Retirement Blog

Finance Blogs » Retirement Blog » Fighting Social Security cuts

Fighting Social Security cuts

By Jennie L. Phipps ·
Wednesday, May 4, 2011
Posted: 4 pm ET

At 88, Merton Bernstein, retired law professor and expert on Social Security, is a vocal and persistent supporter of the program and the benefits it offers people living in retirement.

He's all over the Internet, eloquently setting straight people who want to reduce Social Security benefits or who suggest that delaying eligibility is the right retirement planning approach. "It's easy for people with current jobs and full stomachs to advocate cutting Social Security. They just ignore what a drastic problem this would be for people who are living on Social Security and not much else," he says.

The most recent issue to get his dander up is what he sees as a stealth move to cut Social Security by limiting cost of living increases. The proposed measure -- called "chained COLA" -- would reduce the benefit under the current formula by three-tenths of 1 percentage point every year.

"This utterly arbitrary new element suggests that the name of the game is simply to reduce each year's COLA and to do it by what they regard as unnoticeably minute amounts," Bernstein says.

But small amounts add up. After five years of chained COLA, benefits would be 1.5 percent behind price increases; after 10 years, 3 percent. After 20 years, the benefit reduction would be 6 percent, Bernstein calculates.

Supporters argue that the chained COLA provides a more accurate measure of inflation. "That's malarkey," Bernstein says.

He contends that the CPI as determined by the Department of Labor actually underestimates the cost of living for older people because it doesn't accurately reflect the cost of health care. And the chained COLA would make that problem worse, he says, because it presumes that people avoid inflationary costs by choosing to spend their money differently. But that's hard to do with health care. "Do people choose to have macular degeneration, arthritis, declines in hearing? Of course not," he grumbles.

Bernstein, who has been a recipient of Social Security since he was 70 when he retired from teaching at the Washington University in St. Louis School of Law, and who still teaches an occasional class at the community college near his home in Massachusetts, isn't at all certain that there is even a problem with funding for Social Security. He poohs-poohs the notion that anyone has a crystal ball accurate enough to predict what the economy will be like in 25 years, when Social Security's actuaries say the reserves will decline to the point where there won't be enough to pay more than about 75 percent of what's owed.

"Even 25 years ago did anybody foresee the revolution that the computer would have on the economy? To say what's going to happen in another 25 years and thereafter when the shortfall is supposed to come and attach any degree of certainty to it is totally unwarranted," he says.

And if a shortfall does happen, what then? Bernstein has the answer: "The shortfall is 2 percent of payroll. If employers would pay 1 additional percentage point of payroll and employees would pay an additional 1 percent of payroll. Bye-bye shortfall."

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
June 23, 2011 at 12:10 am

The only reason Social Security has any problem at all is because the Republicans are doing everything they can to kill it off - as they have been doing since it was established by FDR. People of that era, even though they were in a depression, didn't want to see elderly people starving in the streets. The tea-bag republicans like Paul Ryan don't care if granny starves as long as they can present their corporate overlords with another tax cut or subsidy. They are not real Americans.

dale coberly
May 05, 2011 at 3:31 pm


since Keller explained it to Ash, I'll try to explain it to you. You have been lied to by the rather evil people who want to destroy Social Security. There is no Social Security 'crisis' and Social Security funds have not been stolen. The Trust Fund is a real asset to Social Security and a real debt to "The United States." The United States BORROWED the money from Social Security and has a legal and moral obligation to pay it back.

The Liars have tried to confuse you by saying "there is no money in the trust fund." Well, there is almost never any money in any trust fund. The trustees lend the money out at interest, by buying government bonds if they are especially interested in safety. That's exactly what has happened with the Social Security Trust Fund, and The United Sates of America is currently paying the money back, as expected, and on time.

There is NO problem with Social Security. There may be a problem with some taxpayers not wanting to pay taxes to repay the money the government borrowed... but those people don't want to pay taxes for anything. And the government borrowed the money so it could cut taxes when "those people" wanted a tax cut that was going to pay for itself. It didn't and now we need to pay our bills.

The great big huge "unfunded deficit in Social Security" you have been hearing about is the extra money that will be needed to pay for the next generation living longer than the last. That money could be found by raising the payroll tax an amount equivalent to forty cents per week each year... so the people paying the tax can pay for their own Social Security in the future... just as Social Security has always done.

Dora Keller
May 05, 2011 at 9:25 am

Ash, I don't think you get it. Mr. Bernstein paid for his SS account, probably more than he'll ever receive. SS isn't a fund for the needy, but rather an insurance policy. If someone pays into a private life insurance policy all his working life, and then his (maybe very wealthy) widow receives his benefits, would you fault the widow for "sucking at the teat" of, oh, say Aetna?

May 04, 2011 at 8:21 pm

Someone who "retired from teaching at the Washington University in St. Louis School of Law, and who still teaches an occasional class at the community college near his home in Massachusetts" doesn't deserve one nickel of Social Security. This is the problem with this "entitlement". Many receiving Social Security checks don't truly need the income, but because the government provides it, there are seniors elsewhere who are being shortchanged and living on the edge of poverty. What a self-absorbed and self-important society we've become, suckling at the teat of a government too eager to pander to voting blocs such as the one represented by the current generation of seniors. Shame on you all for bankrupting your children.

Herbert Cramer
May 04, 2011 at 7:01 pm

If our goverment had kept ther hands off of the soc.sec. fund from the start, we wood not be in this sutiation now!