Dean Baker: Statement on Gang of Six Plan

by Dean Baker

Dean Baker

The budget plan produced by the Senate’s “Gang of Six” offers the promise of huge tax breaks for some of the wealthiest people in the country, while lowering Social Security benefits for retirees and the disabled. Despite claiming that they will “reform” Social Security on a “separate track, isolated from deficit reduction,” the plan includes cuts to Social Security that would be felt in less than six months, as the plan calls for a new inflation formula that will reduce benefits by 0.3 percentage points a year compared with currently scheduled benefits. The plan also calls for a process that is likely to reduce benefits further for future retirees.

The proposed cuts to Social Security are cumulative. This means that after ten years, a beneficiary in her 70s will see a cut of close to 3 percent. After 20 years, the cuts for beneficiaries in their 80s will be close to 6 percent, while the reduction in annual benefits will be close to 9 percent by the time beneficiaries are in their 90s. For a beneficiary in her 90s living on a Social Security income of $15,000, this means a loss of more $1,200 a year in benefits
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