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89–587 2016

THE PRESIDENT’S AND OTHER BIPARTISAN 

ENTITLEMENT REFORM PROPOSALS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON SOCIAL SECURITY 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

APRIL 18, 2013 

Serial 113–SS3 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

DAVE CAMP, Michigan, Chairman 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

TODD YOUNG, Indiana 

MIKE KELLY, Pennsylvania 

TIM GRIFFIN, Arkansas 

JIM RENACCI, Ohio 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

ALLYSON SCHWARTZ, Pennsylvania 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

JENNIFER M. SAFAVIAN, Staff Director and General Counsel 

JANICE MAYS, Minority Chief Counsel 

SUBCOMMITTEE ON HUMAN RESOURCES 

SAM JOHNSON, Texas, Chairman 

PATRICK J. TIBERI, Ohio 

TIM GRIFFIN, Arkansas 

JIM RENACCI, Ohio 

AARON SCHOCK, Illinois 

MIKE KELLY, Pennsylvania 

KEVIN BRADY, Texas 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

ALLYSON SCHWARTZ, Pennsylvania 


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C O N T E N T S 

Page 

Advisory of April 18, 2013 announcing the hearing ............................................. 2 

WITNESSES 

The Honorable Erica L. Groshen, Commissioner, accompanied by Michael 

W. Horrigan, Ph.D., Associate Commissioner, Office of Prices and Living 

Conditions, Bureau of Labor Statistics, Department of Labor, Testimony ..... 8 

Jeffrey Kling, Ph.D., Associate Director for Economic Analysis, Congressional 

Budget Office, Testimony .................................................................................... 22 

Ed Lorenzen, Executive Director, The Moment of Truth Project, Committee 

for a Responsible Federal Budget, Testimony ................................................... 44 

Nancy Altman, Co-Chair, Strengthen Social Security Coalition, Testimony ...... 56 

Charles P. Blahous III, Ph.D., Trustee, Social Security and Medicare Boards 

of Trustees, Testimony ........................................................................................ 68 

PUBLIC SUBMISSIONS FOR THE RECORD 

AARP ........................................................................................................................ 92

Center on Budget and Policy Priorities ................................................................. 101 

Consortium for Citizens with Disabilities ............................................................. 116 

National Active and Retired Federal Employees Association .............................. 122 

National Education Association .............................................................................. 125 

National Senior Citizens Law Center .................................................................... 127 

RetireSafe ................................................................................................................. 129

Robert Munson ......................................................................................................... 130 

The Social Security Institute .................................................................................. 131 


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THE PRESIDENT’S AND OTHER BIPARTISAN 

ENTITLEMENT REFORM PROPOSALS 

THURSDAY, APRIL 18, 2013 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON SOCIAL SECURITY, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 9:31 a.m. in Room 

B–318, Rayburn House Office Building, the Honorable Sam Johnson [Chairman of the Subcommittee] presiding. 

[The advisory of the hearing follows:] 


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HEARING ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

Chairman Johnson Announces Hearing on 

the President’s and Other Bipartisan 

Entitlement Reform Proposals 

B–318 Rayburn House Office Building at 9:30 AM 

Washington, Apr 11, 2013 

Hearing is the First in the Committee’s Hearing Series on Entitlement Reform 

U.S. Congressman Sam Johnson (R–TX), Chairman of the House Committee on 

Ways and Means Subcommittee on Social Security, today announced the first in a 

series of hearings on the President’s and other bipartisan entitlement reform proposals. This hearing will focus on using the Chained Consumer Price Index to determine the Social Security cost-of-living adjustment. This proposal was included in the 

President’s Fiscal Year 2014 Budget, the report by the National Commission on Fiscal Responsibility and Reform, and the report of the Bipartisan Policy Center’s Debt 

Reduction Task Force. The hearing will take place on Thursday, April 18, 

2013, in B–318 Rayburn House Office Building, beginning at 9:30 a.m. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. However, any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Subcommittee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

Social Security beneficiaries receive an increase in their benefits, known as the 

cost-of-living adjustment (COLA), each year there is inflation. Prior to 1972, Congress enacted increases in Social Security benefits on an ad hoc basis. The Social 

Security Amendments of 1972 (P.L. 92–603) established an automatic process for determining whether a COLA would be provided beginning in 1975. 

The Social Security COLA is based on the percentage change in a measure of inflation known as the Consumer Price Index for Urban Wage Earners and Clerical 

Workers (CPI–W). The percentage change is measured by comparing the highest 

third calendar quarter average CPI–W previously recorded to the average CPI–W 

for the third calendar quarter of the current year. The COLA becomes effective in 

December of the current year and is payable in January of the following year. If 

there is no percentage increase in the CPI–W between the measuring periods, no 

COLA is payable, as happened in 2009 and 2010. In 1975, the CPI–W was the only 

inflation measure produced by the Bureau of Labor Statistics (BLS). Since then, 

other indices have been developed by the BLS. 

In December 1996, a Senate-appointed commission to study the CPI, chaired by 

Michael J. Boskin, Ph.D. (the Boskin Commission) found that both the CPI–W and 

the later developed Consumer Price Index for All Urban Consumers (CPI–U) overstated inflation in a number of ways. The BLS modified the indices to respond to 

a number of the Commission’s recommendations regarding how these two indices 

were measured, but did not address their inability to account for the fact that as 

prices change, consumers will adjust their spending habits across categories of goods 

(e.g., if the price of beef goes up, consumers might buy pork instead). 

In 2002, BLS introduced the Chained Consumer Price Index for All Urban Consumers (C–CPI–U), which accounts for consumer substitution between CPI item categories, as well. According to the 2003 BLS report, Introducing the Chained Consumer Price Index, the C–CPI–U is ‘‘designed to be a closer approximation to a ‘cost 

of living’ index than existing BLS measures.’’ This index cannot be used to deterVerDate Sep 11 2014 13:14 Jun 27, 2016 Jkt 089587 PO 00000 Frm 00006 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\89587.XXX 89587

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mine Federal program adjustments unless Congress passes, and the President signs, 

legislation permitting the change. 

In announcing the hearing, Social Security Subcommittee Chairman Sam Johnson 

(R–TX) said, ‘‘Americans deserve action to protect and preserve Social Security, and the inclusion of Chained CPI in the President’s budget is a welcome acknowledgement that we must take action to shore up the program 

for future generations. Since 2010, Social Security has been paying more in 

benefits than it receives in revenue. According to the Congressional Budget 

Office, the cash flow deficit for the 10-year period ending 2023 is projected 

to reach $1.3 trillion. Beginning in 2033, Social Security will be unable to 

pay full benefits, according to the Social Security Board of Trustees. In 

other words, when today’s 47-year-old workers reach their full retirement 

age in 2033, they and everyone else already receiving benefits face a 25 percent benefit cut unless Congress does its job and steps in to fix this problem. The President likes to say that if we agree on a policy, then we should 

act and not let our differences hold us up, and I agree. This hearing will 

include a full discussion of a policy with bipartisan support—more accurately measuring inflation in order to strengthen the Social Security program.’’ 

FOCUS OF THE HEARING: 

The hearing will examine proposals by the President and bipartisan groups to 

more accurately measure inflation. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov/, select ‘‘Hearings.’’ Select the hearing for which you 

would like to submit, and click on the link entitled, ‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word or WordPerfect document, in compliance with the formatting requirements listed below, by the close 

of business on Thursday, May 2, 2013. Finally, please note that due to the 

change in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House Office Buildings. For questions, or if you encounter technical 

problems, please call (202) 225–1721 or (202) 225–3625. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing 

record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, 

but we reserve the right to format it according to our guidelines. Any submission 

provided to the Committee by a witness, any supplementary materials submitted for 

the printed record, and any written comments in response to a request for written 

comments must conform to the guidelines listed below. Any submission or supplementary item not in compliance with these guidelines will not be printed, but will 

be maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 


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The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days’ notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://www.waysandmeans.house.gov

f 

/. 

Chairman JOHNSON. Good morning. Thank you all for being 

here. This is the first in the Committee’s hearing series on the 

President’s and other bipartisan entitlement reform proposals. 

We need to protect and preserve Social Security. That is what 

this Committee is all about. 

According to the Social Security Board of Trustees, beginning in 

2033, Social Security will be unable to pay full benefits. In other 

words, when today’s 47 year old workers reach full retirement age 

in 2033 and everyone else is already receiving benefits, they will 

face a 25 percent benefit cut unless Congress reforms Social Security, which we can do. 

The inclusion of using a more accurate measure of inflation in 

President Obama’s budget is a welcome acknowledgement that we 

must take action to make sure that Social Security is there for our 

future generations. 

The purpose of this hearing is to have a full discussion of a policy 

with wide bipartisan support, more accurately measuring inflation 

in order to fix the Social Security system. 

Congress passed the first benefit increase in 1950, later increased benefits ten other times before passing a law in 1972 that 

created a formula to determine the cost of living adjustments or 

COLAs. 

The Social Security COLA increases benefits each year that there 

is inflation. If there is no inflation, there are not any COLAs, as 

was the case in 2009 and 2010. If prices fall, benefits cannot be reduced. 

At the time automatic COLAs were enacted, the Bureau of Labor 

Statistics or BLS only produced one measure of inflation, which remains the inflation measure used to determine Social Security 

COLAs today. 

However, BLS has since developed other measures including the 

Chained Consumer Price Index or Chained CPI, which we will discuss today. 

The President’s own budget says most economists agree that the 

Chained CPI provides a more accurate measure of the average 

change to the cost of living than the standard CPI. 

In testifying before the full Ways and Means Committee last 

week, Treasury Secretary Jacob Lew stated ‘‘The Chained CPI is 

a more accurate measure of inflation in that it does a better job of 

reflecting the substitution of goods in response to relative price 

changes.’’ 

