Politicians often rely on a complacent press to enact a draconian agenda. Right now, the mainstream media are failing in their duty to inform Americans about the chained CPI, (Consumer Price Index), a cut to Social Security’s COLA (cost-of-living adjustment) that is likely to be considered by the bipartisan special committee charged with producing a $1.5 trillion deficit reduction package six months from now. This is unfortunate, because while the arguments for its adoption are dubious, the damage the chained CPI would inflict on seniors and disabled persons would be very real.
The chained CPI is a more modest measure of inflation. It increases 0.3 percent less on average than the CPI-W (Consumer Price Index for Urban Wage Workers and Clerical Workers), which is currently used to determine Social Security’s COLA. The COLA is an annual increase in Social Security benefits that beneficiaries receive at the end of the year to ensure that those benefits do not lose value due to inflation. There is not a COLA every year; it is only provided when the CPI registers inflation. In fact, because of the recession, there was not a COLA for the past two years.
The chained CPI is seen as an attractive change in the current bipartisan deficit talks in Washington, because when applied government-wide, it both cuts spending and increases taxes. In addition to Social Security, when applied to several other programs that provide COLAs, such as Veterans Affairs benefits, federal employee pensions and other program’s whose benefits are based on inflation (such as Supplemental Security Income), the chained CPI would dramatically reduce government spending. When applied to the tax code, it would slow the rate at which tax brackets and refundable deductions like the Earned Income Tax Credit (EITC) increase, thereby increasing revenue.