Fiscal Cliff Talk Shows Seniors Could Suffer Soon

Wednesday, 19 Dec 2012 07:37 AM

By Michael Carr

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Social Security is a much-maligned federal program that provides a lifeline for many senior citizens.

Benefit payments are indexed to the consumer price index (CPI) and move higher with inflation. Cost cutters have proposed linking the benefits to a different price index, which has risen at a lower rate and would reduce the annual increases in benefits.

Data do show that the CPI is not an accurate measure of inflation that senior citizens face. However, it does not overstate inflation. The official index understates the rate of price increases experienced by senior citizens.

Alert: End of America's Middle Class a Startling Reality. Read More Here.

The Bureau of Labor Statistics tracked inflation for seniors and created an experimental CPI. They found that inflation was higher for those over 65 years of age.

Seniors spend significantly more on healthcare, and their housing costs are also higher than average. The study found that seniors spend less on food, clothing and recreation. Although the lower spending in these areas might be related to the reality that funds are not available after paying for shelter and healthcare, there is no reason offered in the study.

Average Inflation for seniors was about 0.26 percent higher per year than the Social Security benefits assumed. There is some waste in the program, which offers an average annual benefit of less than $15,000 to seniors.

Cutting benefits for all on flawed assumptions about the cost of living seems unfair even when spending must be constrained. Similar savings could be obtained from means testing and reducing benefits for the wealthy to ensure a safety net remains in place for the needy.

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