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Why the Chained CPI is Wrong for Social Security

Posted By David Certner On April 11, 2013 @ 7:53 am In Where We Stand | Comments Disabled

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Yesterday, the President included Social Security cuts in his budget [2] through a proposal called the ‚Äúchained CPI‚Ä. Let’s take a minute and break down exactly what that means:

The chained CPI would modify the way the cost-of-living-adjustment (COLA) for Social Security is calculated, cutting benefits by $127 billion dollars over the next 10 years alone [3]. That comes out to over $2000 in lost benefits for the average senior.

Some have tried to defend [4] this unprecedented inclusion of Social Security benefit cuts in the President’s budget. Since the last Social Security package in 1983, Washington has never cut Social Security benefits. In fact, we have strong rules in place to prevent Social Security from being used as a piggy bank for deficit reduction. Yet the President’s budget choose to ignore the fact that Social Security is a separate, self-financed, off-budget program that has sufficient assets to pay full benefits for the next 20 years (and 75% of benefits beyond that time). In fact, the President blatantly breaks his earlier promise [5] to not cut the Social Security COLA.

Have an opinion? Get involved. Join the AARP Politics Group [6].

Here are the facts you need to know to refute proponents of the Chained CPI:

  1. Chained CPI is not a more accurate measure of inflation for seniors. The Bureau of Labor Statistics, which calculates the consumer price index (CPI), has developed a separate measure of inflation for the elderly called the CPI-E, because the current CPI actually understates inflation for seniors [7].
  2. Adopting a Chained CPI is an imbalanced approach for Social Security. This proposal deals with a long concern about the ability of Social Security to pay benefits in the future by cutting benefits now. There is no corresponding effort to better protect benefits. Instead, Social Security benefits would decrease under a Chained CPI by a growing amount each year that will mean seniors fall further and further behind the cost of living [8].
  3. Chained CPI disproportionally affects the incomes of those who are most reliant on Social Security, and are especially harmful [9] for those who are lower income and live longer. So-called “mitigation” efforts, which attempt to address the rough edges of this large benefit cut, simply reinforce the fact that the cut is harmful and that the Chained CPI is not accurate.
  4. It takes a political act of Congress to cut benefits as a matter of policy – something that is overwhelmingly rejected in poll after poll [10] of the American public, across party lines.
  5. Social Security should not be discussed in an overall budget package [11], and benefit cuts should not be used as a piggy bank for deficit reduction.  Rather, Social Security should be discussed separately from the federal budget, in the context of retirement policy, with the goal of achieving an adequate income in retirement.

So what can you do? Go to www.aarp.org/whatyoulose [12] to calculate exactly how much your Social Security benefits would be cut – then take action. Urge your members of Congress to reject this harmful change and instead find responsible solutions that keep the promise to current seniors and future generations.


Also of Interest


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URL to article: http://blog.aarp.org/2013/04/11/why-the-chained-cpi-is-wrong-for-social-security-presidents-budget/

URLs in this post:

[1] Image: http://blog.aarp.org/wp-content/uploads/2013/04/Facebook-Share3-Non_Promoted.jpg

[2] President included Social Security cuts in his budget: http://www.whitehouse.gov/omb/budget/

[3] $127 billion dollars over the next 10 years alone: http://www.cbo.gov/sites/default/files/cbofiles/attachments/Government-wide_chained_CPI_estimate-2014_effective.pdf

[4] Some have tried to defend: http://www.c-spanvideo.org/clip/4414584

[5] the President blatantly breaks his earlier promise: http://www.youtube.com/watch?v=BS3P_-FgiBs

[6] Join the AARP Politics Group: http://www.aarp.org/online-community/groups/index.action?plckGroupId=Group1472&plckGroupPage=forum

[7] because the current CPI actually understates inflation for seniors: http://www.aarp.org/content/dam/aarp/research/public_policy_institute/econ_sec/2013/impact-of-chained-cpi-federal-programs-fs-AARP-ppi-econ-sec.pdf

[8] seniors fall further and further behind the cost of living: http://www.youtube.com/watch?v=vDYQZr22Ikk&feature=youtu.be

[9] especially harmful: http://www.aarp.org/politics-society/advocacy/info-03-2013/chained-cpi-infographic-aarp.html?intcmp=AE-BLIL-DOTORG

[10] poll after poll: http://www.aarp.org/politics-society/government-elections/info-04-2013/older-voters-oppose-switch-to-chained-cpi.html?intcmp=AE-BLIL-DOTORG

[11] overall budget package: http://www.youtube.com/watch?v=ihUoRD4pYzI

[12] www.aarp.org/whatyoulose: http://www.aarp.org/whatyoulose

[13] What’s the Reaction to Obama’s Social Security Proposal?: http://blog.aarp.org/2013/04/10/whats-the-reaction-to-obamas-social-security-proposal/?intcmp=AE-ENDART1-BL-REL

[14] Key to Longer Life? Fatty Fish Twice Weekly: http://blog.aarp.org/2013/04/02/key-to-longer-life-fatty-fish-twice-weekly/?intcmp=AE-ENDART2-BL-BOS

[15] Join AARP: https://appsec.aarp.org/MSS/join/application?intcmp=AE-ENDART3-BL-MEM

[16] AARP home page: http://www.aarp.org/?intcmp=AE-ENDART3-BL-HP

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