December 22, 2014

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Residents, politicians split on Obama’s Social Security plan

President Barack Obama’s plan to cut annual Social Security Cost of Living Adjustment would reduce the deficit by $230 billion over 10 years, but some local seniors say Obama, a Democrat, is trying to balance the budget on their backs.

“I’d have to live on a lot less,” said Pat Fallon, one of several Social Security recipients at the North Ridgeville Senior Center who criticized the proposal Thursday. “It’s wrong.”

Under the change, part of Obama’s $3.77 trillion budget proposal, COLA, would be calculated using a “chained” Consumer Price Index rather than the rate of inflation. The average earner retiring at 65 would lose $658 each year until they turned 75 under Chained-CPI, and take a $1,147 cut by 85, according to the Social Security Administration. By the time they reached 95, they would lose $28,000 cumulatively.

Chained-CPI proponents said it more accurately calculates how consumers buy cheaper goods when prices rise than the current formula, which they say over compensates recipients.

“We have to make some adjustments,” said U.S. Rep. Bob Gibbs, R-Lakeville, who said he supports the change beginning in 2023. “When orange (prices) go through the roof, they might buy grapefruit juice.”

Economists from the liberal Economic Policy Institute disagree. Using government numbers, the institute calculated that 65-and-older households spend roughly three times what the rest of the population does on health care, measured as a share of total spending. Between 1989 and 2007, health care costs have risen nearly twice as fast as overall inflation — growing 100 percent over that timespan compared with 53 percent growth in overall prices of consumption goods.

“Elderly and disabled people spend a greater share of their incomes on necessities such as health care, rent and utilities, and since this population is less mobile, a chained COLA based on the spending patterns of workers or the general population may overestimate the ability of Social Security beneficiaries to take advantage of cheaper substitutes,” said a Nov. 20 letter on the institute website signed by 250 economists and 50 Social Security experts opposing Chained-CPI.

Fallon, a 68-year-old North Ridgeville resident, said she worked at a private social services agency before retiring last year. Fallon said a significant portion of her income comes from Social Security and most of her budget is spent on food, medication, rent and utilities. Fallon said she sometimes eats free meals at local churches and at community organizations to save money. Fallon said the change would have a ripple effect on churches and charities that assist elderly people.

“You’re going to affect the whole society,” she said. “You’re not going to be able to give to charity because it’s a choice between you eating or giving to someone else,” she said.

The deficit has shrunk from about $1.3 trillion to a projected $845 billion this year, under Obama, according to the nonpartisan Congressional Budget Office, and Obama said Wednesday that his budget meets Republicans “halfway” on deficit reduction. “I hope that Republicans will come forward and demonstrate that they’re really as serious about the deficits and debt as they claim to be,” Obama said.

The budget and Social Security change drew praise from House Speaker John Boehner, R-West Chester, and Senate Minority Leader Mitch McConnell, R-Ky., as well as from Republicans who represent Lorain County such as Gibbs, U.S. Rep. Jim Jordan, R-Urbana, and U.S. Sen. Rob Portman, R-Cincinnati. However, Democrats who represent Lorain County blasted the plan.

U.S. Rep. Marcy Kaptur, D-Toledo, who represents Lorain, said Thursday that millions of elderly Americans are struggling financially. “The lowest-income citizens in this country are women over the age of 85, and I would never vote to take a penny away from them,” she said in a House floor speech.

Rita Price, senior center director, agreed that many elderly people are struggling. She said they’re living longer and spending more on health care. Price said she gets calls from clients who spend $1,000 per month on medication.

“I’m surprised how some of them survive,” Price said. “Sometimes we just shake our heads and wonder how they can make it out there.”

Contact Evan Goodenow at 329-7129 or egoodenow@chroniclet.com.