Today we will hear from the Commissioner of BLS why that is. 

Some say using the Chained CPI to measure inflation would result 

in a benefit cut, but that is plainly false. 


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The truth is that benefits will continue to grow, only more slowly 

than under the current less accurate measure. Only in Washington 

would that be called a ‘‘benefit cut.’’ 

That said, I fully recognize and am sensitive to the impact this 

change could have on some beneficiaries’ pocketbooks, especially 

those who receive benefits for a long time. 

The fact of the matter is the current measure overstates inflation 

and ignores that it is simply unfair to your children and grandchildren who rightly expect us to make sure Social Security will be 

there for them. 

Let me be clear. Determining the adequacy of Social Security 

benefits especially for those who are most vulnerable is an important discussion to have, and we will as part of this hearing series 

on bipartisan entitlement reforms. 

The President likes to say that if we agree on a policy, then we 

ought to act and not let our differences hold us up. 

We owe it to every American to carry out our responsibility and 

carefully examine each bipartisan policy option, and we will 

through this hearing series. 

Mr. Becerra is not here yet. Without objection, all written testimony will be made part of the record. 

We have one witness panel today. Seated at the table are Erica 

Groshen, Commissioner, accompanied by Michael Horrigan, Associate Commissioner, Office of Prices and Living Conditions, Bureau 

of Labor Statistics, Department of Labor. That is a mouthful. 

Jeffrey Kling, Associate Director for Economic Analysis, Congressional Budget Office. 

Ed Lorenzen, Executive Director, The Moment of Truth Project, 

Committee for a Responsible Federal Budget. 

Nancy Altman, Co-Chair, Strengthen Social Security Coalition, 

and Charles Blahous, III, Public Trustee, Social Security and Medicare Board of Trustees, and thank you for being here again. 

Welcome. Thanks to all of you for being here. 

Commissioner Groshen, will you go ahead with your testimony? 

STATEMENT OF ERICA L. GROSHEN, COMMISSIONER, ACCOMPANIED BY MICHAEL W. HORRIGAN, ASSOCIATE COMMISSIONER, OFFICE OF PRICES AND LIVING CONDITIONS, BUREAU OF LABOR STATISTICS, DEPARTMENT OF LABOR 

Ms. GROSHEN. Good morning. I thank the Subcommittee for 

this opportunity to talk about the family of Consumer Price Indexes published by the BLS. 

As you know, we produce some of the nation’s most current and 

important economic statistics, including the inflation measures 

under discussion today. 

In doing so, we help policy makers, businesses and households to 

make the best decisions for themselves and others. 

I will start by describing the CPI–U. The measurement objective 

of all of our CPIs is to estimate changes over time and the cost to 

consumers of maintaining the same standard of living. 

How do we construct the CPI–U? We estimate the change in 

prices that consumers pay for a market basket of goods and services in urban areas. This market basket is divided into item categories, such as uncooked beef steaks. 


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We collect prices for goods across 211 item categories in 87 urban 

areas, resulting in over 8,000 unique item area cells. We collect expenditure weights for each of these cells, such as steak in Chicago. 

The weights represent shares of total consumer expenditures 

across all items and areas. The data source for the weights is our 

consumer expenditure survey. 

With prices and weights in hand, we produce the CPI in two 

stages, and understanding these stages is the key to understanding 

how our indexes differ. 

In stage one, we calculate a CPI–U for each cell. That is the average change in prices, and for most cells we use a formula that 

assumes that consumers actually do substitute among products 

within the cell. 

In stage two, we combine our indexes across all the cells to 

produce a national number. CPI–U uses a formula that assumes 

consumers do not substitute across items or areas. That is we assume they do not adjust their purchases between steak and chicken 

in Chicago as prices change. 

What is the CPI–W? It aims to estimate price changes for households that receive more than half of their income from wage and 

clerical jobs. The formulas and the prices that we use in the CPI– 

W are the same as for the CPI–U. The only difference is the CPI– 

W uses consumer expenditure weights that are based on the wage 

and clerical group. 

What about the experimental CPI–E? Again, we use the same 

formulas and the same prices as the CPI–U, but we use expenditure weights for households with a respondent or spouse age 62 or 

older. 

Over the past 20 years, while the CPI–U and the CPI–W increased at an average annual rate of 2.4 percent, the CPI–E rate 

was 2.6 percent. This reflects only differences in expenditure patterns of these populations. For example, older Americans relatively 

heavy spending on health care. 

We call the CPI–E experimental partly because the expenditure 

weights are based on smaller sample sizes, but also our CPI–U 

sample may not represent well where the elderly shop, where they 

live, what they buy, and the prices they pay. Moving to an official 

CPI–E would require a thorough research effort. 

Finally, what about the Chained CPI–U? This differs from the indexes I just talked about in weights and formulas. Furthermore, we 

revise it twice before it is final. 

Stage one is the same. Stage two uses a superlative index formula that captures how consumers actually adjust what they buy 

as relative prices change. 

Because consumers make such adjustments, the growth in the 

Chained CPI–U is typically smaller than that for the regular CPI– 

U. For the past 12 years ending in December 2011, while the CPI– 

U grew at an average annual rate of 2.5 percent, the Chained CPI– 

U rate was 2.2 percent. 

The other difference is there are lags in reporting the Chained 

CPI–U. It takes a long time to collect consumer expenditure shares 

and to estimate their weights. The final Chained CPI–U for March 

2013 will be published in February 2015. 


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To sum up, as part of our continuing efforts to improve measurements in our dynamic economy, the BLS has created a Chained 

CPI–U to gauge the cost of living in a way that accounts for how 

consumers substitute among goods when price changes are not uniform. 

I thank you for the opportunity to testify before this Committee. 

Dr. Horrigan and I will be happy to answer your questions. 

[The prepared statement of Ms. Groshen follows:] 


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f 

Chairman JOHNSON. Thank you for your testimony. That is insightful. 

Mr. Becerra, do you still want to make your opening remarks? 

Mr. BECERRA. I can wait until everyone testifies or I can do it 

right now. 

Chairman JOHNSON. We will delay the rest of you for a moment and let Mr. Becerra make his opening remarks. Go ahead. 

You are recognized. 


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Mr. BECERRA. I appreciate that, Mr. Chairman. I apologize to 

the witnesses that I had to run a little late. Thank you for being 

here. We look forward to the rest of your testimony. 

I want to just begin by making a quick observation. At a time 

when folks are talking about their economic security, this is perhaps the most important time to make sure we maintain Social Security because it is for many Americans, not just seniors—many 

disabled Americans, working Americans who have become disabled, 

to children, widows and widowers, it is their economic security. 

Any time someone says to you Social Security is broke or bankrupt or causing our deficit, I will say emphatically here that is contrary to the evidence. In fact, I think I would be on very safe 

ground to say anyone who says Social Security is broke or bankrupt is lying because the facts show just the opposite. 

Let’s look at the numbers. I would say to anyone who wants to 

contest what I am about to tell you, show me your numbers. I will 

show you some numbers and you can see them on this chart. 

Social Security currently has about a $2.7 trillion surplus, and 

that is because over more than 77 years of taking in taxes from 

Americans who have been working and paying into Social Security, 

it has brought in in tax contributions over $14.5 trillion. 

It has also earned interest on those trillions that have been invested into the Trust Fund by tax, paying Americans about $1.5 

trillion. 

At the same time, it has only had to spend in benefits, and a 

very tiny sliver you see above that red bar, in administrative costs, 

because administrative costs are less than one percent, a total 

spending of $13.5 trillion. 

The math is very simple. More than $2.5 trillion that Americans 

have contributed to Social Security through their taxes that have 

never been used through 13 recessions, and in more than 77 years, 

Social Security has never failed once to pay benefits on time and 

in full. 

When we discuss Social Security, we should discuss it in that 

context of the reality and the truth of what Social Security is. 

When you hear conversations about what should happen to Social Security and to those earned benefits that Americans have 

paid into the system so they could get them when they retire or 

should they become disabled or should they happen to die so their 

spouse, who is now a widow or widower, or their children, who are 

now the children of a deceased parent, have a chance to survive, 

those are the folks we should concern ourselves most with. 

Switching to the Chained CPI, the so-called adjustment, change 

to the way we calculate the cost of living, the COLA increase seniors, disabled folks, survivors of an American who has perished get, 

is nothing more than a cut to the benefits that people receive. 

The paycheck or the earned check that people receive from Social 

Security will decrease. It is a cut. It is a substantial cut because 

we know the power of compound interest. With time, that cut 

grows in size. 

If we are talking about economic security at this time when our 

economy is beginning to recover from those devastations of the 

2008 Wall Street crisis, you would think we would want to provide 


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people with the greatest economic security and that would be 

through their Social Security earned benefits. 

The Chained CPI affects not just seniors, disabled, children or 

widows, it affects veterans who will see benefits they have earned 

cut. It affects any number of folks including middle income and low 

income tax paying families who will see their taxes rise. 

The Chained CPI is coming at the worse time for all those folks 

who worked very hard and thought they had paid into a system on 

a bargain, that it would be there for them because they paid into 

it. 

Let us remember that a typical American middle income worker 

at the age of 65 under the Chained CPI would lose about $140 of 

his or her annual benefit if Chained CPI were to become the law. 

By age 75, the annual benefit would be cut by $560. By the time 

he or she reaches age 85, the age at which most seniors tend to 

depend most on Social Security, the annual benefit would be cut almost $1,000 a year. 

The problem here is that we have to know our facts and we have 

to recognize that economic security is perhaps the most important 

thing for our parents, our grandparents, our children, disabled families, and certainly for American working families. 

