Chained CPI Cuts Benefits for Today's Seniors

Today the President released his budget.  It contained several cost cutting measures to Medicare and Social Security, including the implementation of Chained CPI.  To help you understand the basic tenants of Chained CPI,  AARP’s position and how you can get involved, some information and a video primer appear below.

Basic Tenants

Every month, government economists at the  Bureau of Labor Statistics (BLS) of the U.S. Department of Labor release the latest Consumer Price Index (CPI), which is a measure of the average change over time in the price paid by urban households for a set of consumer goods and services. While sometimes referred to as a cost-of-living index, the CPI differs in important ways from a complete index because it does not take into account changes in other factors that affect consumer well-being and are difficult to quantify, such as safety, health, water quality, and crime.

The Chained CPI, or superlative CPI, allows for the substitution of goods as the relative prices of items change.  For example, if the price of Fuji apples rises while the price of Gala apples holds constant, the CPI assumes that people continue to consume the same amount of Fuji apples as before whereas the superlative CPI would assume that people would decrease their consumption of Fuji apples and consume more Gala apples instead. While it is possible for the superlative CPI to be higher than the current CPI over short periods, the Bureau of Labor Statistics states that over time the superlative CPI is expected to trend lower than the CPI by several tenths of a point.

Simply put, the chained CPI shows a lower level of inflation than the current CPI.  This means that adopting the chained CPI measure would allow policymakers to gradually cut benefits and increase taxes in a way that might not be readily apparent to most Americans.

A two minute AARP Government Affairs primer on the Chained CPI and its role in the debate appears below.

https://access.aarp.org/politics-society/advocacy/info-11-2012/,DanaInfo=.awxyCefxwHx1r+social-security-budget-deficit-chained-CPI.html?intcmp=HP-spot6D

AARP Position on Chained CPI

1. It’s a benefit cut. The chained CPI is a significant benefit cut, not some “technical change” as some in Washington would like you to believe.

2. Cuts get deeper every year. The chained CPI would cut benefits more with every passing year, costing seniors, veterans and our nation’s most vulnerable thousands of dollars over their lifetimes.

3. It cuts benefits for today’s seniors. Most politicians promised during the 2012 campaign not to cut Social Security for current seniors. The chained CPI would break that promise, cutting benefits that today’s seniors have earned through a lifetime of hard work.

4. It’s less accurate for seniors. The chained CPI assumes that when the cost of something you normally buy goes up, you will substitute a lower-cost item. This theory falls short since many seniors and veterans spend much of their money on basic goods like prescription drugs, utilities and heath care – items that don’t have lower-cost substitutes.

5. It’s the wrong solution. Americans deserve a separate, national conversation about how to protect Social Security for today’s seniors and responsibly strengthen it for their children and grand children.

Protect Social Security Benefits

Letters to Congress – you can make your voice heard by telling Congresswoman, Eleanor Holmes Norton and all members of Congress that you oppose the Chained CPI  https://action.aarp.org/site/Advocacy?cmd=display&page=UserAction&id=2895

Chained CPI Calculator – this calculator lets older adults see how much they stand to lose annually in the shift to the Chained CPI https://act.aarp.org/CCPI/index-landing.html?cmp=RDRCT-WHULS_MAR12_013

Chained CPI Survey – AARP has, released a survey of 800 voters showing that voters 50+, regardless of party affiliation, oppose Chained CPI. http://www.aarp.org/content/dam/aarp/research/surveys_statistics/general/2013/National-CPI-Survey-AARP-rsa-gen.pdf

You’ve Earned a Say homepage – Here you can find up to date information on proposals to Social Security and Medicare, including the Chained CPI  www.earnedasay.org

Become an AARP e-activist – Make sure you are signed up to receive regular alerts from AARP on the debate around Social Security and Medicare https://action.aarp.org/site/SPageNavigator/YEAS_registration.html