Thursday, February 03, 2005

Footnote to the preceding

One of the nuances of Social Security, and something the Bushites hope to change, is the fact that the initial benefit level that's set for a new retiree is pegged to wage growth, which is a different measure than inflation, which is based on price growth. Since over the longer term, wages tend to rise faster than prices (happily), benefits pegged to wage growth tend over that same longer term to outrun inflation. That's why retirees in 2042 can expert to get higher initial benefits in real terms than those retiring now.

One of the changes the Shrub team proposes for Social Security is to index those first year benefits to prices rather than wages. That would result in a sharp cut in anticipated benefits for future retirees - and of course the further off your retirement, the bigger the cut.

What's more, on Tuesday, Senator Max Baucus (D-MT) released the results of a study performed by the Congressional Research Service at his request that showed that Shrub's proposal
would have pushed seven million seniors into poverty this year, had the plan been in effect since the Social Security program began in 1940. ...

Currently, there are 3.5 million seniors who are living in poverty in the U.S. The report indicates, however, that 10.5 million seniors would be in poverty this year if the plan being seriously considered by the White House had been initiated in 1940, the first year in which Social Security benefits were issued. ...

If this proposal had been in place since the Social Security program began, workers with average earnings who retire at age 65 would be receiving benefits that are 60% lower than those that are currently being paid to them.
The full report can be found here; the report is in .pdf format, as is Baucus's press release linked above. Thanks to Buzzflash for the link.

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