Ted Simons: A new report by the AARP looks at social security's impact on Arizona's economy and the nation's economic prosperity. The report comes at a time when many in Congress are calling for changes to social security and Medicare. Joining me now is AARP national senior policy stragetist Cheryl Matheis. Good to have you here.
Cheryl Matheis: It's great to be here.
Ted Simons: All right. Before we get to this report, I know that the AARP had this initiative, this, you've earned a say initiative.
Cheryl Matheis: That's right. We talked about that last year. We have gone out to our members and to the public to give people good information about Medicare and social security, about the fact that both programs need more financial standing to be there for the future. And what are the options for changing them? And we went out and we wanted to give people information, we used think tanks from the left and the right, brookings and heritage, and we had them write up their arguments so people would understand and know where the argument came from, and they could make up their own mind about what they wanted to see done. And that's the whole point of the “you've earned a say.” You pay into social security, you've earned a say in its future.
Ted Simons: What did you hear people say?
Cheryl Matheis: We heard from 10 million people so far. We have a lot more to go. But we really heard that people value the programs greatly, people of all ages value these programs, very, very popular programs, and all political leanings. It really isn't different. And they want the benefits to be there. And when you think about it, it makes sense, because even a young person, young people often say oh, I don't think social security is going to be there. The fact is, that it is going to be there, because we have enough money to pay full benefits for the next 20 years, and after that point, there will be enough money to pay 75% of benefits. But 75% isn't good enough. But it will be there. So we need to change things to make sure that there's 100% of benefits for our children and grandchildren. And they want it, they may not think it's going to be there, but they're going to need it, because they don't have the pensions people have now, and they're not going to have as much savings.
Ted Simons: And I thought I noticed ideas like clamping down on drug prices, improving care coordination, cut overtesting, cut waste, cut fraud. Did those seem to cut across?
Cheryl Matheis: Those are ideas for Medicare. Those are ideas experts have said, you could save a great deal of money in Medicare without hurting people who get Medicare, without cutting the benefits down. There are ways to get better care at a lower cost. And we're promoting those, because that's what people said they want to see.
Ted Simons: OK. That's Medicare. Let's talk about social security, specifically, and the impact on the national economy, the impact on Arizona, especially the multiplier effect. Talk to us about what that means. We've talked about that with economists before. Give us a capsule summary.
Cheryl Matheis: The idea of a multiplier effect, when I hire you and pay you money to work for me, you go home and spend that money. And that money you spend at a store and that store hires more people because you're spending more money. So it's the way that money flows through the economy that actually adds up to a greater amount than the amount that I just paid you to work for me.
Ted Simons: And that multiplier effect as far as social security is concerned is money that comes into Arizona to a social security recipient, spreads out.
Cheryl Matheis: That's right. So this year in Arizona, social security will pay about $16 billion in benefits. That's a lot of money. But that $16 billion is going to generate almost $30 billion in economic impact. So that's almost a two-for-one expansion through the multiplier effect. And that's a lot of money. In a state like Arizona, even Arizona, with lots of people, $30 billion is nothing to sneeze at.
Ted Simons: You're talking a couple hundred thousand jobs, 1.7 billion in taxes?
Cheryl Matheis: Additional state and local taxes, more people being hired, people getting higher wages.
Ted Simons: OK. With that in mind, both Medicare and social security, obviously paramount to the folks you talked to, the folks you heard from regarding this initiative. But how do you balance that with the idea that the country is in trouble, the country can't pay its bills right now, we've got mayhem practically back in Washington.
Cheryl Matheis: We do.
Ted Simons: And we have all sorts of ideas to cut structural body of social security and Medicare, to cut all sorts of this, that, and the other. How do you balance this?
Cheryl Matheis: Well, our members really care about our country and they care about paying the country's bills. But remember that for social security, that's not part of the budget deficit. Social security and people know this, is a program that is completely funded by what people pay in during their working years. And they pay in with the expectation that if they need it when they retire, or should they I do and leave a widow or widower and children behind, they're going to get it. And that's the compact of it, and it's not part of the budget deficit. So we would like to see a separate conversation just about social security and retirement security to make sure that people in the future, that's our children and grandchildren, because they're the ones who are going to be affected by it. People who are near retirement age now are going to be fine. But we need to make it strong for people in the future.
Ted Simons: How do you make it strong for people in the future?
Cheryl Matheis: Well, there are a number of ideas that have been put out there, and we put out booklets I showed you last year. You can find them on earnedasay.org, and they have different options. And you can make up your own mind about those options. It will probably be a package of them, but I would like to talk about one option, because it's an option that's being talked about right now.
Ted Simons: Please.
Cheryl Matheis: And it's a very dangerous one. And that's called the chained consumer price index, or chained CPI. You know, social security just came out with an announcement that it's going to have the lowest cost of living adjustment that it's ever had next year. And that is because the cost of living adjustment is based on the CPI, which is a market basket of goods and services that people buy. The problem is, older people buy a different market basket of goods and services than younger people, and their market basket is very heavily weighted to medical care, to utilities, things that they cannot control the price of. Older people, the chained CPI, which is a proposal to even reduce it more, goes under the concept that you substitute. So, for instance, if you usually buy steak for your family on Sunday night, you will substitute hamburger if steak gets more expensive. It makes a lot of sense to people, but the problem is you can't substitute cheaper medical care, you can cut out the medical care, you can cut your pills in half and they won't do you any good and you end up in the hospital. You can turn the lights off if your utility bill goes up, but that’s not the kind of substitution we're talking about. So it's a really dangerous proposal, because it starts out as a small cut, but it's cumulative over time. So it gets added to every single year. Just like when we were little and we learned about compound interest, think about a compound cut. And so if somebody- If there's a chain CPI that cuts a little bit from somebody when they're 65, when they're 85 and have much less income to rely on, they could lose as much as an entire month of benefits.
Ted Simons: With that information, we've got about 30 seconds left, what do you want folks, AARP members or not, to do with this information?
Cheryl Matheis: It's really important right now that they tell their member of Congress that they don't think chained CPI is a fair solution for social security. That's an immediate problem, because even though social security shouldn't be part of the budget deficit, it is part of the talks going on right now in Washington.
Ted Simons: All right. Well, it's good to see you again. This is important information. I know a lot of our viewers are very interested. One more time with the website?
Cheryl Matheis: Earnedasay.org. Or you can go on the AARP website, and type in social security, you will get all the information we've talked about.
Ted Simons: All right. Good to see you again.
Cheryl Matheis: It's been delightful to be here.