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Welcome to the first in the Committee’s hearing series on the President’s and other bipartisan entitlement reform proposals.
Americans deserve action to protect and preserve Social Security.
According to the Social Security Board of Trustees, beginning in 2033, Social Security will be unable to pay full benefits. In other words, when today’s 47-year-old workers reach their full retirement age in 2033, they and everyone else already receiving benefits face a 25 percent benefit cut unless Congress does its job and fixes Social Security.
The inclusion of using a more accurate measure of inflation in President Obama’s budget is a welcome acknowledgement that we must take action to make sure that Social Security is there for future generations.
The purpose of this hearing is to have a full discussion of a policy with wide bipartisan support – more accurately measuring inflation in order to help fix Social Security.
Congress passed the first benefit increase in 1950 and later increased benefits 10 other times before passing a law in 1972 that created a formula to determine cost of living adjustments or COLAs automatically.
The Social Security COLA increases benefits each year that there is inflation. If there is no inflation, there are no COLAs as was the case in 2009 and 2010. But if prices should fall, benefits cannot be reduced.
At the time automatic COLAs were enacted, the Bureau of Labor Statistics or BLS, only produced one measure of inflation, which remains the inflation measure used to determine Social Security COLAs today. However BLS has since developed other measures including the chained consumer price index or chained CPI, which we will discuss today.
The President’s own budget says, “Most economists agree that the chained CPI provides a more accurate measure of the average change in the cost of living than the standard CPI.”
In testifying before the full Ways and Means Committee last week, Treasury Secretary Jack Lew stated, “The chained CPI is a more accurate measure of inflation in that it does a better job of reflecting the substitution of goods in response to relative price changes.”
Today, we will hear from the Commissioner of BLS why that is.
Some say using the Chained CPI to measure inflation would result in a benefit cut, but that’s just plain false.
The truth is that benefits will continue to grow, only more slowly than under the current less accurate measure. Only in Washington, would that be called a benefit cut.
That said, I fully recognize and am sensitive to the impact this change could have on some beneficiaries’ pocketbooks, especially those who receive benefits for a long time. But the fact of the matter is the current measure overstates inflation, and ignoring that is simply unfair to our children and grandchildren who rightly expect us to make sure that Social Security will be there for them.
Let me be clear: determining the adequacy of Social Security benefits, especially for those who are most vulnerable, is an important discussion to have. And we will as part of this hearing series on bipartisan entitlement reforms.
The President likes to say that if we agree on a policy, then we should act and not let our differences hold us up.
We owe it to every American to carry out our responsibility and carefully examine each bipartisan policy option. And we will through this hearing series.