When the ill-conceived notion of “chained CPI” first raised its ugly head, its problems were immediately apparent to anyone who was already living primarily or totally on Social Security benefits. The idea was that as the cost of living rises, those of limited means simply switched to buying a cheaper or more generic version of products that had gotten more expensive.
Anyone of limited means can tell you that they already are buying the most economical products available and that even the cost of those products rise with everything else. When you’re already making the most responsible purchase and the cost of everything goes up, there is no way to economize.
Elizabeth Warren understands this and explained very well in a speech on the floor of the Senate on Monday what the plan actually is — a cut in Social Security benefits. The cost of living increase to benefits is already a cut because of the way it is calculated, the increase is always less than the increase in CPI, and therefore continually lags behind the actual increase in costs, chained CPI would further erode purchasing power.
Warren pointed out the changes in the country over the last generation, saying, “A generation ago, middle class families were able to put away enough money during their working years to make it through their later years with dignity.” That is no longer true – those who did have enough to supplement Social Security and maintain a decent standard of living were largely wiped out by the stock market crash of 2008, at a time too late in life to recoup those loses, leaving only Social Security to stay afloat.
Warren goes on to say, “Among working families on the verge of retirement, about a third have no retirement savings of any kind, and another third have total savings that are less than a year’s annual income. Many seniors have seen their housing wealth shrink as well.” In the past, one’s home was a major safety net in retirement, as the most valuable tangible asset that most in the middle class had. In recent years the value of real estate has fallen so much that they no longer have that to fall back on.
Defined benefit retirement plans have gone the way of the dinosaur as well. As Warren notes, “Two decades ago, more than a third of all private sector workers – 35% – had traditional defined benefit pensions, pensions that guaranteed a certain monthly payment that retirees knew they could depend on. Today that number has been cut in half: only 18% of private sector workers have defined benefit pensions. Employers have replaced guaranteed retirement income with savings plans like 401k plans that leave the retiree at the mercy of a market that rises and falls.”
As bad as that is, nearly half of all workers don’t even have access to those resources; they have nothing to supplement Social Security and they are the ones who will also have the smallest Social Security payments. The average benefit is about $1,250 per month before reductions for Medicare supplement plans.
The Senator correctly notes that “Social Security is rapidly becoming the only lifeline that seniors have to keep their heads above water… Instead of taking on the retirement crisis, instead of strengthening Social Security, some in Washington are fighting to cut benefits.”
She says of the chained CPI, “Supporters of the chained CPI say it’s a more accurate way of measuring the cost of living increases for seniors. This statement is simply not true. Chained CPI falls far short of the actual increases in costs that seniors face. Pure and simple, chained CPI is just a fancy way of saying ‘cut benefits.'”
Once again, Warren has shown herself to be a Senator of the people, much like her counterpart, Bernie Sanders. Both are willing to stand up and speak truth to power and do so on a regular basis.
Watch her remarks in the video below:
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h/t: Daily Kos