High up on the rec list is "A Non-Hysterical Progressive Analysis of so called Social Security Cuts on the Table". The message: Obama's social security cuts would be only 14 cents a month compared to what people would get under the current system. What's the big deal?
What's the big deal? First of all, the immediate effect is considerably bigger: if your monthly benefits start at the current average of $1044/month, the monthly increase in benefits starts out about 42 cents (not 14 cents) less than under the current system -- so monthly benefits are 84 cents less than the current system after 2 months; $5 less after a year. Not just a one-time cut of 42 (or 14) cents.
But it still sounds small, right? So how is it that this change is supposed to cut Social Security benefits by $112 billion over the next decade?
It's called compounding. After one year, it's a reduction from a 3.3% increase in benefits under the current system to 2.8% -- about a 1/2% cut in benefits. After 10 years, it's a reduction from a 39.2% increase to a 32.7% increase-- a 4.7% cut in benefits. After 30 years, it's a reduction from a 170% increase to a 133% increase -- a 13.5% cut in benefits, from $2818/month to $2437. (Details below.)
That's right. Our Democratic leader is proposing to gradually cut social security benefits compared to what's currently owed, so they'd be cut by almost 5% in ten years and by 13.5% in 30 years. If a Republican were proposing that, would Daily Kos readers be reccing up a mathematically illiterate defense of it?
Here's the mathematical details: One of the references the diarist points us to compares the current cost-of-living index by which Social Security is adjusted for cost of living increases -- the CPI-W -- with what the administration is reportedly going for -- the "chained CPI" or C-CPI-U: "The annual COLAs based on the new C-CPI-U for 2004-2006 would have been 2.5 percent, 3.3 percent, and 2.8 percent, respectively. In contrast, the CPI-W based COLAs actually granted were 2.7 percent, 4.1 percent, and 3.3 percent, respectively". Taking those 3 years as representative, you can compute that, over those three years, the C-CPI-U grew at 2.826% annually and the CPI-W grew at 3.310% annually. (For example, for CPI-W: you compute log(1.025*1.033*1.028)/3=1.02826.) The difference, 0.484%, times $1044 gives just over $5/year less increase in benefits, or about 42 cents less increase each month. After 10 years, you've got an increase of exp(10*0.03310) vs. exp(10*0.02826) or 1.3923 (a 39.23% increase) vs. 1.3266 (a 32.66% increase). The benefits are cut to 1.3266/1.3923=.953 of what they would have been, a 4.7% decrease. After 30 years, the increase is exp(30*0.03310) vs. exp(30*0.02826) or 2.6990(a 169.9% increase) vs. 2.3344 (a 133.4% increase). The benefit is cut to 2.3344/2.6690=.865 of what it would have been, a 13.5% cut. Starting from a base of $1044/month, after 30 years that's a decrease from $2818/month to $2437/month.
[Updated to better describe the initial monthly change, to add in the actual amounts after 30 years, and other small changes.]