There are now multiple press reports that President Obama will agree to a fiscal deal that enacts a so-called “Chained CPI” to calculate Social Security and veterans’ benefits. Under this plan, beneficiaries would get cuts in their cost of living adjustments.
The plan is drawing the ire of Democrats in Congress. Rep. Elijah Cummings (MD) released the following statement on these proposed cuts, calling them “fundamentally unfair”:
“I stand with my fellow CPC members in strongly opposing any move toward chained CPI that would greatly reduce the long-term benefits of every single Social Security recipient and their families. These are our family members, our friends and neighbors who worked hard, played by the rules, and paid their fair share. Now the government must uphold its end of the deal and protect their Social Security benefits.
“It is fundamentally unfair to ask our most vulnerable citizens – our elderly and our poor – to shoulder the burden for our country; it is morally wrong and unacceptable. We must do better.”
The Center for Economic Policy and Research estimates that, for the average worker retiring at age 65, a change to chained CPI would mean a cut of about $650 each year by age 75 and a cut of roughly $1,130 each year at age 85.
Calculated by the Bureau of Labor Statistics, the Consumer Price Index, or “CPI,” is often referred to as a cost-of-living estimate. Chained CPI changes the formula used to calculate inflation by taking into account changes in spending patterns, not just the price of goods, over time. This different calculation lowers the annual cost-of-living adjustment Social Security recipients receive therefore reducing their total benefits over time.
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