Mr. Chairman, I am looking forward to hearing the testimony because there is nothing more important than the security of Social 

Security. With that, I will yield back. 

Chairman JOHNSON. Yes. You guys need to take what he said 

with a grain of salt. Some of that is shading the truth. 

Mr BECERRA. Show me the numbers. 

Chairman JOHNSON. Easily. We are not going to quit paying 

Social Security. Let’s face it. 

Mr. Kling, welcome aboard. Please proceed. 

STATEMENT OF JEFFREY KLING, ASSOCIATE DIRECTOR FOR 

ECONOMIC ANALYSIS, CONGRESSIONAL BUDGET OFFICE 

Mr. KLING. Thanks for inviting me to testify. As you know, the 

Social Security Administration increases recipients’ monthly benefits in most years, for example, the 1.7 percent COLA that applied 

to benefits paid in January 2013 was based on the increase in the 

Consumer Price Index between 2011 and 2012. 

One option for lawmakers would be to link to another measure 

of inflation, the Chained CPI. That Index generally grows more 

slowly than the traditional CPI does, an average of about one quarter of a percentage point more slowly per year over the past decade. 

Using the Chained CPI in a variety of Federal programs and the 

Tax Code would reduce the deficit by a total of $340 billion over 

the next ten years if implemented starting in calendar year 2014, 

according to estimates by the Congressional Budget Office and the 

staff of the Joint Committee on Taxation. 

The President’s budget for fiscal year 2014 includes a related but 

less comprehensive option that would use the Chained CPI for Social Security and some other spending programs, as well as for the 

tax system. 


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CBO is currently reviewing that and other proposals in the President’s budget. I will not be discussing those specific proposals 

today. 

In my remarks this morning, I will focus on the analysis examining a generic proposal to use the Chained CPI for indexing 

COLAs and Social Security starting next year. Such a policy would 

not alter the size of people’s benefits when they are first eligible, 

either now or in the future, but it would reduce their benefits in 

subsequent years because of the reduction in the average COLA 

relative to current law. 

The impact would be greater the longer people received benefits, 

that is the more reduced COLAs they experienced. 

For example, after a year, the Social Security benefits paid to a 

63 year old who had claimed initial retirement benefits at age 62 

would be about one quarter percent lower on average if the 

Chained CPI was used for indexing. 

After ten years of COLAs, the effect for a 73 year old would be 

2.5 percent on average. After 30 years of COLAs, the effect for a 

93 year old would be 7.2 percent on average. 

According to CBO’s analysis, using the Chained CPI for annual 

COLAs would reduce outlays for Social Security relative to CBO’s 

current law baseline by $1.6 billion in 2014. Those savings would 

grow each year reaching $24.8 billion in 2023, and would total $127 

billion over the 2014 to 2023 period. 

CBO projects that Social Security recipients would face an aver- age benefit reduction of about $3 per person per month in 2014 and 

roughly $30 per person per month in 2023. 

By 2033, outlays for Social Security would be three percent lower 

than they would be under current law or six percent of gross domestic product rather than 6.2 percent. As a result, the gap between Social Security’s outlays and tax revenues in that year 

would shrink by about one-sixth to one percent of GDP. 

According to many analysts, the traditional CPI overstates increases in the cost of living because it does not fully account for the 

fact that consumers generally adjust their spending patterns as 

some prices change relative to other prices, and because of a statistical bias related to the limited amount of price data that the BLS 

can collect. 

However, using the Chained CPI instead for indexing Social Security could have disadvantages. The values of that Index revised 

over a period of years so the programs would have to be indexed 

to a preliminary estimate of the Chained CPI that is subject to estimation error. 

Also, the Chained CPI may understate the growth and the cost 

of living for some groups. For instance, some evidence indicates 

that the cost of living grows at a faster rate for the elderly than 

for younger people in part because of changes in health care prices 

which play a disproportionate role in older people’s cost of living. 

However, determining the impact of rising health care prices on 

the cost of someone’s standard living is problematic because it is 

difficult to measure the prices that individuals actually pay and to 

accurately account for changes in the quality of health care. 

Changing the measure of inflation used for indexing is only one 

of many possible modifications to Social Security, if the Congress 


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wishes to slow the growth of Federal spending by constraining outlays for Social Security benefits or to improve the long term solvency of the program by making changes to its spending or revenues. 

Many other approaches are possible, a number of which CBO has 

analyzed previously. 

Thank you. 

[The prepared statement of Mr. Kling follows:] 


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f 

Chairman JOHNSON. Thank you, sir. 

Mr. Lorenzen, you are recognized for five minutes. 


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STATEMENT OF ED LORENZEN, EXECUTIVE DIRECTOR, THE 

MOMENT OF TRUTH PROJECT, COMMITTEE FOR A RESPONSIBLE FEDERAL BUDGET 

Mr. LORENZEN. Mr. Chairman, Ranking Member Becerra, 

Members of the Subcommittee, it is an honor to be before you and 

an unusual experience to be on this side of the table. 

I am Executive Director of The Moment of Truth Project, which 

was established to continue the work of the National Commission 

on Fiscal Responsibility and Reform, also known as the BowlesSimpson Commission. I worked on the staff of the Fiscal Commission. 

On a personal note, I would like to briefly note that I have had 

significant personal experience with the value of the Social Security program having received survivor’s benefits as a child after the 

death of my father, and more recently, having had to manage my 

family’s finances for a period based on Social Security benefits. 

Neither of those experiences have convinced me that providing 

COLAs that are greater than the rate of inflation is the desirable 

policy, rather, that we should try to find a way to make the Social 

Security system fiscally strong by making progressive changes in 

the benefits in a way that strengthens poverty protections for the 

programs. 

The CPI offers a rare opportunity to achieve both significant savings spread across the entire budgets and by making a technical 

improvement to existing policies. 

Brief background. The issue of overstatement of inflation in the 

CPI gained prominence in 1995 when then Federal Reserve Chairman Alan Greenspan mentioned the issue and his belief in testimony before Congress. 

Even before Chairman Greenspan’s comments, the Congressional 

Budget Office had done a report noting there was a growing discussion and debate among economists identifying a bias in CPI. 

In response to Chairman Greenspan’s comments, the Senate Finance Committee, chaired by then Senator Pat Moynihan, appointed the Baskin Commission, which did a review of CPI and estimated the bias of between 0.7 and 2.0 percent. 

While there was controversy over many of the specific elements 

and disagreements of the specific findings, the general consensus 

was the findings were broadly accepted and confirmed by subsequent analysis by the Federal Reserve Board and others. 

In response to that discussion, the Bureau of Labor Statistics did 

a thorough review of the methodology and made changes where it 

felt there were improvements that could be made, including introduction of the geometric mean to deal with lower substitution bias 

and other changes. 

Those changes reduced the bias by 0.35 percent, and were implemented with very little notice or controversy, very similar to what 

switching to the Chained CPI would do. 

The changes that BLS were able to do administratively did not 

address the issue of upper level substitution bias, which is what 

Chained CPI is intended to do, as described before. 

On the Fiscal Commission, when we started meeting with various groups for suggestions about ideas for deficit reduction, 

switching to the Chained CPI for all parts of the budget was one 


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of the common themes of suggestions from groups across the ideological perspective, and in the Commission meetings, it was an 

area of early discussion for potential consensus among members. 

There was definite agreement that it should only be done as a 

technical correction and therefore should be applied to all parts of 

the budget equally. Interestingly, it was a Democratic member of 

the Commission who first raised the idea of Chained CPI for Social 

Security, and a Republican member who raised it on the issue of 

revenues, both did so on the basis that it should be done for accuracy. 

The final Commission report did include a switch to Chained 

CPI, and had some low income protections. It was one of the few 

elements that every member of the Commission who voted for the 

plan did support. 

Since the Commission report has come out, there have been additional recommendations for improvements for low income protections, which should be considered. 

Switching to the Chained CPI has broad support from the Congress, across the spectrum, which I have detailed in my testimony, 

and has been included in every major bipartisan proposal. 

The budgetary effects have just been described. I would just note 

that while most of the focus has been on the impact it would have 

on Social Security, Social Security represents slightly more than a 

third of the savings while the remaining two-thirds of savings 

would come from revenues and changes in other Government programs. 

Switching to Chained CPI would also close approximately onefifth of the Social Security funding gap and help avoid the Trust 

Fund exhaustion, and therefore, avoid the automatic reduction in 

benefits that would occur with Trust Fund exhaustion. 

It is important to remember that under Chained CPI, nominal 

benefits would continue to increase. We estimate they would increase by approximately 60 percent over 20 years under Chained 

CPI, instead of a 68 percent increase under the current measure. 

Also, interestingly, real benefits for an 85 year old will be higher 

in the future than a similar retiree today. 

If you were to compare a worker who retired at age 65 and is 

85 today and took a worker who retired today at age 65 and received benefits subject to Chained CPI, that future retiree would 

still have a higher benefit in real inflation or adjusted terms by 

about eight percent higher. 

On the distributional effects, both the Tax Policy Center and the 

Social Security Administration have found that switching to 

Chained CPI is roughly distribution neutral. However, that does 

not mean we should not have concerns about the distributional effects. 

However, those should be addressed in the context ideally of a 

comprehensive plan where it makes comprehensive reforms of the 

Social Security program and tax system to make the Tax Code and 

Social Security system more progressive, but absent that, there are 

many proposals where you could make much more targeted, much 

more effective improvements to provide benefits for lower income 

beneficiaries who have been assisted by the higher Chained CPI 


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which provides a very blunt and fully targeted way to provide assistance to those populations. 

Chairman JOHNSON. The gentleman’s time has expired. 

