Fiddling with the cost-of-living calculations isn't the way to solve Social Security's problems, one of the top AARP officials told an Omaha audience of 300 Wednesday.
Robert Romasco, president of Washington-based AARP, spoke at the Salvation Army Kroc Center, telling listeners they should reject an idea that has emerged in Washington called “Chained Consumer Price Index.”
Chained CPI was proposed by President Barack Obama and endorsed by others to slow increases in benefits. AARP says it simply lowers Social Security cost-of-living increases by building in assumptions that recipients will substitute less expensive consumer goods and services as prices rise. It is a stealth benefit cut of $146 billion over 10 years, Romasco said.
“Retirees are already making all the substitutions they can; they are already on hamburger,” Romasco said. “And you can't substitute for doctor visits, prescription drugs and electricity.”
AARP, formerly known as the American Association of Retired Persons, estimates Social Security will be able to pay full benefits for the next 20 years, but only 75 percent after that.
Romasco said Chained CPI would cut the 2014 Social Security cost-of-living increase of 1.5 percent to 1.2 percent, reducing benefits for the 313,000 Nebraskans and 584,000 Iowans receiving benefits. The average annual Social Security benefit is about $15,000, according to AARP.
AARP hasn't proposed or endorsed a single, comprehensive Social Security reform package. The group's website includes a paper on 12 proposals that have made the rounds in recent years, with AARP commentary on the pros and cons of each.
Some of the proposals revolve around small adjustments to revenue and benefits, a prospective solution championed by Peter Diamond, a professor emeritus at the Massachusetts Institute of Technology and the 2010 Nobel laureate in economics.
Diamond said in an interview that Social Security can easily be returned to what he calls “actuarial balance” via modest increases in payroll taxes and small reductions in benefits.
“Nips and tucks is what they amount to,” Diamond said of his plan.
One of his proposals, made in 2003, was to address the burden of higher life expectancy by collecting half of the longer-life shortfall via higher payroll taxes and half via modest benefit decreases upon retirement to those 59 years and younger.
AARP conference attendee Judy Dittmer of Omaha said any reform plan will have snags.
“There isn't a government program that doesn't,” she said.