A Social Security cut could lead to higher Latino and black elder poverty

John Lewis Slams Obama’s Fiscal Cliff Proposal to Cut Social Security

By Lauren Victoria Burke
Crew of 42
December 19, 2012
http://tinyurl.com/c2rth2a

Rep. John Lewis quickly came out in opposition against
President Obama’s latest fiscal cliff proposal which
included a cut to Social Security.

“After seniors suffered through two years during some
of the roughest economic times in recent American
history without seeing a Cost of Living Increase, there
are some suggesting a significant change to the formula
used to calculate cost of living adjustments for Social
Security beneficiaries.  An obscure term is being used
to refer to this cut—“the chained Consumer Price Index
or chained CPI”.

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FOR IMMEDIATE RELEASE

December 18, 2012

Grijalva Rejects Potential Social Security Benefit Cuts Through “Chained CPI” in Latest Floated Year-End Financial Agreement

Washington, D.C. – Rep. Raúl M. Grijalva today released the following statement on the potential inclusion of a so-called chained Consumer Price Index feature in the latest floated version of a financial agreement.

“Federal law has always prohibited Social Security from contributing to the deficit. Any talk of shrinking the program to ‘save money’ is flawed from the start because Social Security is not part of the national budget in the same way as military spending – it’s paid for through a dedicated payroll tax separate from general budgeting.

“Some have suggested that Social Security benefits should be based on a chained Consumer Price Index (CPI), which assumes that when the price of one item rises, people buy something else – no matter how popular or necessary that original item might be. If this change goes into effect, Social Security benefits would stop reflecting the rising prices of popular goods.

“The average Social Security recipient rakes in a whopping $13,000 a year. If we pass chained CPI, projected annual cuts for a typical retiree would be about $560 a year by age 75, $984 a year by age 85 and $1,400 a year by age 95.

“The less money our Social Security recipients – including 9 million veterans – are able to spend, the less money goes to the businesses that create jobs. Chained CPI makes life harder for millions of retirees, weakens Social Security and doesn’t reduce the deficit by a penny. It’s a Beltway fig leaf that I will never support, and I call on my colleagues to make their feelings known as soon as possible before this becomes yet another piece of conventional wisdom that makes things worse.

“Lifting the cap on high earners paying into Social Security is a real fix that would make the program solvent indefinitely. If we want to talk about solutions, let’s talk about that, not inventing reasons to take money from American retirees.”

The Icelandic Success Story

December 8, 2012

http://azizonomics.com/2012/12/08/the-icelandic-success-story/

Emotionally, I love Iceland’s financial policies since the crash of 2008:

Iceland went after the people who caused the crisis — the bankers who created and sold the junk products — and tried to shield the general population.

But what Iceland did is not just emotionally satisfying. Iceland is recovering, while the rest of the Western world — which bailed out the bankers and left the general population to pay for the bankers’ excess — is not.

Bloomberg reports:

Few countries blew up more spectacularly than Iceland in the 2008 financial crisis. The local stock market plunged 90 percent; unemployment rose ninefold; inflation shot to more than 18 percent; the country’s biggest banks all failed.

This was no post-Lehman Brothers recession: It was a depression.

Since then, Iceland has turned in a pretty impressive performance. It has repaid International Monetary Fund rescue loans ahead of schedule. Growth this year will be about 2.5 percent, better than most developed economies. Unemployment has fallen by half. In February, Fitch Ratings restored the country’s investment-grade status, approvingly citing its “unorthodox crisis policy response.”

So what exactly did Iceland do?

First, they create an aid package for homeowners:

To homeowners with negative equity, the country offered write-offs that would wipe out debt above 110 percent of the property value. The government also provided means-tested subsidies to reduce mortgage-interest expenses: Those with lower earnings, less home equity and children were granted the most generous support.

Then, they redenominated foreign currency debt into devalued krone, effectively giving creditors a big haircut:

In June 2010, the nation’s Supreme Court gave debtors another break: Bank loans that were indexed to foreign currencies were declared illegal. Because the Icelandic krona plunged 80 percent during the crisis, the cost of repaying foreign debt more than doubled. The ruling let consumers repay the banks as if the loans were in krona.

These policies helped consumers erase debt equal to 13 percent of Iceland’s $14 billion economy. Now, consumers have money to spend on other things. It is no accident that the IMF, which granted Iceland loans without imposing its usual austerity strictures, says the recovery is driven by domestic demand.

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