Last week President Obama announced a budget that includes something called "Chained CPI" as a way to reduce Social Security benefits. I will not support it. And will not vote for any plan that includes cuts to benefits Americans have earned. The proposal has already sparked large protests by groups ranging from organized labor to nonpartisan veterans' organization. But what exactly is Chained CPI? And what makes cutting Social Security benefits so harmful right now?
To understand, here's some context. American families have traditionally depended on three legs of a stool to support them during their retirement: retirement plans from their employers, private savings, and Social Security. But over the past thirty years, two of those legs - personal savings and retirement plans - have been rotting away for the American middle class.
Americans used to be able to depend on their jobs to provide a stable retirement. In 1985, about 80 percent of employees at medium and large-sized companies had guaranteed pensions for their employees. Now that number stands at less than a third. Today, most seniors depend on savings from plans they contribute to, such as 401(k)'s. But these are a poor substitute, as employer contributions to individual plans are much stingier than defined benefit plans. In addition, investments are subject to the whims of the market, costing workers $2.8 billion dollars from their 401(k)'s during the financial crisis.
The story is even worse when it comes to personal savings. One in four households has insufficient net worth to subsist at the poverty rate for three months if they lose their jobs or income. The vast majority of Americans' wealth is in the equity in their home. Yet American homeowners lost more than half the value of their homes during the Great Recession for a total loss of $8 trillion.
As a result of this collapse of the first two legs of the stool, Americans now depend on Social Security more than ever. One third of all widowed women rely on Social Security for at least 90 percent of their income. And in an era of increasing income inequality, Social Security is the only lifeline many middle class seniors have.
Chained CPI would be a direct cut to the last leg of the stool. A typical senior retiring now would lose $650 a year by the time she is 75. By the time that retiree is 95, she will have lost $25,000 in Social Security cuts over the course of her retirement. For the 3.2 million disabled veterans who sacrificed for our country, it will mean they see reduced disability and Social Security benefits.
President Obama has done many things right in his budget negotiations with Republicans. In the face of Republican opposition to even the most common-sense job proposals, the President has been a steadfast advocate for investment, increased revenue and asking the most well-off to pay their fair share.
But this is about more than politics. It is about the senior in Hopkins, MN who lives on less than $22,000 and depends on Social Security to put food on the table. It is about the couple in Minneapolis who lost their home during the financial crisis and need Social Security more than ever. It is about the disabled veteran who served his country, but will now be hit with a double benefit cut because Washington refuses to close a single loophole for special interests.
Many say Chained CPI will not yield much in savings, so opposing it is an overreaction. But this is real money to seniors who are already struggling. There are ways to strengthen Social Security that don't cut the benefits millions of seniors depend on. In 2008, President Obama proposed raising the income cap on the Social Security payroll tax. Just by asking wealthy Americans to contribute to the Social Security trust fund from all of their income, as middle class Americans already do, we can make Social Security solvent for 75 years.
The American people agree. A poll just this week found that 7 in 10 voters oppose changing the way the cost of living is calculated through chained CPI, including 69% of Republicans and Independents. More than 8 in 10 believe Social Security should be considered separately from any budget discussions.
Democrats should not propose policies that hurt middle class families in the hope that Republicans will suddenly cooperate in solving our budget challenges. Republicans in Congress show no signs of accepting this offer - in fact they have already denounced it.
So instead of supporting policies that harm seniors, let's get back to the real problems facing this country--creating 21st century jobs in America, confronting climate change and growing income inequality, and making sure seniors have an adequate retirement on which to live. Let's oppose the Chained CPI.