As a part of negotiations to reduce the budget deficit, President Obama has released a new tax plan that aims to cut social security spending by using a new formula for calculating benefits. This new formula uses a chained CPI. The chained CPI reduces benefits for senior citizens and other social security dependents by reducing the substitution bias currently included in the calculation of social security payments. Opponents to the new policy say that a reduction in benefits would lower the standard of living drastically for those who require social security to make ends meet.
The government has not issued a formal response to this plan but it seems like it will not gain strong support in congress because it is strongly opposed by the president's democratic base. The republicans who are all out for small government might also face opposition in passing this bill due to strong opposition from their constituents. Also based on discussions from Public Finance with Dr. Gitter, if the government wants to reduce the budget deficit this is one of the options it has in doing this. However, this measure is not politically popular and if it goes through, the government would have to ensure that those who depend on Social security get alternatives. This can be done by policies designed to improve the savings rate and to ensure that families have adequate retirement savings, and policies ensuring that employers pay out adequate amounts into retirement accounts and provide prudent advice to their employees to ensure that their retirement accounts are relatively safe and adequate for their retirement life.
http://www.huffingtonpost.com/2013/04/10/elizabeth-warren-social-security_n_3053355.html?1365613267&utm_hp_ref=politics
http://www.huffingtonpost.com/rep-keith-ellison/why-cutting-social-securi_b_3084891.html?utm_hp_ref=business&ir=Business
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