Going To A Chained-CPI Would Be A Benefit Cut To S.S.

The House has just passed a budget and sent it to the Senate -- and it looks like Social Security recipients have dodged a bullet this time. This budget does not include any cuts to Social Security benefits. But the argument over cutting Social Security benefits is not over. This budget just funds the government through September, and this summer Congress will be discussing a budget for next year -- and you can be sure the Republicans will again be demanding those cuts.

The sneakiest way to cut those benefits, and one which President Obama has said he would consider, is to change the cost-of-living (COLA) raises for Social Security from being equal to the rise in the Consumer Price Index (CPI), which shows the real rise in the cost of goods (inflation). Instead, the Republicans want to fix the COLA raises to a stingier way to figure inflation called the Chained-CPI (which doesn't really reflect the true rate of inflation).

I went to the Labor Department website and got the figures for the last decade of both the CPI and the Chained-CPI. They are reflected in the top chart above. Note that in every year but one (2008), the Chained-CPI has been lower than the CPI, which means that going to a Chained-CPI would reduce the COLA raises that Social Security recipients would get.

The bottom chart illustrates the difference that would cause for recipients (with the green line representing the CPI and the red one representing the Chained-CPI). The chart shows what would have happened to a recipient receiving $1000 a month in 2003 in COLA raises through that decade. Note that the change would be small for the first few years, but as time passes the change becomes larger (and the lines on the chart grow farther apart, which means under the Chained-CPI the recipients would be losing buying power because of inflation -- which mirrors the green line).

We also need to remember that these figures were for a decade that included the recession and the poor economy following it. In a healthy economy, the inflation would grow at a larger rate -- and those lines on the chart would grow apart much faster, since there would be an even bigger difference between the CPI and Chained-CPI. And Social Security recipients would lose more buying power much faster if their COLA was based on the Chained-CPI instead of the CPI.

Now the difference between the two figures, at least for the first few years, probably seems like a negligible difference to Wall Street and many in Congress (whose salary is over 4 times the median salary of a U.S. worker, and much more the Social Security received by the elderly). But to someone who must exist solely on a Social Security check (which averages just slightly more than $1000 a month), every single dollar counts. They are already struggling to live on what they receive now, and they can't afford to lose any buying power at all to inflation.

Those who say that going to a Chained-CPI to figure COLA raises for Social Security recipients would not be a cut in benefits are lying to the American people. How can a growing loss in buying power not be considered a cut in benefits?