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AARP: Chained CPI is a Significant Benefit Cut

Testimony provided for House Committee hearing on entitlement reform.

FOR IMMEDIATE RELEASE

April 18, 2013

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202-434-2560, media@aarp.org, @AARPMedia

 

AARP: Chained CPI is a Significant Benefit Cut

estimony provided for House Committee hearing on entitlement reform.

WASHINGTON—AARP filed a statement for the record with the House Committee on Ways and Means Subcommittee on Social Security for today’s hearing about the chained CPI. In its testimony, AARP outlined reasons for its opposition to the proposal. Excerpts from the testimony follow:

“Social Security is the only lifetime, inflation-protected, guaranteed source of retirement income that most Americans will have. It is the foundation of retirement security that keeps millions of older Americans out of poverty and allows them to live independently.   But Social Security also provides some measure of economic security for families who face a loss of income because of the disability or the death of a wage earner. The inflation protection provided through Social Security’s annual COLAs is a critical component to the success of the program…

“Today, half of those 65 and older have annual incomes below $20,000… Every dollar of the average Social Security retirement benefit of a little over $15,000 is absolutely critical to the typical beneficiary. For older American households receiving benefits, Social Security is the principal source of income for nearly two-thirds, and roughly one third of these households depend on Social Security for nearly all of their income. Reliance on Social Security as a source of guaranteed income only increases as people age…

“Despite claims to the contrary, the chained CPI is NOT a more accurate measure of inflation, especially for Social Security COLAs.  In fact, it is even less accurate than the current formula…

“AARP believes that to the extent Congress is searching for a more accurate measure of inflation for annual COLAs, Congress should adopt a measure that accounts for the spending patterns of older Americans. The chained CPI fails this test and would further underreport the inflation experienced by retirees and the disabled and thus erode their standard of living…

“Although many have attempted to characterize the chained CPI as a minor tweak, it is in fact a significant benefit cut that snowballs over time. The adoption of chained CPI would take approximately $340 billion dollars out of the pockets of current and near retirees, working families, veterans and the disabled, as well as the local economies in which they live, in the next 10 years alone…

“AARP believes that reducing the nation’s deficit and restoring confidence in our budget is important, but we also understand that Social Security is vital to the economic security of older Americans and the disabled; it has a dedicated funding source, is a separate and self-financed program, and did not add to our federal deficit. Therefore, AARP believes that cuts to the program should not be made to reduce the deficit…

“AARP believes that the current Social Security funding shortfall should be addressed sooner rather than later so that the fundamental structure of the program can be retained and the protections it offers to almost all workers and their families can be protected and even enhanced. However, any such changes to the Social Security system must be made within the proper framework of increasing the retirement security of real people and protecting current beneficiaries who have paid into the program during their working lives. The chained CPI does neither…

“In the face of declining pensions, shrinking savings, stagnating wages, and rising health costs, Social Security deserves its own national conversation that focuses on preserving and strengthening the retirement security of Americans and their families for generations to come. AARP welcomes that conversation and stands at the ready to engage with Congress, our members and other Americans on ways to strengthen Social Security now and in the future…”

 

AARP is a nonprofit, nonpartisan organization, with a membership of more than 37 million, that helps people turn their goals and dreams into real possibilities, strengthens communities and fights for the issues that matter most to families such as healthcare, employment and income security, retirement planning, affordable utilities and protection from financial abuse. We advocate for individuals in the marketplace by selecting products and services of high quality and value to carry the AARP name as well as help our members obtain discounts on a wide range of products, travel, and services. A trusted source for lifestyle tips, news and educational information, AARP produces AARP The Magazine, the world's largest circulation magazine; AARP Bulletin; www.aarp.org; AARP TV & Radio; AARP Books; and AARP en Español, a bilingual news source. AARP does not endorse candidates for public office or make contributions to political campaigns or candidates. The AARP Foundation is an affiliated charity that provides security, protection, and empowerment to older persons in need with support from thousands of volunteers, donors, and sponsors. AARP has staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Learn more at www.aarp.org.

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