Mr. LORENZEN. Very briefly, moving to the CPI–E would be a 

very controversial step. There are many questions and concerns 

about the methodology of CPI–E. 

I would just conclude by saying that any changes in deficit reduction are going to require tough choices, but moving to Chained CPI 

is not a change in policy, but rather a more accurate way to implement the current policy and any adverse effects of implementing 

current policy more accurately should be addressed by more targeted and effective policies. 

[The prepared statement of Mr. Lorenzen follows:] 


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f 

Chairman JOHNSON. Thank you, sir. 

Ms. Altman, you are recognized. 

STATEMENT OF NANCY ALTMAN, CO–CHAIR, STRENGTHEN 

SOCIAL SECURITY COALITION 

Ms. ALTMAN. Thank you. As you know, every January, Social 

Security benefits are automatically adjusted for inflation. Some 

refer to these adjustments as increases, but they are not. 

They are intended to allow those on fixed incomes to remain in 

place, to simply tread water, without accurate and timely inflation 

adjustments, retirees, people with serious and permanent disabilities, and others will see their Social Security erode as they age. 

That is no small matter. Half of retirees have total incomes, that 

is incomes from all sources, of less than $17,000. Most of that 

comes from Social Security. One out of three seniors relies on Social Security for virtually all of their income. Nearly one out of two 

seniors age 80 or over does. For women and people of color, the reliance is even greater. 

The intent of the adjustment is to allow beneficiaries to tread 

water, but they are not, they are sinking. The current inflation 

index under measures the inflation they experience. 

The Index is designed for workers and the general public, but 

seniors and people with disabilities spend more on health care 

where prices rise faster and less on clothing, recreation and other 

items where prices tend to rise slower. 

Chained weighting an Index that already under measures their 

inflation simply will sink beneficiaries faster. 

By shielding some from the harshest impacts of the Chained CPI, 

the Simpson-Bowles, Rivlin-Domenici, and Administration proposals all implicitly concede that it is less accurate for this population. 

People do not need to be shielded from a more accurate adjustment. 

These protections cannot solve what is a poorly targeted benefit 

cut. The Chained CPI cuts the benefits of every single one of today’s 57 million beneficiaries, but people already on fixed incomes 

have little or no ability to make up the loss. 

In addition, the cost grows with each succeeding year, like a 

snowball rolling down a hill, hitting hardest the oldest of the old, 

the poor and the near poor. 

Members must confront many divisive issues, but Social Security 

is not one of them. Poll after poll reveals that Democrats, Independents, Republicans, Union households, tea parties, the young, 

the old, and virtually every other demographic overwhelmingly 

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They agree that Social Security should not be addressed as part 

of a deficit deal to reduce the deficit, and they are right. Cutting 

Social Security does not reduce by even a penny the Federal Government’s total debt burden. Cutting it does not buy the Government a single extra day of borrowing authority. 

Let me repeat because many people find this surprising. Cutting 

Social Security does not reduce at all the Federal Government’s 

debt subject to the debt limit. 

Including Social Security in a deficit package gives the appearance that policy makers are raiding Social Security’s contributions 

and diverting them to unauthorized purposes. 

You can easily avoid this improper appearance by addressing Social Security as it should be addressed, on its own, and in the sunshine. 

That is how it was done in 1977 and 1983, when Social Security’s 

projected shortfall was much more immediate in 1983, it was six 

months versus 20 years today, and much larger, over eight percent 

of taxable payroll in 1977 versus less than three percent today. 

Social Security is too complicated and too important to address 

any other way, but to do that, policy makers have to be prepared 

to follow the will of the people. 

This body must open the door to more than just a narrow group 

of budget experts, an open process focused solely on Social Security 

will not lead to the Chained CPI. Instead, it will lead, I am confident, to a stronger foundation of economic security for America’s 

workers and their families. 

Thank you, Mr. Chairman. 

[The prepared statement of Ms. Altman follows:] 


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f 

Chairman JOHNSON. Thank you. 

Mr. Blahous, welcome again. Good to see you. Please proceed. 

STATEMENT OF CHARLES P. BLAHOUS, III, TRUSTEE, SOCIAL 

SECURITY AND MEDICARE BOARD OF TRUSTEES 

Mr. BLAHOUS. Thank you, Mr. Chairman, Mr. Ranking Member, all the Members of the Subcommittee. It is an honor as always 

to appear before you. 


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As has been mentioned, I am here to discuss proposals to apply 

the Chained CPI to calculation of Social Security COLAs. 

In my written testimony, I have provided some background information about how the COLAs are currently calculated, along with 

some basic information about the current state of program finances. 

Because my speaking time is limited, what I would like to do is 

gloss over most of that background information and really just 

focus on three major points. 

The first point, admittedly, at the risk of stating the obvious, is 

that whether Chained CPI should be used for Social Security 

COLAs is primarily a function of whether you as lawmakers are 

persuaded that it is technically meritorious as a measure of general 

price inflation. 

Obviously, if you were not so persuaded, it would not make sense 

to apply it to Social Security. 

If you were persuaded, I would argue that it should be applied 

to Social Security along with everything else, including the Federal 

Income Tax Code, including other Federal programs. I would not 

recommend specifically singling out Social Security for the change 

nor would I recommend specifically exempting it. 

The second point has to do with the state of program finances 

and the impact that the Chained CPI would have upon them. 

Basically, the current Social Security system faces a substantial 

financial shortfall that consists of significant excess of scheduled 

benefits over projected taxes. 

One way or the other, we are going to need legislation to correct 

that. 

Our best estimates are that if Chained CPI were adopted, it 

would reduce that shortfall by between 16 and 20 percent, depending on the measure that is employed to measure it. That would be 

a significant financial step in the right direction, although one 

could argue it is modest in the context of the overall financing 

shortfall. 

A very important factor to bear in mind is that with each passing 

year, the shortfall has been growing larger, and because of that, 

changes to Chained CPI that improve the financing situation would 

actually get us back a little bit less than to where we were two 

years ago. It would make up not fully for the last two years of deterioration in program finances. 

We would still have a very long way to go. I would regard CPI 

reform as sort of a broader Government-wide technical reform on 

how inflation is measured. I would not regard it as Social Security 

reform or entitlement reform or tax reform. The basic work of comprehensive solvency reform would still be ahead of us. 

The final recommendation I have, and this is a subjective one, 

but I believe in it very strongly, which is regardless of what the 

Subcommittee concludes with respect to the technical merits of 

Chained CPI, I would recommend that we continue to base Social 

Security COLAs on measures of general price inflation affecting 

America as a whole and population as a whole. 

Occasionally, you read commentary from people suggesting that 

we should have sort of a senior specific inflation index and use that 

for Social Security COLAs. I would strongly recommend against 


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doing that. That approach, I think, would suffer from a number of 

disqualifying problems. 

One is you have to remember a lot of Social Security recipients 

are not elderly. A lot are dependent children. You have the disabled, 19 percent are disabled, and their dependents. 

Clearly, it would be inappropriate to use an inflation index for 

the elderly to index benefits for children or young disabled. 

If you went down the road of trying to have specific inflation indices for specific sub-populations in Social Security, we could create 

real problems and real chaos in a hurry. 

We would have a situation where different components of the Social Security population would be getting different COLAs, that can 

be very divisive. You have to also remember that people move from 

one group to the other, when the disabled reach retirement age, 

they convert from disability to retirement benefits. 

It would not take very long for people to notice that there are 

other disparities in inflation experienced by other sub-populations, 

geographic differences, things like that. 

I would strongly caution against going down the road of trying 

to divvy up the Social Security recipient population into sub-populations. 

I would recommend sticking with the long-standing use of CPI 

which is measure for general price inflation affecting the population as a whole. 

In conclusion, Mr. Chairman, I would just say again I think the 

main point is whether it should be applied for Social Security 

COLAs is really a function of the technical merits of the Chained 

CPI as a measure of general price inflation. 

It would have a positive, modest effect on program finances, and 

we would still have in front of us the major work of Social Security 

financing reforms. 

Thank you. 

[The prepared statement of Mr. Blahous, III follows:] 


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f 

Chairman JOHNSON. Thank you, sir. 

As is customary, for each round of questions, I am going to limit 

my time to five minutes and ask my colleagues to also limit their 

questioning time to five minutes as well. 

Commissioner Groshen, it seems like we have an acronym for everything here in Washington. Maybe we could think of a new one 

today. 

For those not so well versed in the inside the Beltway jargon, 

what exactly is the ‘‘CPI,’’ and is it best called an ‘‘inflation estimator,’’ and how does your staff go about determining it? 


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Ms. GROSHEN. As I said, we think of it as a way to estimate 

the changes over time in the cost to consumer of maintaining their 

standard of living. 

It really focuses on what it is that consumers buy and weights 

it by the experience of consumers. It is an attempt to measure a 

cost of living index, and in that way, the Chained CPI is different 

from the CPI that we had before, because it allows for substitutions. 

When people can substitute for goods, they experience less of a 

decline in their standard of living than when they cannot substitute among goods, and therefore, the cost to restore them to 

their previous standard of living is lower. 

It also corrects another technical problem called ‘‘the small sample bias’’ that I can tell you more about if you are interested. 

Chairman JOHNSON. How is Chained CPI different? What does 

it mean to call a CPI ‘‘chained?’’ 

Ms. GROSHEN. One of the benefits of having it be chained is 

that you can compare the current level of the Index to an original 

level very simply. That is where the term ‘‘chained’’ comes from. 

Again, a somewhat technical explanation. 

It is really on the difference between the current one that you 

have to do a more complicated set of algebra to be able to get the 

total difference over time. 

Chairman JOHNSON. Do we have to go back to college? 

[Laughter.] 

