Three years ago, spending for Social Security exceeded dedicated tax revenues, and the gap has been growing since then, according to the Congressional Budget Office. Spending will exceed tax revenues by 20 percent by 2030.
President Barack Obama has proposed changing the inflation measure used in the Social Security program, the government’s largest single program, to reduce costs. He wants to switch from using the traditional consumer price index, which is calculated by the Bureau of Labor Statistics, to the chained consumer price index, which grows more slowly.
In the past decade, it grew an average of about 0.25 percentage points less than the traditional CPI each year, according to the Congressional Budget Office. Using chained CPI for all governmental programs starting in the 2014 calendar year would reduce the deficit by a total of $340 billion in the next 10 years, the Congressional Budget Office said in recent testimony before Congress — $216 billion in reduced spending and $124 billion more in revenues from the 2014 through 2023 fiscal years. The estimate pre-dates the release of the president’s budget plan, which would use chained CPI for a more limited set of programs.
Other options for preserving Social Security is to lift the ceiling on income subject to Social Security taxes from the current $113,700 and increasing the retirement age.
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