How Will Obama's Budget Proposal Effect Social Security?
In the last few weeks, President Obama has provided a budget plan, which among other things, plans for changes for social security benefits. The country is running off of a multitrillion dollar deficit and everyone has been looking for ways to shrink it. Obama's budget calls for both an increase of taxes for those making a certain amount, as well as cutting the amount of money that goes to varies entitlement programs. In the case of social security, the President's budget does not just cut benefits. Instead Obama's budget suggests a different way of calculating benefits so people are getting enough, but not more than necessary. Every year, social security, retirement as well as disability, benefits are reviewed to make sure people are receiving an appropriate amount of benefits. Right now, when it is necessary, benefits are increased to take into account cost of living increases as established by the Consumer Price Index (CPI). The CPI monitors the prices of consumer goods for fluctuation in price. It looks at items in certain areas and compares the costs of like items from two years previous. For example, the cost of bread in New York today would be compared to the cost of bread in New York in 2011 and depending on how much the prices have changed, there may be an increase of benefits. This increase would only apply to New York. Other areas have different price ranges and therefore require their own comparisons, which is part of why benefits are different per person and region. Because CPI is updated only even two years, there are a lot of price fluctuations that are not accounted for. Under Obama's new budget, social security benefits would be based on an alternate CPI known as the Chained CPI. It is very similar to the currently CPI except for two things. First, unlike the standard CPI, the Chained CPI is updated monthly. This means benefits can be updated more often if necessary to make sure people have the right amount of benefits. The second way the Chained CPI differs from the CPI is that it takes into account changes in purchasing when prices change, unlike the CPI. For example, when the price of beef increases, people are more likely to buy less beef and purchase chicken instead, because it is cheaper. By taking these changes into account, the government can give out less in benefits. This is because although the cost of living may increase by one amount, the increase for an individual should be less assuming they change their habits. There are mixed feelings on whether using chained CPI is a good plan. Between negotiations, alternate budgets and lobbying efforts, what is ultimately decided regarding the budget and social security could be completely different than Obama's current plan. The implementation of other laws and regulations could also effect your benefits, even if they do not seem related social security. There is a lot of information available and it is constantly changing, but it is not always clear if or how it will relate you. If you are considering applying for disability benefits in Georgia, you should contact our experienced attorney. See Related Posts: Back to the Basics: SSI v. SSDI Applying for Social Security Disability Insurance