Ms. GROSHEN. No, you might need to use your calculator. That 

is all. 

Chairman JOHNSON. Why is Chained CPI considered the most 

accurate measure of inflation? 

Ms. GROSHEN. It is considered more accurate because it allows 

for this substitution, where consumers substitute. It does not act 

as if consumers are more constrained than they actually are. 

Chairman JOHNSON. Dr. Blahous, you are well versed in Social 

Security history, and have been here many times. Was not the 

original reason for the COLA to ensure benefits keep pace with inflation? If the current measure is not accurate, do we not need to 

switch to a more accurate one? 

Mr. BLAHOUS. I would argue yes, and that was the original intent. The COLAs were basically created in the 1972 Social Security 

Amendments, which have kind of a history. There were some mistakes that were made in the 1972 Amendments, and also the way 

it is done today really reflects the state of knowledge at the time. 

Basically they made an effort to adjust benefits for inflation both 

for people already receiving them and for initial retirees. They 

made some technical errors in the application of new retirees, and 

that is what the whole 1977 Amendment set of changes was about, 

the notch babies, and that whole story. 

They made some mistakes. The reason we are using CPI–W 

today for Social Security is not so much because people regard it 

as the most accurate measure of inflation, it was just the only one 

that was around at the time. Even CPI–U was not around at the 

time of the 1972 Amendments. 


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Over time, the interpretation has been that CPI–W is the one 

that has to be applied to Social Security COLAs based on the old 

wording of the law. 

Ms. ALTMAN. Mr. Chairman, if I can add to that. 

Chairman JOHNSON. No, ma’am. I am not asking you the question. Thank you. My time has practically expired. I am going to 

stop now. Mr. Becerra, you are recognized. 

Mr. BECERRA. Thank you, Mr. Chairman. I think it is appropriate to talk about this Chained CPI. I think it is a very appropriate name for this change in the way you calculate seniors’ benefits. 

It really does drag down the ability of those who rely on Social 

Security to know their Social Security will be there for them the 

way they expect it, they will be chained down. 

On the issue, Commissioner Groshen, of the accuracy of the 

Chained CPI or the CPI, you also do a calculation called ‘‘CPI–E,’’ 

which is a calculation of the cost of living for the elderly. You take 

a sample of elderly Americans throughout the country. It is a 

smaller sample. You do not apply it but you keep a study that samples elderly Americans when it comes to what their cost of living 

is. 

In that CPI–E, which calculates cost of living for elderly, do you 

notice a difference between the CPI–E and the currently used CPI? 

Ms. GROSHEN. Yes, we do. The difference between the two 

measures, the CPI–E and the CPI–U, are the weights, the consumption weights, differences between the elderly and the non-elderly. 

Mr. BECERRA. What are the actual results? I know I am going 

to run out of time. Which ends up providing a higher benefit 

amount to an elderly person, the currently used CPI–U or the CPI– 

E which takes into account the survey of elderly folks? 

Ms. GROSHEN. During the period from December 1982 to December 2012, the average annualized change for the CPI–W was 

2.8 percent, and for the CPI–E, it was 3.1 percent. It was threetenths of a percent higher for the CPI–E. 

Mr. BECERRA. The CPI–E, which is a calculation of the cost of 

living for elderly that you do showed that the elderly have a cost 

of living that is higher than the average consumer that you use to 

calculate the regular Consumer Price Index. 

Now we have the Chained CPI, which would be below the currently used CPI down here. When people ask is this a more accurate measure of what the costs of a senior are, there is a good 

chance that senior is going to lose way more than what he or she 

is currently receiving, which may already be inaccurate given that 

seniors probably tend to use health care more than the average 

consumer you use to measure your CPI. 

I suspect—I am guessing Mr. Kling and Mr. Lorenzen are probably the youngest folks here. I suspect they have not had to worry 

about colonoscopies yet. They probably, being male, do not worry 

about mammograms as much. 

Once you are a senior, that colonoscopy is something you have 

to regularly do. If you are a female, you probably have to worry 

about mammograms quite a bit. 


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If you are young and healthy, you do not have to worry about 

that. You might decide if you are running out of money, you will 

not buy the steak, you will buy the chicken because it is less expensive. 

I doubt you are going to have a choice when it comes to a 

colonoscopy of getting a colonoscopy or a cheaper colonoscopy somewhere else, or taking your heart medication or buying a cheaper 

heart medication. 

It is a less flexible calculation for seniors when it comes to their 

ability to substitute one product or one service for another because 

for them—we would love to have as many choices in health care, 

for example, as possible, but they are not always there. 

Ms. Altman, does the change to a Chained CPI, as modest as it 

may sound when we speak of it in terms of accountants and .0 this 

and .0 that, does it have an actual impact on the resources that 

most seniors or disabled or survivors of our deceased American 

workers have? 

Ms. ALTMAN. Absolutely. As I say, it has a snowballing effect. 

It compounds over time. The older you get, the larger the cut. We 

have calculated that for an average work, retires at age 65, fortunate enough to live 30 years, even these bump up’s in these various 

proposals, would still lose a cumulative amount of about $15,000. 

That is someone who during their working years was only earning 

$40,000. 

Mr. BECERRA. It is a hit. Let me just conclude by saying I 

thank you all for your testimony. We have to continue to examine 

these things. 

I think Mr. Blahous said it correctly, we have to here in Congress decide what we do, and I would simply finally add that knowing that Social Security has never added a single penny to our deficits. 

I would hope that we confine our discussions about working on 

strengthening Social Security to Social Security, not within the 

context of budget deficits that Social Security never caused. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Thank you. Mr. Renacci, you are recognized for five minutes. 

Mr. RENACCI. Thank you, Mr. Chairman. I want to thank all 

the witnesses today for being here. When I saw this chart in the 

beginning, it is interesting, because you try to learn some things. 

Mr. Kling, I want to ask if this statement is true. Since 2010, Social Security has been paying more in benefits than it receives in 

revenue and that the cash flow deficit for the ten year period ending 2023 is projected to reach $1.3 trillion according to the CBO? 

Mr. KLING. Yes, it is correct. The Congressional Budget Office 

generally focuses on the budget of the Government as a whole. On 

that basis, the dedicated revenue from Social Security taxes was 

less than outlays for Social Security benefits last year, and will be 

throughout the next decade under current law, contributing to the 

unified Federal budget deficit and increasing Federal debt held by 

the public. 

Looking at just the Social Security program, the total inflow including payroll tax revenue and interest payments on the Trust 

Fund balances from the Treasury will exceed the outflow from the 


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combined Old Age Survivors and Disability Insurance Trust Funds 

for the next several years. 

That situation will reverse and the outflow will exceed the inflow 

starting in 2017, CBO projects. That combination of Trust Funds 

includes the Disability Insurance Trust Fund that will be exhausted in 2016. 

Mr. RENACCI. Between now and 2023, we will reach $1.3 trillion? That is a true statement? 

Mr. KLING. Yes. 

Mr. RENACCI. Thank you. Mr. Lorenzen, I think this comes 

down to accurate measure. You were ending your testimony about 

this is all about coming up with an accurate measure of inflation. 

You did not get a chance to finish. I would like to hear the rest 

of what you were going to say. 

Mr. LORENZEN. What I was saying is the policy within the Social Security program, within the Tax Code and many other programs is to ensure that the value of those benefits or those provisions in the Tax Code keep pace with inflation. 

As long as that is the policy, we should try to implement that 

policy in the most accurate way and make sure those programs are 

indexed to the most accurate measure of inflation as possible. 

In some cases, providing a higher than justified increase in inflation masks other shortcoming’s in the programs or provides benefits across the board that benefit certain populations more so and 

provide a more accurate measure that may have other undesirable 

consequences, but those should be addressed by policies that are intended to do that. 

We should not be having a policy to index programs to greater 

than inflation that provides a higher adjustment for everyone in 

order to help some. 

For example, it makes no sense to have an indexing of the Tax 

Code that provides a $450 windfall to someone at the top quintile 

of the Tax Code in order to protect a $25 tax benefit for someone 

at the bottom quintile. 

You would be far better to accurately index inflation for everyone, and then if we are concerned, as I am about the person at the 

bottom quintile, find another change to the Tax Code to address 

that. 

I think we can do that in Social Security and other programs, 

index the programs to achieve the policy goal of keeping pace with 

inflation for all of them and then finding ways to help and assist 

those for whom that change in inflation exposes other shortcoming’s. 

Mr. RENACCI. What do you believe is the most accurate measurement? 

Mr. LORENZEN. I do believe the Chained CPI that has been developed over years is the most accurate measure based on what I 

have read from experts. 

Mr. RENACCI. Thank you. Commissioner Groshen, why is CPI– 

E referred to as experimental? Is it ready for prime time? 

Ms. GROSHEN. The short answer is no, it is not ready for prime 

time, which is why we all it experimental. The problems with it are 

it is based on a small sample size, but even more than that, it is 


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based on using the same stores and the same prices and the same 

set of goods as for the general population. 

For the BLS to stand behind it as an official statistic, we would 

need to do the research involved to really design the program to 

measure the cost of living for the elderly in a statistically sound 

way. 

Mr. RENACCI. Mr. Lorenzen, do you have any comments about 

the flaws in the CPI–E? 

Mr. LORENZEN. I would add a couple of flaws. I think health 

care is one area of different expenditures, but there are other differences in spending patterns among seniors that are not reflected 

in CPI–E, including mail order and senior discounts. 

There are also questions about how it accounts for housing is accurate, that seniors are much more likely to own their own home 

and have paid off mortgages, whereas CPI and CPI–E both assume 

inflation based on imputed rent. 

