Monday, April 8, 2013

My Mom and Social Security

By Blueberry T

My mom is 89 years old and she receives $971 per month from Social Security, from which is immediately deducted $249/month for Medicare and supplemental coverage.  This leaves $722/month for: housing; food; heat; electricity; water; telephone/internet/TV; additional medical expenses; clothes; shoes; personal and household necessities; and any other expenses.  She has a modest amount of savings, which was helping bridge the income gap but is currently earning close to zero interest.

Well, she couldn’t do it; she couldn’t make ends meet. She ran up big credit card bills, and then racked up interest charges that were completely unaffordable.  I discovered this when I visited her last spring and went over her finances with her – it was not a pretty picture!  So, we had to take most of her savings to pay off the credit cards. Now, we’re tapping into the remaining principle each month to make ends meet, but at least she isn’t running up the credit card bills. I hope. (I canceled the accounts and cut the cards up.)    

We’ve been over her expenses many times, trying to figure what can be cut.  We got rid of all the non-necessities. Until last year, she had an old car and paid for gas, maintenance and insurance.  She made the decision to stop driving when she turned 88, in part for safety reasons and in part because she could no longer afford having a car. That saved a lot of money, but unfortunately, she is now almost entirely a shut-in, as the elder-transportation system in her community is so overbooked that she has been on the waiting list for more than a year.

She has always been a kind and generous soul, and the downside of that is that she is easy prey for every con-artist, scam, and even legitimate charitable organizations. They call constantly for donations, and each time, she gave. That had to stop. Now, she gives small donations to just a few charities and gives $5 to her church every week, even though she can no longer attend services. It saddens her that she cannot give more, though.

She also sends money to the family for birthdays and holidays – a matter of both generosity and pride. We tried not cashing the checks, but that upset her as she wants to be able to do this. Let’s just say that now, some of these gifts might find their way back into one of her own accounts.  

Her meager savings were in CDs that were earning 4%, but when they matured, the new rate was close to zero. The low interest rates are bad enough, but holding them so low for such a long time is really hurting elderly people like my mom. She can either accept very low interest, and spend down her principle, or shift her money to riskier investments. That is because the financial sector and its regulators have jointly concluded that interest rates should be kept near zero, going on 5 years now and projected until at least the end of next year, to address the financial calamity that they caused and/or abetted. My mom and the rest of us are paying the price for their high crimes and misdemeanors. (Actually, I think they were all felonies, but Eric Holder says they’re “too big to jail.”  Fortunately, not everyone agrees.)

As if things aren't tough enough, now President Obama proposes that Social Security benefits should be "adjusted" lower by using "superlative" (a misnomer if ever there was) or “chained CPI." This would save $130 billion over 10 years.

How do those savings materialize? By cutting benefits, with the cuts "compounded" over time and thus hitting the eldest recipients the hardest.  Robert Reich explains. (Here and here is more on the subject and here is AARP’s calculator to estimate the reduction in benefits over time.) The fallacy is that elders spend a high percentage of their income on medical costs, which have a high rate of inflation; elders cannot simply substitute for cheaper options as the chained CPI formula assumes.

To many, this feels like a betrayal by the President of all those who worked so hard to elect him, and of the promises he made on the campaign trail. (To be fair, it was Joe Biden who "flat guaranteed" no changes to Social Security during last year's campaign; then-candidate Obama said that raising the income cap was the preferred option back in 2007-08.) The blogosphere is aflame with scathing critiques of President Obama’s decision to cut Social Security benefits. I want to give him the chance to explain himself.  If it is NOT a betrayal, then I say: "Mr. President, please explain yourself. In detail. Sooner rather than later. Please."

This is not an abstraction for me and my family, nor for millions of other Americans, especially older women. I realize that my mom is probably not going to live long enough to have the new chained CPI proposal affect her Social Security income by large amounts. That will be my generation’s problem and that of our kids, and theirs. But my mom’s story is pretty typical and will play out for many millions of Social Security recipients in the future. How would someone at her benefit level survive on ~10% less income per year, when she can’t get by now? They will be consigned to poverty. 

Chained CPI will hit women especially hardWomen typically receive lower Social Security benefits because women earn less than men, even for comparable work; many women (like my mom) were stay-at-home mothers or worked part-time for a significant part of their “working” years, thus building a lower earnings record on which their own benefits are calculated; and many women are only eligible to receive half their husband’s benefit. Women are more dependent on Social Security for a large percentage of their retirement income, and women live longer, and will thus be subject to the larger benefit cuts over time that will occur with chained CPI. 

I realize that President Obama has said that he will carve out some exemptions from “chained CPI” to protect the vulnerable, but what on earth does that mean?  Enough with being cagey about the exemptions. I need to know what that means; we all need to know. 

We need to see for ourselves and judge for ourselves whether this is a fair proposal. I don’t want to have a knee-jerk reaction, but the lack of information from the Administration makes it hard not to. My hope, perhaps delusional, is that he will actually propose increases in benefits for people like my mom at the low end of the benefit curve, protect the disabled, and save the benefit reductions for those who have substantial income in addition to Social Security.  If so, it may be a reasonable reform. I realize not everyone will agree!

We will still be left to wonder why it is not a better “fix” to raise the cap on income subject to  FICA taxes; it seems like so much more reasonable an approach to resolving whatever issues Social Security may have in the future.  The President himself said so (when he was a candidate). Otherwise, it seems to me that we’re really talking about definitely cutting benefits now to avoid possibly cutting benefits later. What a deal! (Not.) And, as Senator Bernie Sanders so often reminds us, Social Security does not add to the deficit. The Senate has now voted in opposition to chained CPI (in a largely symbolic vote).

At this point, I think it is fair to say that the President’s chained CPI proposal is immensely unpopular with progressives, his base and the elderly.  AARP did some surveying about it; here is their report. I ask President Obama - why should the Congress listen to the American people on gun reform, as you have repeatedly argued - but yet you ignore the American people on Social Security? 

Some claim this is President Obama's strategy to show how uncompromising the GOP is. [More here on Obama bluffing.] We already knew that they are uncompromising. What we didn't know that a Democratic President would undermine one of the most successful social programs in history, a signature Democratic accomplishment that has saved millions of Americans from poverty. That is a bad, bad message.

As was true with mischaracterizations of the Affordable Care Act (like Sarah Palin’s “lie of the year” about “death panels”), President Obama is not doing himself any favors by keeping his cards close to his chest on this.  He is allowing others to write the narrative, instead of doing so himself. It sure would help if he would explain why he thinks this is reasonable, and what exemptions he proposes, rather than leaving us to guess as to what he means, or conclude that he is betraying us and lambaste him as "the Democratic President who cut Social Security."      

So, why should we not oppose this?  Please proceed, Mr. President.

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