More On COLA v. Chained CPI Soc. Sec. Cut... Plus Handy Chart...

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The idea is to change the way Cost of Living Adjustments (COLAs) are calculated across the federal government. Currently, the COLAs for tax brackets, pensions, and Social Security are tied to different measures of the Consumer Price Index (CPI). Because spending habits change when living costs increase, some experts think these measures are too generous, and want to change all of the COLAs to a different, smaller measure of inflation: the so-called "chained-CPI."

On the tax side, this would likely draw more revenue: Tax brackets would rise more slowly than incomes, so people would get kicked into higher brackets more quickly and, voila, more income subject to taxation.

But on the benefits side, this means money out of people's pockets, even current retirees and pensioners. Responding to a letter of concern from House Democrats' top Social Security guy the program's chief actuary explained that moving to "chained-CPI" would constitute an immediate 0.3 percent benefit cut. That may sound small, but the effects would compound, and "dditional annual COLAs thereafter would accumulate to larger total reductions in expected scheduled benefit levels of about 3.7 percent, 6.5 percent, and 9.2 percent for retirees at ages 75, 85, and 95, respectively."

In a recent brief, the National Women's Law Center, which opposes reducing the Social Security COLA, turned similar numbers from an earlier SSA memo into a handy chart:



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Link: http://tpmdc.talkingpointsmemo.com/2011/07/chart-of-the-day-the-stealth-social-security-cut-in-debt-talks.php

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(K and R)


After the Boskin Commission in the 90's, the CPI/COLA calculations were rigged, resulting in our current "no inflation" figures (which have already reduced COLA'S to zero for at least 2 years.

The "chained CPI" concept is, by definition, extremely flexible, depending on at what point manipulators decide that a "substitution effect" should be inserted. Since they are no ;onger required to compare apples to apples, the "chained CPI" substitution effect allows manipulators virtually infinite ability to FURTHER rig the CPI/COLA figures downward in the future without new legilation.








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