI" formula to make cost of living adjustments for Social Security-a formula which experts agree would significantly reduce those adjustments and result in cuts to Social Security benefits for current and future retirees.

Braley has consistently been a strong supporter of preserving and strengthening Social Security benefits. In April of 2013 Braley became a co-sponsor of House Continuing Resolution 34 which maintains that Chained CPI should not be used to calculate cost-of-living adjustments for Social Security benefits.

Press release from Braley's office, February 19 (emphasis in original):

Braley Calls on Administration to Oppose Cuts to Social Security

Congressman: 'slashing benefits isn't fair to those that have spent decades paying into the system'

Washington, D.C. - Rep. Bruce Braley (IA-01) today sent a letter to President Barack Obama calling on him to exclude a budget provision that could recalculate cost of living adjustments for Social Security that would result in cuts to seniors.

"Social Security has drastically improved the lives of seniors and kept tens of millions out of poverty-slashing benefits isn't fair to those that have spent decades paying into the system," Braley said. "Reducing our debt is and should remain a top priority, but anyone that's looked at the federal budget knows there are better places to cut than Social Security benefits to Iowa's seniors."

Previous administration budgets have proposed moving to a system that uses the "Chained CPI" formula to make cost of living adjustments for Social Security-a formula which experts agree would significantly reduce those adjustments and result in cuts to Social Security benefits for current and future retirees.

The letter, which included the support of many members of Congress as well as groups such as the Military Officers Association of America, the Iraq and Afghanistan Veterans of America and the National Committee to Preserve Social Security and Medicare, describes how a moved to Chained CPI could results in thousands of dollars in lifetime cuts to Social Security beneficiaries.

"Switching to Chained CPI would be devastating for seniors, veterans, federal retirees, (and) disabled individuals," wrote Braley.

Braley has consistently been a strong supporter of preserving and strengthening Social Security benefits. In April of 2013 Braley became a co-sponsor of House Continuing Resolution 34 which maintains that Chained CPI should not be used to calculate cost-of-living adjustments for Social Security benefits.

A copy of the letter to President Obama is available below:

February 19, 2014

President Barack Obama

The White House

1600 Pennsylvania Ave., NW

Washington, DC 20500

Dear Mr. President:

We write to urge you to rule out using the chained Consumer Price Index (CPI) to calculate cost-of-living and inflation adjustments for federal programs in your Budget for Fiscal Year 2015.

Switching to a chained CPI would be devastating for seniors, veterans, federal retirees, disabled individuals and others.  Under legislation enacted in 1983, Social Security benefits for seniors retiring in the coming years are already scheduled to be reduced.  Today, the average worker earning $43,000 annually who retires at age 65 will find that Social Security replaces 41 percent of their previous earnings.  Soon, this will decline to just 36 percent of previous earnings, as the full retirement age climbs from 66 to 67 over the 2017-2022 period.

Chained CPI would further reduce those earned benefits over time because it fails to take into account inflation for older Americans.  While the Affordable Care Act has had a positive effect in reducing Medicare spending growth, increased medical costs continue to take a larger and larger share of Social Security earned benefits.  As you know, many seniors already face tight personal budgets, challenges that the recession has only exacerbated.  For many seniors living on a fixed income, any reduction in benefits would have a serious impact on their ability to afford basic necessities.

While there have been protections proposed to mitigate the impact of chained CPI on the very elderly and certain vulnerable populations, such as the blind, disabled and seniors with limited income, many with limited, modest incomes would still be impacted.  For instance, even with the benefit enhancements that have been proposed, a low-wage retiree receiving $9,600 per year would see their benefits reduced by an average of 1.5 percent between ages 62 and 81, a loss of more than $140 per year.  

Your Budget for Fiscal Year 2014 proposed a comprehensive $1.8 trillion deficit reduction package that sought to replace sequestration and reflected the compromise you offered to House Speaker John Boehner in December 2012.  That plan incorporated a Republican proposal to use chained CPI to reduce cost-of-living increases for Social Security recipients, as well as military veterans, people with disabilities, and beneficiaries of other federal programs.  Since then, however, the Republican majority has consistently refused to discuss a balanced approach that would include increased revenues and the closing of tax loopholes.

We recognize that additional measures are required to address our nation's long-term budget challenges, and we appreciate the difficult choices you are wrestling with as you prepare a fiscal blueprint to promote economic growth. But, we respectfully ask that you not place the burden of additional deficit reduction on the backs of seniors, veterans, federal retirees, disabled individuals and others by including chained CPI in your Budget for Fiscal Year 2015.

Sincerely,

E-mail Loebsack sent to his mailing list before the White House announced its decision:

Dear Friend,

Growing up, my family struggled to make ends meet.  My grandmother relied on Social Security survivors' benefits to care for my siblings and me.  I know first-hand the importance of maintaining this promise of retirement security and wanted to update you on the work I am doing to protect Social Security. As the President begins to craft his budget proposal for 2015, I am urging him to keep a move to what's known as "chained CPI" out of his plan. This move, used to calculate annual Cost of Living Adjustments (COLAs), would have a negative effect on Iowa's seniors.  This is particularly unacceptable after several years of historically low COLAs.

No Iowan should ever retire into poverty or have to make the choice between putting food on the table and paying their bills. That's why I have long worked to strengthen and improve Social Security to ensure that Iowans who played by the rules, paid into the system, and worked hard get their earned benefits.

I am leading the fight against a move to a "chained CPI" to calculate the yearly COLA for seniors.  This change, as you know, would cause a permanent, across the board cut to both current and future seniors and I will continue to fight against it.  Seniors did not get us into the financial situation we are in now and should not be punished for it. We must not balance the budget on the backs of the most vulnerable, and that's why I am fighting so hard to keep the "chained CPI" out of the budget for 2015.

Sincerely,

Dave Loebsack

Iowa's Second District

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