On the issue of health care, I would say two things. First, as was 

noted, it is not clear how much the measures are accurate in measuring health inflation, that it is very difficult to do so accurately, 

and some suggestions that measures overstated health care inflation. 

I would add the bulk—the increase in health care costs for seniors is in a small population. Instead of again having a higher inflation adjustment based off the higher health expenditures for the 

smallest population, we can address that through something like 

an out-of-pocket limit and other reforms of the Medicare program 

instead of providing a higher adjustment for everyone. 

Mr. RENACCI. Thank you. I yield back. 

Chairman JOHNSON. Thank you. The gentleman’s time has expired. 

Ms. Schwartz, you are recognized for five minutes. 

Ms. SCHWARTZ. Thank you, I appreciate the testimony. I do 

also have to start with where I think our premise has to begin. 

I will echo some of the comments made by the Ranking Member, 

that we should begin by understanding that Social Security is different and is funded differently, has its own Trust Fund, in fact, 

in the wisdom of Congress, they actually anticipated the baby 

boomers, unlike in Medicare, for example, and that was important. 

Those are dollars in Social Security going forward. 

We have made a commitment, Social Security to seniors and to 

their families, and we ought to start with the premise of absolutely 

sustaining it and making sure it’s there for our current seniors and 

our future seniors. 

The discussion about how to modify the CPI, Consumer Price 

Index, for Social Security, it feels really different. How it affects 

seniors, as I think was pointed out in the panel, the idea of changing it and already we know it is not going to work for all seniors. 

Therefore, how many seniors are we then going to modify it for 

because we are worried about older seniors, the biggest group that 

is growing, over 85. The poorest seniors, which is a lot of them also, 

and our sickest seniors. 

If you are starting to say okay, it does not work for percent or 

that percent, we begin to say is this a wise thing to do. That is 

really the question before us, should we even be applying a change 


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in the Chained CPI or even considering it for seniors and for Social 

Security? 

That is a big deal. In Pennsylvania, it is a big deal. We have almost two million seniors. As you know, seniors are aging. 

As already pointed out, they have very different uses of the economy than you might compare to a 25 or 35 or 45 year old. They 

are living on fixed incomes, more and more of them are relying on 

Social Security as the one piece they know is going to come to 

them. 

Small changes in an inflationary factor, I think it becomes increasingly important as we are seeing changed in retirement benefits for many Americans, to sort of move from defined benefits to 

defined contributions, it may be even more important as we go forward for future seniors. 

Again, you point out that most seniors—I thought the number was $14,000, average income, you said $17,000. It is still not very 

much. 

I wanted to really ask the question about how this would apply 

to the poorest and sickest seniors. The question was raised about 

seniors had a different position in terms of health care than younger Americans. 

I know when I talk to a group of seniors, and I bet if I say it 

to everybody in this room, how many of you take a medication. Forget the ones that are really serious, how many of you who are over 

65 take a medication. They laughed. 

I said, ‘‘does anyone take one?’’ They all laughed at me. One. 

How about two, how about three, how about four. Which one are 

you not going to take if you do not get a little more of an increase. 

It is a little different than am I going to buy steak or chicken. 

It is really a question of am I going to buy chicken at all. Am I 

going to buy vegetables. Am I going to take one medication versus 

another. 

That is serious business. It has implications for higher costs for 

families, who often have to help out their seniors/relatives, or higher costs to taxpayers because they show up in emergency rooms. 

The implication in relationship to health care costs, which seems 

to be very, very important and different for seniors, as well as some 

of the issues some others would like to raise about housing. 

These are seniors who live on a fixed income. It is not easy for 

them to shift costs to somewhere else, as some do. I will get a job. 

I will get a second job. I will find a higher paying job. I will not 

buy a new car this year. 

This is really not what most 85 year old’s or 80 year old’s or even 

75 year old’s are really thinking about. 

We really have to understand that may be very different than a 

change we might make or might not make in how we index increases. 

What we hear as Members of Congress all the time is the increases, and they are small, that they get in Social Security, often 

go to the increases in Medicare, cost sharing. They get pretty upset 

about it. 

It is not even an increase question, about whether they can afford increases in their heating bill because they have already used 

it all up for health care. 


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I really wanted to ask Ms. Altman if you could just speak more 

specifically to how many seniors would have to—I think Mr. 

Lorenzen talked about this—be ameliorated. The harm to seniors 

would have to be ameliorated in terms of our sickest seniors, our 

poorest seniors, our oldest seniors. 

Ms. ALTMAN. We have actually looked at that very carefully. It 

is really more than half. If you are talking about the poorest of the 

poor, you are talking about 9.4 million seniors who are not getting 

SSI but just Social Security, but are poor or near poor. 

As you say, the population is aging. More and more are getting 

older. 

If it is an accurate Index, you do not have to ameliorate. People 

talk about shielding veterans, two out of five Social Security beneficiaries are veterans. 

There are lots of groups that I think the American people would 

see as deserving and not worthy of having a cut. 

Chairman JOHNSON. The gentlelady’s time has expired. 

Ms. SCHWARTZ. Thank you very much. 

Chairman JOHNSON. Mr. Kelly, you are recognized. 

Mr. KELLY. Thank you, Chairman. Thank you all for being here. 

There is an old adage where I come from, if you do not know 

where you are going, any road will get you there. In this case, we 

do know where we are going. We know if we do not take a look 

into the future, if we do not get this fixed—I understand charts and 

I understand income has nothing to do with solvency. A lot of people make a lot of money and still go broke every year. 

It is not a matter of how much you make, it is how much you 

save. It is about keeping your spending under control. 

Listen, I am/ 64. You think I am not concerned about what is 

happening? I am absolutely concerned with what is happening. By 

the same token, there is something about early detection. If you get 

it early enough, you can usually get it fixed and get it done at 

much less cost. 

I am trying to figure out why even have the hearing today if 

there is no problem. We have all kind of revenue. We do not have 

any problem looking into the future, why are we worrying about 

this? Why are we even having this conversation about the solvency 

and the long range stability of Social Security? 

If I look at the figures, what are we talking about? We have all 

kind of money. All kind of money coming in. It is growing at a tremendous rate, 1.6%, 1.8%. 

Here is the deal. If your heart is willing but your wallet is weak, 

I do not care how much you care about these folks, I care about 

them. 

We made promises to people years ago that we cannot keep today 

and then we try to soft soap it and really, I wish policy were the 

driving force in this town and not politics. 

I wish we could talk about the reality of how we are going to 

save this program as opposed to how we are going to spend it some 

way that makes us look good in the next election. 

If we really care about Americans, I do not care about Republican, Democrat, Independent, Libertarian, whatever you are in 

this country, there is always that ability to speak about it openly 

and do it the right way, but do it honestly, please. 


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I want to save the program, too. Mr. Blahous, you have some interesting approaches. Running a business all my life, there are a 

lot of things that I made a mistake on early. My dad was a World 

War II pilot, and much like the Chairman, he was a bomber pilot. 

We had a Cessna franchise for a while. 

The most important thing he told me is when we were flying 

somewhere. He would say, son, make sure that you chart that the 

right way and make sure you stay on course. 

It is no big deal being off one degree. I grew up in a little town 

called Butler, about 25 miles from Pittsburgh. You can be off one 

degree flying from Butler to Pittsburgh and end up pretty close to 

Pittsburgh. If we were flying from Butler to Los Angeles, we would 

end up in Oregon. 

There is a long range effect to this stuff. The equities that you 

talked about, if it is not a problem, we have all this income, if it 

is coming in and we cannot spend it fast enough and do not worry 

about it, why be concerned? Why all the interest? 

If we do not do this, what is the ultimate effect? I like the approach you have to it. We are talking now about numbers that support what our hearts want to do. 

Mr. BLAHOUS. I think even relative to many other experts, I 

am extremely concerned about the financial future of Social Security. 

You made a reference to early detection. I fear the early detection light has been going off for a while and there has been a failure to act. 

I fear we are actually getting to the point where it is going to 

be difficult to get this problem resolved. 

In 1983, the program faced a very substantial financing crisis. It 

took a tremendous amount of bipartisan cooperation to resolve it. 

You actually had Republicans and Democrats joining together to 

overcome the very spirited opposition of the AARP and other seniors groups. It was a very difficult thing to do. 

We had to delay COLAs by six months. They had to raise the retirement age. They exposed benefits to taxation for the first time. 

They had to bring all Federal employees into the system. They had 

to accelerate a previously enacted increase in the payroll taxes. 

This was really politically painful stuff. The current long range 

shortfall in Social Security relative to that then, it is about twice 

as large now. The amount of political pain that all of you would 

have to endure in a long range solvency fix is about twice as much 

as it was in 1983. 

If you did a 50/50 on benefits and taxes, conservatives would 

have to agree to twice as much in terms of tax increases and progressives twice as much in terms of benefit restraints as was done 

in 1983. 

That is a very tall order. With each passing year, this becomes 

a bigger problem to solve. I am very worried about it. I am worried 

about the consequences if we do not enact repairs relatively soon. 

Mr. KELLY. Mr. Renacci and I are both automobile dealers. In 

the old day, we had gauges that told us what the temperature was, 

what the oil pressure was, and they switched the lights. They 

would go red. It was called ‘‘idiot lights’’ because when the light 

was on, it was already too late. The engine was fired. 


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You say we have a blinking light right now. It may be blinking 

yellow but we better wake up and smell the coffee. We are at a 

dangerous, dangerous point. 

I thank you for your testimony. Mr. Chairman, my time has expired. 

Chairman JOHNSON. Thank you. Mr. Thompson, you are recognized for five. 

Mr. THOMPSON. Thank you, Mr. Chairman. Thanks to all the 

witnesses for being here today. 

