Bye, Bye CPI

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Social Security has been called the third rail of American politics.  That role has been preserved.

According to an unnamed White House official:  The compromise embedded in last year’s budget included policies like chained CPI – the number one policy change that Republicans had asked for. . .However, over the. . .last year, Republicans consistently showed a lack of willingness to negotiate on a deficit reduction deal, refusing to identify even one unfair tax loophole they would be willing to close, despite the President’s willingness to put tough things on the table.

Those words seem to draw a line in the fiscal sand.  President Obama’s proposed budget for the coming year will omit chained CPI (Consumer Price Index), which slows the rate at which Social Security benefits grow.

Using just the unvarnished CPI to calculate increases in Social Security benefits would not be a problem.  “Plain” CPI simply looks at how prices change over time.  But chained CPI measures living costs by assuming that when prices for a given item go up, people purchase cheaper substitutes.  Bottom line: cost-of-living adjustments would be lower with chained CPI than with ordinary CPI.

Had the President allowed the proposal for chained CPI to stand, it’s estimated that the rate of growth of Social Security benefits would slow by about 0.3 percent annually, and would trim benefits by a combined $1,500 after five years for many workers.

The President has come through for workers again.

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Michele Petrovsky is the Webmaster at Tools4Change, Author of “Cathedral or Bazaar?  Fix Higher Education – Teach by the Seat of Your Pants ,”  “Donkey Dharma,” and “Quick Guide to Linux.” Petrovsky resides in Glen Mills, Pa.

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