US Senator Bernie Sanders said Tuesday that a "draconian" proposal to chain the cost-of-living increase to the Consumer Price Index is "not only morally grotesque, it is extremely bad economics."

The Social Security Administration on Tuesday announced a 1.7 percent cost-of-living adjustment (COLA) next year, one of the lowest since the automatic annual adjustments were adopted in 1975.

But benefits for senior citizens and disabled veterans would be reduced under a proposal by former GOP Sen. Alan Simpson of Wyoming and investment banker and former White House chief of staff Erskine Bowles.

The Simpson-Bowles Plan would chain the COLA to the Department of Labor's CPI. That would reduce Social Security checks by 3 percent over 10 years and 9 percent over 30 years—even as the cost of living for the elderly may actually increase, said Dean Baker, co-director of the Center of Economic and Policy Research.

The average senior who retires at age 65 would see their Social Security benefits cut by about $560 a year when they reach 75 and by about $1,000 a year once they turn 85. At the beginning of 2012, the average Social Security benefit for a retired worker was $14,760 per year, according to Sanders.

“The idea of balancing the budget on the backs of some of the most vulnerable people in our country—the elderly, orphans, widows and disabled veterans—is not only morally grotesque, it is extremely bad economics," Sanders said.

Baker called for creating an elderly index, arguing that there is no reason not to "unless those pushing for switching the basis for the COLA to a chained index are simply using it as a backdoor to cut benefits. This is not only dishonest; it is an especially bad way to cut benefits. Those who would be hit hardest would be the oldest beneficiaries, who also tend to be the poorest."