Chained CPI Imposes Painful Social Security Benefit Cuts and a Benefit Bump-Up Provides Only Limited

he National Women’s Law Center has released a new report, “Chained CPI Imposes Painful Social Security Benefit Cuts and a Benefit Bump-Up Provides Only Limited Relief,” available here: http://www.nwlc.org/resource/chained-cpi-imposes-painful-social-security-benefit-cuts-and-benefit-bump-provides-only-lim. It analyzes how effective the “20-year benefit bump-up” proposed in the Bowles-Simpson report would be in protecting vulnerable beneficiaries from the impact of switching to the chained CPI. (NWLC’s other materials and infographics about the chained CPI are available here: http://www.nwlc.org/chained-cpi-what-it-and-what-it-means-women.)

NWLC’s new analysis finds that for the typical single elderly woman – a woman whose initial benefit is $1,100 per month, the median benefit for single women 65 and older:

• The cut from the chained CPI would reduce her monthly benefits by an amount equal to the cost of one week’s worth of food each month at age 80. She would still have two years to wait before receiving any help from the bump-up.

• The Bowles-Simpson bump-up would restore her monthly benefits to current-law levels for only two years – and then her benefits would fall behind again.

• By age 95, the cut in her benefits would equal the cost of three days’ worth of food each month.

The report also explains that the bump-up would provide no relief to most of the poorest elders who rely on Supplemental Security Income (SSI). SSI beneficiaries would get a double hit from the chained CPI, because it is used to adjust both the initial benefit level and subsequent benefits. But every additional $1 in Social Security benefits reduces SSI benefits by $1 – so a small increase from the bump-up would provide no additional income to most SSI beneficiaries. And some SSI beneficiaries could be even worse off, if the bump-up in their Social Security benefits pushed them slightly above the SSI eligibility threshold – and they lost automatic Medicaid eligibility.

People disabled at an early age also would be severely impacted by the chained CPI. The Bowles-Simpson 20-year bump-up would apply to recipients of disability benefits, starting 20 years after the disability determination. But some proposals for a “birthday bump-up,” such as the proposal in the Rivlin-Domenici deficit reduction plan, would provide no help to recipients of disability benefits.

Joan Entmacher
Vice President for Family Economic Security