I am glad you preceded me in the questioning because you raised 

an issue that I came into this Committee thinking about today. It 

is a little bit confusing as we deal with this. 

I think we need to talk about Chained CPI and what it means 

and how it works. The idea that we are talking about it from the 

vantage that you brought up as part of the shortfall for Social Security, I find a little bit baffling. 

I do not think it is a reform to Social Security. As I understand 

it, it is about 20 percent of the shortfall. That is a long way from 

what we need to be doing. It is even worse in this case because to 

get that 20 percent of the shortfall, you are cutting benefits to seniors and you are cutting benefits to veterans, and many times those 

veterans are the seniors that we are trying to help provide a secure 

retirement for. 

When we talk about Chained CPI as part of the deficit issue, I 

think it really muddies the water. Social Security does not have 

anything to do with the debt, as I understand it. I do not believe 

Social Security has added a dime to our debt. I do not believe it 

can by law. 

When you start co-mingling these topics, I do not know if it gets 

us to where we need to be. That is we certainly need to deal with 

our deficit. We need a long term plan to do it. When we start doing 

that, I think we need to look at what caused it. 

You cannot have major tax cuts without paying for them. You 

cannot go to war without paying for it. You cannot provide prescription drug benefits without paying for it. Yet, we are not talking about anything like that. 

We also need to make sure that Social Security is available for 

providing a secure retirement for many years to come. 

As I mentioned, this does not do it. It is 20 percent. I do not 

know you factor that in. If you look at the 20 percent and you are 

getting that from the seniors themselves, that kind of raises havoc 

with the security of those seniors that you are trying to help. 

I have a couple of specific questions. Ms. Altman, can you explain 

how Chained CPI cuts veterans’ benefits? 

Ms. ALTMAN. Sure. The veterans’ benefits actually can get hit 

three or four times because as you know, there are a number of 

programs Government-wide that are indexed, the largest savings 

comes from Social Security. 

As I said earlier, two out of five veterans receive Social Security. 

People who are disabled or die in Service in Iraq or Afghanistan 

qualify for Social Security benefits. Those benefits would be cut by 

the Chained CPI. 

In addition, there are a number of veteran specific programs, veteran retirement programs and programs for disabled veterans. 


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Those also are indexed and those also would be cut by the Chained 

CPI. 

Mr. THOMPSON. If you are a veteran who was wounded in a 

previous war and you get a certain disability payment as a result 

of that, you can expect to see your veterans’ disability check reduced? 

Ms. ALTMAN. That is right. 

Mr. THOMPSON. If you are a veteran who was killed and your 

children are receiving benefits, the children of that veteran can expect to see a reduction in their benefits they receive from their 

dead mother or father? 

Ms. ALTMAN. They will be cut twice. They also receive survivor 

benefits under Social Security. 

Mr. THOMPSON. Mr. Blahous, do you still believe we ought to 

privatize Social Security? 

Mr. BLAHOUS. As you know, I worked for President Bush and 

worked on his proposal to include personal accounts of Social Security. I actually think although at one time, it would have been prudent to try to save as much Social Security contributions as we 

could going forward in personal accounts, I think that time has 

passed. 

I think it is too late to advance fund a significant portion of Social Security obligations. 

I believe our solutions at this point are best confined to the traditional ones, trying to align benefits and taxes within the current 

structure. 

Mr. THOMPSON. You do not believe we should privatize Social 

Security? 

Mr. BLAHOUS. No. 

Mr. THOMPSON. How do you think we should do the reform? 

Mr. BLAHOUS. I will give you a two part answer. There is what 

I personally would design if I were dictator of the world, and there 

is what I would support. 

The second ranges much wider than the first one. I would tend 

to focus primarily on reductions in the rate of the growth on the 

high income end basically by changing the benefit formula. There 

are some other changes I would make. 

Mr. THOMPSON. Means test it? 

Mr. BLAHOUS. No, I would not do a true means test. A means 

test basically means measuring income outside the Social Security 

system and withholding benefits based on that. 

There is a benefit formula in the current law that is progressive. 

It is like a system of income tax brackets except you have benefit 

brackets. I would basically make those more progressive and hold 

down benefit growth on the higher income end. 

Having said that, there have been proposals put forward that 

would do more of a mix of revenue changes and benefit changes 

like the Simpson-Bowles proposal. 

Mr. THOMPSON. Raising the age, is that one? 

Mr. BLAHOUS. Raising the age would be something I would consider as was in Simpson-Bowles. Simpson-Bowles included some increases in the tax base as well. 

I frankly think a solution is important enough that I would go 

along with a variety of ways to do it. 


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Chairman JOHNSON. The gentleman’s time has expired. There 

are a lot of ways to fix it and we need to and we will. 

Mr. Griffin, you are recognized. 

Mr. GRIFFIN. Thank you, Mr. Chairman. I want to start out by 

saying that I saw a representative from the White House here in 

the room. I want to say something I do not say much, which is I 

congratulate the President on acknowledging that we have a problem. 

There are some people here I have heard from today that do not 

acknowledge that we have a problem, and the President has acknowledged that we have a problem. 

We may disagree on what to do about it, but it was welcomed 

to see him at least putting something forward that starts the conversation on this. 

I will say one of the big problems is the longer we wait, the closer we get to the edge of the cliff, the fewer options we have. 

We have heard a reference to that here a minute ago. My mother 

is on Social Security. I pay into Social Security, despite what the 

Internet says. I hope to get Social Security benefits at some point, 

especially since I turned down my congressional pension. 

I am counting on Social Security. I want to save it. I feel like I 

am in a land of glitter and unicorns here because you have people 

who are saying Social Security has a problem, it does not have 

enough money, but it does not add to the deficit or the debt. Complete and utter nonsense. 

I am not going to be one of these guys that cites Factcheck.org, 

although they have commented on this. Sometimes they are right 

and sometimes they are wrong. 

The bottom line is we have a yearly deficit. If Social Security 

only used the money it has coming in, we would have a problem. 

You can say it does not add to the deficit. You can say it does not 

add to the debt. You may be thinking of Social Security as a separate fund and it technically is, but it is one Government. 

Mr. BECERRA. Will the gentleman yield? 

Mr. GRIFFIN. The gentleman will not yield. If you take $100 in 

your personal account and separate it in ten separate accounts, you 

still have $100. 

The bottom line is because of where we go to get the money to 

plus up Social Security, at the end of the day, we are borrowing 

money. Where is the money coming from if we are not borrowing 

it from somewhere? 

This is just ridiculous. I agree with this gentleman, why are we 

here if there is not a problem. There is a problem and that is why 

we are here. It is that simple. 

You can talk Washington speak, about moving money around, 

and it is not here, that is a bunch of nonsense to normal people. 

You are insulting people when you say we have enough money. 

If you say we do not have enough money, then you have to admit 

it is adding to some deficit somewhere even if it is on another balance sheet. 

These ideas of trust funds is Washington speak, we know they 

are routinely treated as one big pool of money. Either you are wasting my time, which I rushed over here from somewhere else, or we 

have a problem. 


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I think the President just acknowledged we have a problem. I am 

a veteran. I am still serving. I had to get up early this morning 

and run Army Reserves all the way down the Mall. Do not talk to 

me about veterans. My grandfather served in World War I. I served 

in Iraq. 

I want to help veterans. Will they be better off if we have a debt 

crisis, folks? How are seniors going to be better if we have a debt 

crisis? Ask the Europeans. It is a bunch of nonsense. 

I had a question, but I am out of time. If I hear somebody else 

say that we have plenty of money and this is not adding to the deficit or debt, I just cannot listen to it. 

I thank President Obama for starting the conversation so we can 

fix this for the next generation of people, which includes me. Thank 

you, Mr. Chairman. 

Chairman JOHNSON. Thank you. The President is aware. Mr. 

Doggett, you are recognized. 

Mr. DOGGETT. Let me just affirm that Social Security is not 

adding to the debt to begin with. That does not mean that I am 

not concerned about the long term solvency of Social Security and 

that it will be there as strong for my grandchildren as it was for 

my parents. 

Mr. Lorenzen, your group has worked with the recommendations 

of the Simpson-Bowles Commission. This is not the only recommendation that the Simpson-Bowles Commission made to ensure the long term solvency of Social Security, is it? 

Mr. LORENZEN. No, it is not. 

Mr. DOGGETT. In fact, one of the other recommendations of the 

Simpson-Bowles Commission was that the wage base, the taxable 

wage base would be slowly expanded, and did not that proposal— 

if the concern is for the solvency, the long term solvency of Social 

Security, did not that proposal do more to protect the long term solvency than adjusting the cost of living increase? 

Mr. LORENZEN. It did somewhat more. It was a comprehensive 

plan that looked at all parts. 

Mr. DOGGETT. I want to be open to all points of view. My main 

objection here, when the President’s name is invoked, that once 

again, as has happened a number of other times in this Administration, he begins by saying he agrees with what the Republicans 

want, which is clearly a limitation on the growth of Social Security 

benefits, and then begs for something in return. 

Of course, they have rejected any other revenues, including additional revenues to protect the solvency of Social Security, or closing 

corporate loopholes, or making the other changes that would allow 

us to address our budget shortfall, which is very real. 

Commissioner, let me ask you, with reference to the Chained 

CPI, my understanding from your testimony is that even if the Republicans exerted total control on this and they could impose it this 

morning, we are not quite ready yet to do so. It is not, as you said, 

ready for prime time yet. 

Ms. GROSHEN. What is not ready for prime time is the Chained 

CIP–E. The Chained CIP–U is ready. 

Mr. DOGGETT. Could be ready. 


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Ms. GROSHEN. That is right. You would have to deal with the 

fact that it is revised twice, but there is a plan out there that 

would allow that to happen. 

