Social Security Cuts Would Hurt Low Income Older Adults

Statement of Paul Nathanson, National Senior Citizens Law Center

WASHINGTON, Dec. 2, 2010 /PRNewswire-USNewswire/ --The National Senior Citizens Law Center is concerned that proposals contained in the National Commission on Fiscal Responsibility and Reform report to cut Social Security benefits would land a devastating blow to those older adults who rely on the program for all or most of their income. Low-income older adults and those who work on their behalf should be extremely concerned about the Commission's recommendations related to the program.

• Social Security is of vital importance to older Americans, providing a majority of income for two-thirds of them. Its importance to people of color is even larger.  For example, the majority of single older Hispanic, Asian American and African American women rely on Social Security for 90% of their income.  
• Calling for a gradual increase in the Social Security retirement age to age 69 and a corresponding increase in the minimum age for early retirement to age 64 is a cut in benefits, no matter what age a person retires.     For example, if the normal retirement age is raised to 69, this means that benefits would be approximately 25% less than they would be if the retirement age had remained at age 65. Since Social Security benefits are already modest, this would have a particularly negative effect on those who heavily rely on it to pay their bills and the increasing costs of health care as they age.
• Similarly, changing the method for calculating the annual cost of living adjustment (COLA) by using the Chained Consumer Price Index (C-CPI) instead of the standard CPI that is currently used would cut future benefits for those with limited income and resources. Since they have already reduced their expenditures to basic necessities, it is far harder for them to adjust to having less income when prices continue to rise. Those with other income from pensions or savings may be able to substitute a less expensive item and manage to deal with little or no COLA. This is just not the case with the elderly poor.
• The calculation of the COLA needs to be changed, but in the opposite direction so that it reflects the greater impact of health care inflation that Social Security beneficiaries experience. The conclusion that the standard CPI does not accurately measure changes in the cost of living for older people and people with disabilities is correct, but not in the way the commission's leaders would have you believe. In fact the standard CPI is deficient because it is based on the expenditures of the general population and not on the expenditures of the older persons and people with disabilities who have much higher expenditures for health care, the one sector of the economy that has consistently shown the highest rate of inflation.  
• Future generations will suffer the greatest impact of Social Security cuts. It is especially ironic that some advocates for cutting Social Security benefits say that the deficit and government spending on programs like Social Security increases the debt "our children" must pay. In fact, people approaching retirement age today will not suffer from the proposed increase in the retirement age. It is their children who will.
• An increase in the amount of wages subject to the FICA tax so as to reach 90% of all wages is a good idea, but it should be phased in immediately, not over the next 40 years. Another helpful recommendation is mandating participation by all new state and local government hires.
• Social Security is not the cause of nor is it contributing to the nation's current deficit problem. The Social Security Trust Fund continues to generate a surplus and, contrary to current political rhetoric, Social Security will be able to pay full benefits until 2037 without any change in the law. The program's financial solvency can be sustained for the foreseeable future beyond 2037 with only a modest increase in FICA revenue. This does not rise to the level of a crisis.

The Social Security program is likely to become more, not less, important for the economic survival of older adults both now and in the future. Surveys continue to show retirement security in old age is extremely important to a majority of Americans. Since savings and defined contribution plans have lost significant ground in the economic downturn and defined benefit pensions are threatened with extinction, we should not make such drastic cuts to a program that is a lifeline for so many.

The National Senior Citizens Law Center is a non-profit organization whose principal mission is to protect the rights of low-income older adults. Through advocacy, litigation, and the education and counseling of local advocates, we seek to ensure the health and economic security of those with limited income and resources, and access to the courts for all. For more information, visit our Web site at www.NSCLC.org.

SOURCE National Senior Citizens Law Center