This week The Washington Post reported results from its December poll with ABC, which took the public pulse on a number of fiscal matters.The public wants compromise, the Post headline tells us, but some specifics were not popular. Among them was the “chained Consumer Price Index,” an alternative way of adjusting Social Security benefits for inflation that saves the government a ton of money. The president has agreed to put the chained CPI on the negotiating table.
As we and others have been reporting, deficit hawks favor changing the CPI calculation because that adjustment could produce some $217 billion in savings over the next 10 years, with about $145 billion coming from cuts to Social Security and other government pensions. Where would those savings come from? From lower Social Security payments (including disability benefits), which would increase 0.3 percentage points less on average each year under the new formula, eventually resulting in a much smaller check when beneficiaries reach their 80s. Perhaps those numbers are sinking in. The Post got similar results from both registered voters and all adults, when it asked whether respondents would accept changes that increase benefits at a slower rate. Sixty percent of all adults and 57 percent of registered voters said the change was not acceptable.Thirty-four percent of all adults and thirty-six percent of registered voters said that it was.
The Post picked up public disapproval even though there’s been little reporting on how the formula will affect real live Social Security beneficiaries—the aging faces that the wonks advising Congress seldom see. There should be more reporting on just how these numbers affect flesh and blood people.
In an effort to do that myself, I visited the senior center in the Chelsea area of Manhattan this week, to learn how people living with the help of Social Security think they will fare under the chained CPI. Here are three of them:
Sixty-one-year-old Phyllis Carleton says she was thrown into “abject poverty” a year ago, when she suffered a heart attack that left her heart severely damaged. Carleton has a family history of cardiac problems—her brother died of a heart attack at age 44—and she must cope with the genetic hand she’s been dealt. She worked most of her career as a make-up artist for high-end cosmetics companies that sold their products at high-end Manhattan stores. The real job, she said, was selling, and she was expected to sell around $2,500 worth of products each day. Some days she did, and, as an independent contractor, she could make as much as $40,000 a year. She had no employer-sponsored health coverage. Still, with a rent-stabilized apartment, she managed pretty well financially, though she dropped the health insurance she bought on her own when the premiums got too expensive.
After the heart attack, she expected to return to the job, but found that her damaged heart barely allowed her to walk a few blocks. Attempts to open her blocked arteries with stents haven’t worked. Eventually she got Social Security disability benefits of $885 a month, for a yearly income of $10,620.
But that plus came with a minus: Carleton had been getting welfare payments when she first got out of the hospital, and with that came food stamps and Medicaid. Now her Social Security income is too high to qualify for food stamps and Medicaid, although she can buy into Medicaid to cover her doctor bills and the 14 medications she is taking. Friends are helping her with those payments. After a two-year waiting period that began last August, she will be eligible for Medicare. (Obamacare did not eliminate the long wait for Medicare benefits faced by people on Social Security disability.)
Until then, Carleton is ensnared in a Medicaid Catch 22. Higher income decreases her eligibility for Medicaid. So, “If I got a COLA increase,” she said, “I’d have to pay it back to Medicaid, so I won’t benefit from any cost-of-living increase.”
Meanwhile, over time, the chained CPI will also affect Social Security disability benefits, just as it will retirement benefits, thus eroding Carleton’s purchasing power. The advocacy group Social Security Works estimates that a person receiving an average disability benefit of around $13,000 a year at age 45 would receive a cut of a little more than $1,000 by the time he or she reaches age 75.
Her retirement checks are not high to begin with—$813 a month, and Ava McNamee will be affected by the slower rise in benefits. She is 64, and worked in the movie industry as a scenic artist, which paid her about $1,300 a week. But those jobs dried up with the recession, and a job as an assistant to a fashion designer didn’t last long. “I had no choice,” she said. “I had to take my Social Security at 62. I was jobless.”
In 2011, people under their full retirement age accounted for about 70 percent of new claims for retirement benefits, even though taking benefits early reduces their payments by some 25 percent from the amount they’d get if they were able to wait for full benefits at age 66.
So now McNamee, an art teacher by trade, earns $100 a month teaching ceramics classes at the center. She had almost nothing in savings, and a roommate helps pay the rent in a rent-stabilized building. McNamee says she is “pretty healthy” except for scoliosis, an abnormal curving of the spine. Medicaid takes care of her medical bills.
We chatted about what the chained CPI might do to her benefits 20 years from now, though she didn’t know much about the change in the COLA formula. “No one knows about this,” she told me. “Do you really think the politicians are going to advertise this? I guess they want all the old people on the street begging.” As for her own situation, McNamee said, “I hope I am dead by that time. I can’t afford to be alive.”
He spent most of his career composing music and musical scores for the film industry. At age 77, Gerald Busby still writes music, but Social Security retirement benefits are his main source of income. He gets $730 a month plus a small disability payment of $72 from SSI—Supplemental Security Income —for blind, disabled, and aged with very low incomes. Busby qualifies because, he says, he is HIV positive. There’s Beltway talk about exempting SSI payments from the chained CPI, but it’s far from clear how lawmakers will resolve that issue.
Like so many Americans, Busby also claimed benefits at age 62. His partner had died and he declared bankruptcy because he “needed every penny.”
A good chunk of his check goes for rent in the Chelsea Hotel, for a rent-stabilized studio apartment. He also gets help from the city and from a foundation (a foundation “for geezers,” he said) to cover the rent. The rest of the check covers credit card bills, computer and music supplies, and lingering bills from his partner’s illness years ago. “I’m still paying off old debts,” he said. “About $30 to $50 a month.” He is on Medicare and has a Medicare Advantage plan that takes care of most of his health expenses. “The true bill for my HIV medications is about $45,000 a year, but I pay less than $100.”
Busby didn’t know about the Great Debate over the chained CPI, but he doubted that COLA increases would help much, particularly if they are diminished by a new calculation formula. “It’s really pretty negligible unless you’re pretty frugal,” he said. In the end, he said, he believes there is little people like him can do to make their voices heard, “unless I became a full-time activist. I spend all my time writing music.”
And so the chained CPI comes down to a battle between outfits like the AARP, the AFL-CIO, and MoveOn.org on one side, speaking for people like Carleton, McNamee, and Busby, with some politicians and the Fix the Debt crowd on the other, speaking for those who worry about the deficit. I
Tuesday The Huffington Post ran a piece that brought an ordinary person’s voice into the reportorial mix. It would be good to hear from more people like that, people who will be affected by the battle’s outcome, as the debate is joined.
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