Mr DOGGETT. You have indicated that implementing that takes 

longer than the way we do the CPI now, that the data takes longer 

to collect and is not as available as quickly as the way we do it 

now. 

Ms. GROSHEN. No. We publish an initial number and that could 

be used to adjust the cost of living, were that the choice of the policy makers. 

The BLS makes no recommendation on how our official numbers 

should be used. 

Mr. DOGGETT. I guess like so many other members, I receive 

so many expressions of concern for seniors during the two years 

that they received no cost of living increase of any kind and the notion that increases in the cost of food at the grocery store did not 

decline or stay steady during that time, they soared. 

If we had in effect the cost of living increase that is being discussed today, the chained approach, how much less over the last 

decade or two would seniors have received? Would there have been 

other years in which they had no cost of living increase? 

Ms. GROSHEN. We can do that calculation for you. I do not have 

that off the top of my head. 

Mr. DOGGETT. It would not surprise you taking it say over the 

last two decades if they had two recent years in which they got no 

cost of living increase, if this new system had been in place, there 

would have been other years over that 20 years in which they also 

would have received no cost of living increase. 

Ms. GROSHEN. Possibly. 

Mr. DOGGETT. Ms. Altman, let me ask you also, looking forward with reference to veterans, and I appreciate the gentleman’s 

service, I have a lot of veterans in the San Antonio/San Marcos/ 

Austin area concerned about what impact this will have on them, 

just like seniors and individuals with disabilities. 

What difference will it make over time to them in terms of dollars and cents? What is the estimate? 

Ms. ALTMAN. Let me make clear that the American Legion and 

the Veterans of Foreign Wars are against the Chained CPI, both 

for Social Security and the veterans’ programs. 

They would have the figures on the overall calculation. 

Mr. DOGGETT. You are saying both the VFW and the American 

Legion oppose this change? 

Ms. ALTMAN. We can give you a list of veterans, Paralyzed Veterans of America, those are the most prominent groups. There are 

about fifteen veterans’ groups that have come out against it. We 

can provide your staff with the letters they have sent. 

Mr. DOGGETT. Thank you. 

Ms. GROSHEN. Actually, I have an answer. The two years 

where there was no increase were 2009 and 2010. The Chained 

CPI–U would have given three-tenths of a percent increase rather 

than zero. 

Mr. DOGGETT. Why is that? 

Ms. GROSHEN. It is because—basically the substitution effect. 


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Mr. HORRIGAN. One of the issues is we had such a large increase in energy prices in 2008 and then the decline, the way the 

adjustment in Social Security works using the CPI–W is it is compared to the previous peak. 

We had two years where the Index was not above the previous 

peak. However, with the Chained CPI, because of substitution, it 

started at a lower level and came back a little bit faster. 

Just in terms of the comparison of the previous year, it hit that 

previous peak one year earlier with the way it is adjusted, in the 

official way it is adjusted. 

Mr. DOGGETT. Thank you. Thank you, Mr. Chairman. 

Chairman JOHNSON. Thank you. Mr. Tiberi? 

Mr. TIBERI. Mr. Chairman, thank you. Mr. Doggett, can we sign 

you up for that proposal now? 

[Laughter.] 

Mr. TIBERI. Mr. Chairman, Mr. Ranking Member, if I were 

watching on C–SPAN 25, on the Internet right now, I would be 

pretty darn confused. I have to tell you, I am so blessed. I have an 

80 year old father, he is going to be 80 this year, who came to 

America in 1950. In 1950, there were 16.5 workers for every retiree 

on Social Security. There were not 10,000 people retiring a day. 

Now there are less than three workers for every retiree. My dad 

had figured it out and my mom has figured it out, my mom and 

dad still live in the same house I grew up in in Columbus, Ohio— 

just got rid last year of their 18 year old car, not because they 

wanted to but because it broke down, and Social Security is still 

really, really important to them. 

They look at their grandkids and they have again figured it out, 

partly because of organizations like yours, who are doing a great 

job of saying we have a problem, even though some honorable folks 

even up here believe there is not a problem. 

Here is what helped them. 

Mr. BECERRA. Will the gentleman yield? 

Mr. TIBERI. After my five minutes, I will. 

Mr. BECERRA. I never said there is not an issue or challenge 

for Social Security. I just said today using Social Security funds to 

pay for deficits that it did not cause is the problem. 

Certainly, we all want to take care of Social Security long term. 

Mr. TIBERI. The long term for me is very quickly approaching. 

When I get my Social Security statement now, it says if we do 

nothing, if I go online, I will get approximately 72 percent of the 

benefits that I am supposed to get. 

When I came in 2000, Mr. Becerra, it did not say that. I used 

to talk about saving Social Security for my kids. Now it is for people of my generation. My mom and dad get that, not because they 

are concerned about me, but they are really concerned about their 

grandkids. 

If it is going to impact me in my generation, God help my kids 

and their kids. 

Sir, in your written testimony, which I thought was awesome, 

you talk about the difference between the President’s proposal and 

the current law, and the difference it has in terms of impact on 

benefits over a year, over a period of 20 years. 

Can you expand on that for us? 


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Mr. LORENZEN. I was speaking about the proposals on the 

Chained CPI. 

Mr. TIBERI. Yes, generally. 

Mr. LORENZEN. With Chained CPI in place, benefits will still 

be increasing in nominal terms, obviously. 

Mr. TIBERI. Can you say that again? I could not quite hear you. 

Mr. LORENZEN. I am sorry. Benefits will still be increasing in 

actual terms. They will be increasing slightly less than they are 

under scheduled law, but doing it more accurately. 

However, the Trust Fund is projected to be exhausted in 2033, 

at which point there will be a 25 percent reduction for all beneficiaries. The Chained CPI would delay that exhaustion briefly and 

make the shortfall thereafter smaller, so benefits would be higher 

with Chained CPI because the Trust Fund has money to pay benefits, but also because the initial benefits are indexed to wages, that 

a future retiree is going to start with a greater benefit in real inflation adjusted terms than a previous retiree. 

If you were to compare someone who retired in 1993 at age 55 

with what their benefit is today and took a comparable worker who 

retired today at age 65, 20 years from now when they are 85, even 

if Chained CPI had been applied and there was not any bump up 

in benefits or any other adjustments to compensate for it, someone 

retiring today would still have a higher benefit in real inflation adjusted terms at age 85. 

Mr. TIBERI. Thank you. Commissioner, one last quick question. 

To follow up on Mr. Doggett’s point, if this is enacted, long term, 

this is not even enough, correct? We need to do more? 

Ms. GROSHEN. I am sorry? 

Mr. TIBERI. Because of demographics, in terms of Social Security. 

Ms. GROSHEN. The BLS does not do calculations of that. 

Mr. TIBERI. Mr. Blahous. 

Mr. BLAHOUS. You have to do a lot more. 

Mr. TIBERI. We have to do a lot more. Any suggestions on your 

part in terms of saving for my kids, saving Social Security for 

them, at the same time not hurting current seniors like my mom 

and dad? 

Mr. BLAHOUS. I think we are in ‘‘all of the above’’ mode. We 

have to make changes to the eligibility age. I think we have to 

make changes to the benefit formula. I think we should slow the 

rate of benefit growth on the high income end just by making brute 

force changes in the benefit formula itself. 

I think there are other changes we should make to improve the 

work incentives in the system that would basically have the effect 

of rewarding seniors for staying in the workforce longer. 

Mr. TIBERI. The longer we wait, the more difficult a challenge 

it is? 

Mr. BLAHOUS. Absolutely. 

Mr. TIBERI. Thank you. 

Chairman JOHNSON. We have to get it through the House and 

the Senate. 

[Laughter.] 

Chairman JOHNSON. May or may not happen. Mr. Becerra for 

half a minute. 


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Mr. BECERRA. Thank you, Mr. Chairman. I just want to make 

clear we are clear on something. We all say we want to preserve 

Social Security. This is about making sure for our kids and our 

grandkids, it is working as well as it has worked for our parents 

and grandparents. 

To try to make it sound like Social Security is having the sky fall 

on it today when what the sky is falling on is the Federal budget 

which has exhausted its resources and over spent, not Social Security, to say that the Social Security Trust Fund that Americans 

have created through their tax contributions does not exist and the 

interest it earned, it is like telling any American how much money 

do you have in your pocket today, can you pay off your house and 

your car loan today with the money you have in your pocket without going into your savings account? 

That is crazy. We have money in the savings account for Social 

Security. It is there because Americans contributed taxpayer 

money into that Fund. 

To cut benefits, to discuss a budget deficit caused by unpaid for 

wars or tax cuts that went to very wealthy folks, that is just putting it on the backs of seniors. 

I think a number of us are ready to engage in a conversation 

about what we do long term to make sure Social Security is viable 

for everyone. 

To just cut seniors and veterans’ benefits to deal with today’s 

budget deficits caused by other things, that is what concerns many 

of us. 

Thank you, Mr. Chairman, for the time. 

Chairman JOHNSON. The President likes the idea. Thank you 

to our witnesses for their testimony. I also thank our members for 

being here. 

We know we have to do something to protect Social Security long 

term, and we will do that. Come 2033, Social Security will not be 

able to pay full benefits. Americans deserve a Social Security program they and their children and grandchildren can count on. 

As our hearing series moves forward, I look to our continued examination of bipartisan Social Security reforms. We need to do 

right by today’s beneficiaries and workers. When there is bipartisan agreement, we can and should act, and we will. 

I want to thank you all for being here today. The meeting stands 

adjourned. 

[Whereupon, at 11:05 a.m., the Subcommittee was adjourned.] 

[Public Submissions for the Record follows:] 

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Æ 


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