What Exactly is the CPI?

Have you heard the phrase “chained CPI” lately?  It’s an innocuous sounding name for a budget proposal that would cut Social Security and other benefits for today’s seniors and veterans – including disabled veterans and military retirees. But what does it mean?

What does “chain

ed CPI” stand for?

CPI is an acronym for consumer price index, the formula that looks at how the prices of things we need (like food, for example) change over time.  CPI is used to make cost-of-living adjustments (another common acronym: COLA) in Social Security, veterans benefits, and food assistance programs. Chained CPI measures living costs differently and assumes that when prices go up, people settle for cheaper alternatives.

What would it do?

Cost-of-living adjustments would be lower with the chained CPI.  And a lower COLA would change the amount of Social Security payments, veterans benefits, and more.

How much could payments change? Under the chained CPI, estimates show that your cost-of-living adjustment (COLA) would be about .3 percentage point below the regular CPI. True. Three dollars less on every $1,000 doesn’t sound like much, but the adjustment keeps compounding over time.  So that $45 deduction this year becomes $90 next, and gets higher and higher as the years go by.

What’s the bigger picture?

The hidden consequence of this proposal means that current and future seniors and veterans would lose $129 billion in benefits over the next ten years – and for the oldest Americans, that would mean losing a full month’s check.

How can I learn more?

Use AARP’s calculator to see how your Social Security or veterans’ benefits would be impacted if Washington changes the cost-of-living-adjustment.

How can I get involved?

Send a message to President Obama and your Members of Congress – urge them to reject this shortsighted change and instead find responsible ways to address our nation’s budget challenges.

 

Tell them to leave your hard-earned Social Security and veterans’ benefits out of any shortsighted budget deal.