Thoughts on the Chained CPI, Social Security, and the Budget
|Written by Dean Baker|
|Monday, 17 December 2012 21:43|
According to reliable sources, the Obama administration is seriously contemplating a deal under which the annual cost of living adjustment for Social Security benefits would be indexed to the chained consumer price indexrather than the CPI for wage and clerical workers (CPI-W) to which it is now indexed. This will lead to a reduction in benefits of approximately 0.3 percentage points annually. This loss would be cumulative through time so that after 10 years the cut would be roughly 3 percent, after 20 years 6 percent, and after 30 years 9 percent. If a typical senior collects benefits for twenty years, then the average reduction in benefits will be roughly 3 percent.
There are a few quick points worth addressing:
Read More: Thoughts on the Chained CPI