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Common Dreams

Obama's Deficit Proposal: Cut Social Security Benefits

Indexing Social Security benefits to chained consumer price index means a cut for all beneficiaries

by
Andrea Germanos, staff writer

"Chained CPI," a major piece of President Obama's latest proposal in the budget deficit talks, really means, as progressives point out today, a real cut in benefits.

The Center for Economic and Policy Research's Dean Baker explains that in the proposed formula "the annual cost of living adjustment for Social Security benefits would be indexed to the chained consumer price index rather than the CPI for wage and clerical workers (CPI-W) to which it is now indexed."

The "Chained CPI" is a flawed strategy, The Nation's Bryce Covert writes, because it uses

[...] a measure that tries to take into account human behavior in reaction to price increases—specifically, the substitution for something cheaper if the price of what you normally buy goes up. If provolone costs a fortune, perhaps I’ll switch to Swiss. Unfortunately for the elderly, they buy products that don’t behave much like provolone. As Dean Baker explains, the elderly spend more of their money on health care, which has seen costs far outpace the costs of cheese, and are also generally less likely to be able to make substitutions on what they buy.

More reactions today on Twitter from progressives:

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