For Immediate Release: Tuesday, November 20, 2012
Contact: Phoebe Silag or Donte Donald, firstname.lastname@example.org 202-775-8810
Economists and other social insurance experts oppose proposed changes to Social Security COLA
Today, 300 leading social insurance experts, including 250 Ph.D. economists and 50 experts with doctorates in related fields, issued a statement opposing proposals to tie the Social Security cost-of-living adjustment to a lower chained consumer price index. Tying the COLA to a chained CPI would result in a 3 percent benefit cut after 10 years and a 6 percent cut after 20 years. It would have the greatest impact on older retirees and disabled beneficiaries, who are often the poorest beneficiaries. The initiative was led by economists Dean Baker, J. Bradford DeLong, Heidi Hartmann, Lawrence Mishel and William E. Spriggs, and sociologist Eric R. Kingson.
The proposed changes are often presented as a technical correction that better reflects consumers’ ability to substitute cheaper goods and services in response to price increases. However, spending patterns of retired and disabled Social Security beneficiaries, who are disproportionately affected by escalating health costs, differ from those of workers or the general population.
“Since elderly and disabled people spend a greater share of their incomes on necessities such as health care, rent, and utilities, and since this population is also less mobile, a chained COLA based on the spending patterns of workers or the general population may overestimate the ability of Social Security beneficiaries to take advantage of cheaper substitutes,” the letter states.
“The COLA change that the Committee for a Responsible Federal Budget, Erskine Bowles and Alan Simpson have called for is not a technical improvement or a more accurate measure,” Mishel said. “It would hurt the elderly and disabled, and it is unneeded for deficit reduction.”