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Don’t Cheat Your Grandma
Targeted cuts
that will shrink
Social Security
by
odically raised as inflation goes up.
This is logical because, like every
one else, retirees need more money
to buy goods and services when
prices rise. The increase is called the
annual cost-of-living adjustment
(COLA). This variable has always
been calculated using something
called the Consumer Price Index
(CPI).
The CPI is merely an estimate of
how much more, percentage-wise, it
will cost now to buy the same goods
you bought last year. But some
economists say the CPI is flawed
because it doesn't account for
changes in consumers' buying hab
its as prices increase. They ques
tion whether you'll do what the CPI
assumes and buy the same goods
year-to-year even if prices rise.
The chained CPI supposedly
accounts for expected changes in
buying habits when prices increase.
For example, you might start making
chili with beans instead of meat if
ground chuck starts costing too
much. This alternative approach
M artha B urk
Despite the fact
that Social Security
isn't contributing a
penny to the fed
eral budget deficit,
fiscal hawks have
convinced Presi
dent Barack Obama that we must
slash its benefits to save the coun
try. He's joined the sky-is-falling
crew in a crazed search for targeted
cuts that will shrink Social Security
outlays.
One idea he's considering is a
magic trick known as "chained CPI."
Most people don't understand
the economic-speak well enough to
grasp what this sleight of hand
would do to your Social Security
check. Here's how it works.
Social Security benefits are peri
usually results in a number that's at
least 0.25 percent lower than the
regular CPI.
If the government started using
this method to calculate Social Se
curity benefit increases, it would
mean those cost-of-living adjust
ments would be lower. That would
save the government money be
cause S ocial S ecu rity checks
wouldn't increase as much as they
otherwise would. In turn, this would
slow deficit growth.
There's little disagreement that
chained CPI would in fact do what
its proponents say it would.
The problem with using it to cal
culate Social Security COLAs is that
it's tied to the spending habits of
workers.
Retirees are apt to spend a larger
portion of their income for housing
and health care than workers do.
They don't commute, for example,
so they spend less on gas. And
housing and health care costs are
rising much faster than other ex
penses. They're also the two areas
where people have the least flexibil
ity in beans-for-meat type substitu
tions. It's unrealistic to expect retir
ees or the disabled to move every
time their rent or utility bills spike.
And if they need a new hearing aid,
what's the alternative?
The bottom line for seniors is
that chained CPI is just like a pay cut
that compounds as the years go by.
The longer you live, the less you
get.
While this method will hurt all
retirees, it will hit women harder
than men. The A ARP is running ads
against the change to a chained CPI,
featuring a variety of women with
the lines, "I am a grandmother. I am
a widow. I am a woman. I am not a line
item on a budget." Here are some
key reasons why this accounting
trick will hurt women most:
Thanks to the gender pay gap,
women already have lower average
annual benefits ($ 13,000) than men
($17,000).
Women live longer and will see a
greater share of the cuts with every
passing year. More than two out of
three Social Security beneficiaries
ages 85 and up are female.
Women are less likely to have
other sources of retirement income,
such as pensions and savings, so
Social Security is more apt to ac
count for nearly all of their income.
Lower payments could push more
women into poverty. In 2011, Social
Security kept roughly 38 percent of
older women out of poverty, com
pared to 32 percent of older men.
Whether the A ARP and women’s
advocates can prevail in this fight
over who is going to pay for the
d e fic it h aw k s' o b se ssio n is
anybody's guess. But younger
people ought to take up this cause
too.
After all, if grandma's benefits
are cut, who has to take up the
slack?
Look in the mirror.
Martha Burk is the director o f
the C o rp o ra te A c c o u n ta b ility
Project fo r the National Council o f
Women's Organizations.
A Return to Multigenerational Living
Moving in with
family has its
benefits
by
nomic advantages, m ultigenera
tional families may become the new
norm in today’s post-re
cession economy.
A recent U.S. Census
Bureau study shows that
4.3 million households
now contain m ultiple
generations — a 13 per
cent increase from 3.8
million households in 2008.
Moving in with family cushions
the blow of a job loss by giving
newly laid-off workers valuable time
to regroup. The unemployed have
two options going forward: search
for a new job, or undergo additional
training. Both of these options can
take a long time.
Sharing a roof with family makes
it easier to go back to school or
pursue an internship without wor
rying about rent. Instead of scram
bling to take a low-wage job to make
D edrick M uhammad S r .
It’s easy to forget that
m ultigenerational h o u se
holds were once the rule, not
the exception. The 1950s nuclear
family was only possible because a
thriving middle class and social
safety net fostered newfound eco
nomic mobility.
But the middle class has shrunk
considerably in the last few decades,
besieged by years of stagnant
wages, rising debts and a growing
concentration of wealth at the very
top.
I f s clear that nuclear families no
longer make sense for everybody.
In fact, thanks to its compelling eco
ends meet, those living in multigen
erational households can plan for
the long-term and hold out for a
wealth-building position that pro
vides higher salaries, health insur
ance anda401(k).
Living with more people also cre
ates more financial savings. Paying
for Internet, cable, heat and other
utilities for one home eliminates
duplicate bills in several different
homes. Sharing mortgage and car
payments among more people also
greatly eases the financial burden
for everyone.
Living with family can also sub
stantially cut down on domestic la
bor — families living with elderly
relatives save on nursing-hom e
payments, while working mothers
can cut child care costs. Household
chores such as cooking, cleaning
and maintenance work can be less
time-consuming with more people
USPS 959-680
P u b l is h e r :
E d it o r :
Mark Washington
M ic h a e l L e ig h to n
E xecutive D irector :
Rakeem Washington
C rea tive D irector :
P a u l N e u fe ld t
O ffice M anager /C lassifieds :
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tionately affected by the Great Re
cession — blacks, Hispanics and
young adults.
Living with family has its own set
of challenges, but its benefits may
provide a lifeline for many members
of the endangered middle class.
Dedrick Muhammad Sr. is the
director o f the NAACP Economic
Department.
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Leonard Latin
S taff W riter /P hotographer :
around to help out.
Overall, moving in with relatives
translates to tangible benefits: the
multigenerational household pov
erty rate is substantially lower than
that of other households.
Moreover, a study by Pew shows
that multigenerational living brings
the greatest benefits for economi
cally vulnerable groups dispropor-
Cari Hachmann
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