Retirement Blog

Finance Blogs » Retirement Blog » Obama drops chained CPI plan

Obama drops chained CPI plan

By Jennie L. Phipps ·
Thursday, February 20, 2014
Posted: 5 pm ET

The Obama administration took its highly unpopular chained CPI proposal off the table Thursday, causing a host of Democrats and other progressives to give a collective shout of approval.

"This is a huge progressive victory -- and greatly increases Democratic chances of taking back the House and keeping the Senate. Now, the White House should join Elizabeth Warren and others in pushing to expand Social Security benefits to keep up with the rising cost of living," said Stephanie Taylor, cofounder of the Progressive Change Campaign Committee, an organization dedicated to electing progressive politicians.

Adopting this lowered way of calculating cost-of-living adjustments, or COLAs, for Social Security and other benefits would have lowered the shortfall in Social Security funding by about 20 percent. That's according to Voice of the People, a nonpartisan organization working to give Americans a voice in the policymaking process.

A lowered COLA would not cut Social Security, but its effect would compound over time by slowing the increase in benefits. Voice of the People calculates that after 10 years, the average monthly benefit would be $35 less than it would have been under the current COLA. And after 30 years, average monthly benefits would be $107 less than they would be under the current method -- a relatively small impact on most people's retirement planning.

The Obama administration told The Associated Press that the administration hadn't totally removed the proposal from consideration but wouldn't push it as part of the 2015 budget proposal, which is expected to be announced next month.

Nancy Altman, co-director of Social Security Works, an organization whose mission is to protect Social Security, said this was the right thing to do. "We should be talking about expanding Social Security, not cutting it," she added. "The president is moving in the right direction. We think cutting Social Security would increase wealth inequality and worsen the impending retirement crisis."

The office of House Speaker John Boehner, R-Ohio, criticized President Barack Obama's decision, stating, "This reaffirms what has become all too apparent: The president has no interest in doing anything, even modest, to address our looming debt crisis."

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.
Kenneth Gordon
February 21, 2014 at 4:44 pm

To all you people who complain about cutting the budget, how about cutting tax breaks for millionaires and subsidies for big corporations instead of cutting benefits for seniors. People like me who are 65 & older are having a difficult enough time making ends meet. How about making the rich pay their fair share?

February 21, 2014 at 4:38 pm

Another bad idea from the President that claimed to help middle-American. Find another way to be fiscally competent.

February 21, 2014 at 4:26 pm

If all money that was given to other gov, programs that came out of SS was paid back with interest SS would not be in any chance of running out of money in 18 or 20 years. Also if our gov. would of stopped all the big companys from moving so many jobs over sea for cheap slave labor our SS system would not be short on money. think about it!!

February 21, 2014 at 4:23 pm

At $17.3 trillion of debt and deficits of half to $1 trillion per year, when will the Feds Credit Card finally hit it's limit? I have read that the Federal Debt currently can never be realistically paid back?

Sharon Morris
February 21, 2014 at 4:16 pm

Social Security runs out of money for the government always has its hands in the pot. It was not ment for that and the only reason they are even looking at it so the seniors think they are actually going to do something to help them but it is only for political reasons trying the keep the senate and trying to get the house back. It has nothing to do with what is right for Social Security recipients. Seniors keep getting a new piggy bank and the government keeps breaking it to steal the coins inside.

February 21, 2014 at 4:11 pm

Do not put a cap on social security everybody would be better off let the CEO's and pro ball players pay their fair share it is called social security

Bob Kaplan
February 21, 2014 at 3:45 pm

Why is it Social Security, paid for by the individual tax payer, all ways running out of money while welfare is fully funded and we can afford to send aid to foreign countries ?

February 21, 2014 at 3:37 pm

Legitimate Social Security recipients should not be punished with lower colas. They’ve been paying into this system their whole working lives and depend on it to live. Where there is fraud is in the many people who receive disability social security who are not deserving. This needs to be tightened up. All these lawyers on TV encouraging people to file for disability is also a scam that needs to be curbed. This is one area ripe for potential savings. Also SS could be bolstered easily by raising the cap upon which SS is taxed. A wealthy person can easily pay a little more into the system.

February 21, 2014 at 3:15 pm

Nancy Altman says we should expand SS benefits? I say, let's put the SS back in the black by doing what was intended for the program. Only Americans living in America should be eligible for SS. (Out of the millions of people drawing outside this country, the SS department verifies only a small percentage to see if they are even paying the right people...and most countries enjoy the extra influx of money and do nothing to stop fraud). Eliminate the theft of SS by Congress, (if they put back all they have stolen and had to pay for those extra programs, no one would support the waste of our money). Let people contribute to their own benefits in a personal account so they can received a higher retirement payout.

February 21, 2014 at 8:55 am

So instead of SS running out of money in 20 years (per the SS Admin) and having to cut benefits 25% - now it can run out in 18 years! Hooray for more spending!