Pelosi, Dems signal openness to Social Security changes

House Minority Leader Nancy Pelosi of Calif. gestures while speaking on Capitol Hill Friday, July 8, 2011, in Washington, to discuss the debt ceiling.
AP Photo/Alex Brandon
For the first time today, House Democratic Leader Nancy Pelosi did not rule out changing the way the government calculates annual cost-of-living adjustments for Social Security recipients. The possible change, adamantly opposed by progressives in the Democratic caucus, could make payments to retirees smaller.

As negotiations over deficit reduction and raising the debt ceiling continue, Pelosi reiterated today that Democrats are opposed to making cuts to Social Security benefits.

When asked if changing the Social Security formula for cost of living adjustments was a de facto benefit cut, Pelosi did not directly answer.

"No. Cutting benefits is exactly that. Cutting benefits," Pelosi said. "There's concern in my caucus about what would happen with the CPI (consumer price index). Some think it is a benefit cut, others do not."

But she reiterated that any savings from changing the CPI would have to go back to the Social Security Trust Fund.

Meanwhile, in the House Ways and Means Committee Friday, lawmakers grappled with the costs of Social Security and how to save it for future generations.

"Social Security has never contributed a dime to our national debt," said liberal Rep. Xavier Becerra, D-Calif., noting it has a nearly $3-trillion dollar trust fund to last it until 2036, according to the most recent estimates.

Rep. Sam Johnson, R-Texas, disagreed. All of Social Security's money is in bonds, which require the government to borrow money to redeem, he insisted.

Both, however, agreed that something has to be done.

Starting in 2037, benefits will drop to 77 percent of their required levels, as the system can only pay out what it takes in. For the third of seniors who have no other source of income, the impact could be significant.

"If we do wait until we're close to trust fund depletion," said Charles Blahous, a research fellow at the conservative think tank the Hoover Institute, "there's no historical president for closing that level of shortfall."

A panel of experts proposed a myriad of solutions. Raise the retirement age. Cut benefits for the well-off. Eliminate the cap on taxable wages.

Syl Schieber, former Chairman of the Social Security Advisory Board, proposed adjusting the CPI.

The consumer price index used to adjust benefits fluctuates with price changes in a fixed collection of products. But, Schieber argued, because people buy different items when others become more expensive, the index overstates the living costs for most seniors.

Joan Entmacher, vice president for family economic security at the National Women's Law Center, disagreed. Because seniors spend twice as much on health care as the general population, Entmacher argued, the current CPI actually understates their living costs.

While Pelosi said today that any savings from Social Security must be returned back to the program, Republican leaders today were also resolute about certain conditions.

GOP leaders made clear that any savings from closing tax loopholes should go to tax cuts elsewhere.

"It just does not make sense for Americans to suffer under higher taxes in an economy like this," House Majority Leader Eric Cantor told reporters today after the dismal monthly job numbers showed unemployment rising to 9.2 percent.

The resolution of both parties leaves the question of how members can actually hit deficit reduction goals of $2-4 trillion if a large chunk of savings -- either from closing tax loopholes and reforming entitlements --don't go to deficit reduction.

Though staffs will continue to work over the weekend to see how to breach the remaining divides, many of the negotiators have left town and will return Sunday to see if there is a realistic path forward for a big deal that reduces the deficit by up to $4 trillion.

It will be a heavy lift. House Speaker John Boehner said today that the two sided remain far apart on a deal. He said the problem is like a "Rubik's cube that we haven't quite worked out yet."

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    Jill Jackson is a CBS News senior political producer.