President Obama drops Chained CPI from his budget

Alliance for Retired Americans hails move away from ‘grand bargain’

Washington – President Obama’s Fiscal 2015 budget will not include a switch to the chained CPI formula that would limit cost-of-living increases in Social Security and other programs, the White House announced.

The Alliance for Retired Americans (ARA), the nonprofit, nonpartisan organization of retired union members affiliated with the AFL-CIO, worked diligently for months in the hope that the change would not be implemented – and that earned benefits would not be cut – by rallying outside federal offices with a “Human Chain” event last July, visiting representatives, and educating union members, senior groups and others about the impact of the proposed cuts.

“I want to thank all of the members and our affiliates for all of the work they’ve done and to everyone who took the time to call their Congressmen urging them to have the President take Chained CPI out of his budget,” said Dave Meinell, president of the Missouri ARA. “In my opinion, we have won the first battle to keep from cutting our future benefits.”

WHAT IS THE CHAINED CPI?

CPI stands for the consumer price index, a formula that looks at how prices of things like food and other necessities change over time. It’s used to make cost-of-living, or COLA, adjustments in programs such as Social Security, veterans’ benefits and food stamps.

The chained CPI is a twist on that. It measures living costs differently by assuming that when prices for one thing go up, people will settle for cheaper substitutes (If beef prices go up, for example, they’ll buy more chicken.)

Cost-of-living adjustments would be lower with the chained CPI and people on programs such as Social Security would suffer.

The AARP estimates a Chained CPI would cut Social Security benefits for seniors, veterans and people with disabilities by $146 billion over the next 10 years.

“We are thrilled that President Obama heard Alliance members from across the country and removed the chained CPI cut to Social Security and other programs from his 2015 budget,” said Richard Fiesta, executive director of the Alliance.

“Now that the pesky chained CPI is out of the way, we can focus on the real task at hand, which is to expand Social Security so that it fits the retirement security needs of today.”

END OF THE ‘GRAND BARGAIN’

Deficit hawks said Obama’s move to shelve chained CPI likely kills any chance of a grand bargain – slowing the growth of Social Security and other benefits while increasing taxes on the wealthy – for the rest of his term.

Just prior to the President’s announcement, 117 Members of the U.S. House, led by Rep. Allyson Schwartz (D-PA), signed a letter urging him not to include the chained CPI in his 2015 budget, and 16 Senators signed a letter, spearheaded by Sen. Bernie Sanders (I-VT), urging him not to cut Social Security, Medicare, or Medicaid.