WASHINGTON – With congressional budget negotiations moving behind closed doors, one item apparently on the table is changing the way cost-of-living adjustments are calculated for seniors, veterans and other recipients of government benefits.
The consumer price index, or CPI, is the government’s main gauge of inflation and is used to determine cost-of-living adjustments, often shorthanded as COLAs. It’s a formula that has been used for more than four decades.
But President Barack Obama earlier this year proposed a less generous formula called a “chained” consumer price index, in hopes of saving the government $230 billion over 10 years.
In April, Obama’s proposal was viewed as an olive branch to Republicans that was largely rejected. With budget bills passed by the House of Representatives and the Senate now in a conference committee to narrow differences and a mid-January deadline approaching, the issue is back on the table.
The chairman of the congressional talks, House Budget Committee Chairman Paul Ryan, R-Wis., identified the issue as an area ripe for compromise.
That’s why groups representing seniors and veterans were out in front of the White House Thursday afternoon, demanding that the president and Congress back off the changes.
“It’s a benefit cut, a significant benefit cut, $340 billion out of the pockets of current and near retirees, veterans and the disabled over the next 10 years alone,” Joyce Rogers, senior vice president of the powerful AARP lobby for seniors, told the gathered elderly protesters.
In front of the White House fence, the president of the National Committee to Preserve Social Security and Medicare, Max Richtman, went after Obama.
“We’re here because the elephant in the room is a donkey,” Richtman said in a play on words with political party symbols. “The chained CPI is in the president’s budget.”
Under the president’s April budget proposal, future benefits for retirees, government workers and veterans would be subjected to the less generous measure of inflation. The “chained” index assumes that consumers don’t always pay higher prices but rather substitute with cheaper alternatives.
As a candidate in 2008, Obama opposed such COLA calculations. But earlier this year, White House press secretary Jay Carney explained the backtrack by saying the president’s proposed budget in its entirety favored seniors.
Veterans groups are angry, too. By the calculation of the Paralyzed Veterans of America, a soldier who becomes disabled at 30 would, under the president’s alternative measure, see $1,376 less in benefits by age 45, $1,821 by age 55 and $2,260 by 65.
“Veterans … sacrificed for the nation,” Susan Prokop, the group’s associate policy advocate, told protesters.
Critics of the existing consumer price index argue it already doesn’t capture the reality that seniors spend money differently that the broader population, and in different places. The “chained” CPI is even more flawed, for these critics, because in many areas seniors can’t substitute products. A retiree with a heart condition isn’t going to switch back to butter because margarine prices are rising.
Instead, some liberals want to raise taxes and increase spending on Social Security.
Sen. Tom Harkin, D-Iowa, is floating legislation to raise the current $113,000 cap on how much of an individual’s income is subject to the tax that funds Social Security benefits. He’d also change cost-of-living adjustments to calculate them off of what now is the Labor Department’s experimental consumer price index for the elderly, which gives more weight to pharmaceuticals and other products bought by seniors and would increase their benefits.
“It’s more accurately reflective of what elderly people spend their money on,” Harkin told McClatchy.
“I think … (it) is the way to go; raising the wage caps, we can secure Social Security forever and ever.”
The measure has support from Sen. Sherrod Brown, D-Ohio, who said that “a third of Social Security beneficiaries are essentially living on Social Security alone. We shouldn’t be playing games to cut Social Security, period.”
While many advocacy groups favor a better measure of inflation as it affects seniors, it’s not clear the experimental index is ready for prime time, said Keith Hall, who until 2012 headed the Bureau of Labor Statistics.
“It seems pretty clear the elderly shop in other stores. If you really wanted to measure the older folks a bit better, you’d have to redo the whole index,” said Hall, now a researcher at Virginia’s George Mason University.
“When you’re thinking about how much money is involved with just Social Security payments alone, you’re talking about $40 million on data collection for $50 billion in Social Security payments. That would be a significant bump up in what they (Labor Department) spend on the CPI.”
Republicans accuse Obama of proposing the inflation-measure change with little intent to actually pursue it.
“The White House will not agree to take up chained CPI without getting something in return,” said Sen. Bob Corker, R-Tenn. “I would think that since we know it’s a good policy, why not adopt it at face value?”