Delegations Wary that COLA Reductions will cut future Social Security benefits increases

N.M. Delegation Wary Of COLA Reductions
By Michael Coleman / Albuquerque Journal Washington Bureau
Nov 8, 2011

WASHINGTON – New Mexico’s congressional delegation is leery of a federal debt-reduction proposal floated this week that would cut future increases in Social Security benefits.

The cut would stem from a new way of measuring inflation that also would increase taxes for most American families. All of it still is in the discussion stage.

The new measure would reduce Social Security cost-of-living adjustments, or COLAs, by an average of 0.3 percentage points each year, according to the Social Security Administration. Next year’s increase, the first since 2009, will be 3.6 percent, starting in January.

Taxes would go up by $60 billion over the next decade because annual adjustments to the tax brackets would be smaller, resulting in more people jumping into higher tax brackets because their wages rose faster than the new inflation measure, The Associated Press reported. Annual increases in the standard deduction and personal exemptions would become smaller.

The proposal to adopt a new Consumer Price Index is one of the few options supported by both Democratic and Republican members of a joint supercommittee in Congress working on a plan to reduce government borrowing, according to the AP.

All four Democrats in New Mexico’s congressional delegation, as well as the delegation’s lone Republican, expressed initial disapproval of the idea, although all said they would have to consider the proposals as part of a larger package of deficit and debt reduction recommendations expected from the supercommittee later this month.

Tinkering with Social Security – especially in a way that could negatively affect benefits – is seen as a political land mine by many members of Congress, most of whom view senior voters as key to their re-elections.

Sens. Jeff Bingaman and Tom Udall, New Mexico Democrats, said the proposal, at least as a stand-alone idea, is unacceptable.

Bingaman, who is retiring next year, and Udall have said any deficit-reduction plan they might support would need to include a combination of spending cuts and revenue increases.

“Realistically tackling our national debt requires us to put everything on the table, but only if we take a balanced approach,” Udall said. “While I could consider reasonable changes to the cost-of-living adjustment, pushing our seniors into poverty is a nonstarter.”

Rep. Steve Pearce, a New Mexico Republican and who has advocated deep spending cuts to balance the federal budget, expressed skepticism about the proposal but said he would review the entire plan of the supercommittee before making judgments about its work.

“I have concerns with using the chained Consumer Price Index (the new proposal) as the basis for adjusting federal spending and COLAs,” Pearce said. “Such a proposal would cause a cost shift to Social Security that I fear many seniors would find difficult to bear.”

Reps. Martin Heinrich and Ben Ray Lujan, the two other New Mexico Democrats, also sounded leery of the proposal Monday.

“I have serious concerns that such a proposal would place the burden of reducing the deficit on the backs of seniors and low-income families at a time when so many are struggling to make ends meet,” Lujan said.

“Rep. Heinrich has concerns about shifting to a chained CPI – especially because of potential impact it would have on our most vulnerable seniors and women,” said Heinrich spokeswoman Whitney Potter.

If adopted across the government, the inflation measure would have widespread ramifications. Future increases in veterans’ benefits and pensions for federal workers and military personnel would be smaller. And over time, fewer people would qualify for Medicaid, Head Start, food stamps, school lunch programs and home heating assistance than under the current measure.

Despite fierce opposition from seniors groups, the proposal is gaining momentum partly because it would let policymakers gradually cut benefits and increase taxes in a way that might not be readily apparent to most Americans.

Changes at first would be small – the Social Security increase would be cut by just a few dollars in the first year. But the impact, as well as savings to the government, would grow over time, generating about $200 billion in the first decade and much more after that.

The proposal to adopt a new Consumer Price Index was floated by the Obama administration during deficit reduction talks in the summer. Now, the deficit-reduction supercommittee of six Democrats and six Republicans is struggling to come up with a plan to reduce government red ink by at least $1.2 trillion over the next decade. Changing the inflation index alone would put them a sixth of the way there.