LOS ANGELES, April 9, 2013 ― Aspects of President Barack Obama’s 2014 budget proposal, scheduled to be released tomorrow, reflect a disregard for older workers and the elderly.
If implemented, certain policies in the proposed budget could define Obama’s second term in a negative light. That’s especially since much of what he has in mind undermines the resources on which workers over 50 and senior citizens rely.
First, the entitlement cuts in the crosshairs: Social Security and Medicare. Proposed plans to reduce the Social Security cost of living adjustment (COLA), and strip $400 billion from Medicare over 10 years are part of the strategy to reduce the $16.9 trillion federal deficit by $1.8 trillion over 10 years.
The way the Bureau of Labor Statistics figures it, the use of “Chained CPI” to calculate benefits could reduce their rate of growth by 0.3 percent each year, because it produces a lower estimate of the inflation rate. But the really bad news is that this is cumulative. The longer you receive benefits, the deeper the cuts relative to unchained CPI-U and CPI-W based cost-of-living adjustments that are currently used. So at age 65 you may receive $1,100 in monthly benefits, but in 15 years, at age 80, the chained CPI would reduce the growth of benefit by $56 per month ($672 annually). You live another 15 years to age 95, and that reduction would be $101 per month ($1,212 annually). Because a large percentage of cash outlay for the elderly is out-of-pocket medical expenses, and because these grow faster than even the CPI-U, the costs faced by you in old age will increase more quickly than your benefits, and that difference will compound.
In terms of Medicare, Obama hints at combining Medicare parts A and B (hospital and doctor coverage) to cut costs, as well as reducing payments to drug companies, reducing hospital payments for patients who don’t pay their bills, and asking wealthier patients to pay more for their care.
All of these proposed cuts are warmed over strategies that Obama first presented to Congress during the fiscal cliff negotiations, and administration officials have couched it as a compromise to Republicans. The word “compromise” should be used loosely, as these entitlement cuts are contingent on the approval of tax increases on the so-called wealthy. The House rejected this strategy in 2012, so what makes the President think they will be more amenable in 2013?
Linda Culpepper, an executive assistant in her early 60s expressed her concern. “Based on the overall of Obama’s policies, he is not generous to the older person. I don’t know how he can keep doing cuts and expect any decent treatment for people who have worked hard all their lives, still have life left in them, but are forced to struggle.”
Second, the proposed $3 million cap on individual retirement accounts (IRAs).Older workers took a severe hit to their retirement savings during the economic downturn, and some were looking to double-down on beefing up their retirement savings to regain ground. If this cap on IRAs gets implemented, they can kiss that possibility goodbye.
A small business owner in her late 50s, who asked that her name be withheld declared, “Who can live on Social Security? Unless you have everything paid for, who can live on that? The President’s policies are crippling my ability to earn. His policies are doing nothing to encourage the prosperity of small business—the entrepreneurial spirit. Most people who are self-employed are not thinking of retirement or of the possibility because of this.”
Again the President’s focus is eliminating loopholes for the so-called wealthy, but in the long run, this would have more of a detrimental effect on small business owners, the middle class, and those older individuals who have even less time to bounce back from the devastating effects of the last five years. Couple that with the proposed COLA adjustments, and the possibility of retirement, or any retirement at all, drifts further and further away.
The first baby boomer applied for Social Security early retirement in October 2007, and six years later, scores more are either reaching retirement age or opting for early retirement. According to a March 21, 2013 bulletin from the Heritage Foundation, those same baby boomers will increase the size of Medicare spending over the next 25 years, increasing the number of beneficiaries from 51 million (as of 2012) to 81 million in 2030. Any savings that may be gained through these proposals may not offset the increase in beneficiaries over time. In 18 years, one in five Americans will be age 65. Barring a later retirement age, this still adds up to less workers supporting more retirees.
Entertainment attorney/producer Bruce Nahim, 60, sees the President’s policies in this light: “I think he sees older people as a drain on resources, so his policies work toward hastening their demise. Siphoning $716 billion from Medicare to fund Obamacare is one example of this.”
The President said in his weekly address on Saturday that his proposal is “not an ideal plan.” The announcements, and statements by his administration, have been met by tepid protestations from Republican lawmakers, and strong objections from left-wing groups like MoveOn, AARP, and the AFL-CIO. Any way you slice it, there is no joy in Mudville, and if these proposals become reality, senior citizens and those over 50 will be the ones most affected.
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