January 28, 2013


The quiet liberal plans for entitlement reform  (David Nather, January 27, 2013, Politico)

Here are the highlights of the Democratic entitlement reform menu:

Social Security: 'Chained CPI'

Savings: $112 billion

The idea is to change the way the government figures out how much more seniors should get in Social Security benefits each year to account for changes in their cost of living.

This new formula -- a tweak to the consumer price index -- would assume that people switch their buying habits when prices rise, rather than just buying the same things over and over. So, for example, if the price of ground beef goes up, someone might buy chicken or fish instead.

The result: Social Security benefits will rise more slowly.

Obama has offered the change before -- he supported it during his fiscal cliff talks with Republicans in December. And two think tanks that supply ideas to the Democrats -- the liberal Center for American Progress and the more centrist Third Way -- have included it in their Social Security plans, giving Obama plenty of cover in case he decides to go that way again. [...]

Social Security: Lift cap on taxable earnings 

Revenues: $500 billion or more

Even if the Democrats accept chained CPI, they're going to want some goodies in return. One big one: Let the highest earners pay more Social Security payroll taxes.

Right now, employers and workers only pay those payroll taxes on the first $113,700 of income. [...]

Social Security: Change the benefit formula

Savings: Would close half of Social Security shortfall

Another big item on the liberals' agenda would be to change the way Social Security is distributed -- giving more to low-income seniors and less to high-income seniors.

Both CAP and Third Way have proposed the option, which they say would strengthen Social Security's role as a safety net for vulnerable seniors while giving the higher-income ones more incentive to save for their own retirement. It also acknowledges that the seniors who live the longest tend to be the people with high incomes and education levels, according to Van de Water. [...]

Medicare: Expanded means testing

Savings: $20 billion

Obama has said he won't consider Medicare changes that would shift costs to seniors, but an expansion of the program's means testing is the one benefit cut Democrats have hinted they might accept -- because it would hit wealthier seniors and spare the rest.

There's already some means testing of premiums for Medicare coverage of doctors and prescription drugs, thanks to Obamacare and the 2003 law that created the Medicare prescription drug program. The version that Obama proposed in his 2011 deficit plan, and could put on the table again, would extend that means testing to charge higher premiums and hit a larger group of seniors.

Posted by at January 28, 2013 6:30 AM

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