Eight leading veterans’ groups sent letters to President Obama, and to members of the U.S. House of Representatives and the U.S. Senate today, urging them to continue their commitments to veterans and their families during negotiations over the federal deficit by opposing any effort to reduce benefits by adopting the chained consumer price index (CPI) formula for determining Cost of Living Adjustments (COLAs) for recipients. 

The letters from the American GI Forum, AMVETS, Blinded Veterans Association, National Military Family Association, Paralyzed Veterans of America, VetsFirst, a program of United Spinal Association, Vietnam Veterans of America, and VoteVets.org identified significant cuts that would occur to 9 million veterans receiving Social Security retirement benefits, 3.2 million receiving VA Disability Compensation Benefits, and 310,000 receiving VA Pension Benefits if the chained CPI was used to calculate the annual COLA. Those cuts are detailed in this fact sheet.

The letters from veterans groups said: “Many veterans who rely on these programs live on fixed incomes and very tight budgets. For them, every dollar of hard-earned benefits counts in meeting basic expenses, attaining quality of life, and building a better future for themselves and those who depend on them. For many of them, reducing the annual COLA would mean real sacrifice. We ask that you not do that for those who have already sacrificed so much for this great country.”

The letter to President Obama is below. Similar letters were sent to all members of Congress.

Dear Mr. President:

We thank you for the strong commitment you have shown to veterans and their families since you came into office. We are very grateful.

We hope you will continue your strong support during these challenging negotiations over the federal deficit. That is why we are writing to bring to your attention our concerns about the harmful effects changes to the formula used to calculate the annual cost of living adjustments (COLAs) will have on Social Security benefits and veterans’ benefits.

The Congressional Budget Office estimates that adopting the chained consumer price index (CPI) to calculate annual COLAs could save the government $208 billion over ten years by reducing Social Security, disability, and other benefits, and by increasing revenues. More than half of this amount – $112 billion – would come from Social Security cuts, which veterans rely on very heavily for both retirement and disability benefits. Another 11 percent of the savings – $24 billion – would come from VA benefits, civilian pensions, and military retirement pay.

We estimate that use of the chained CPI would have a significant effect on benefits that millions of veterans depend on in the following ways:

• Social Security Retirement Benefits: Social Security is one of our nation’s most important programs serving veterans and their dependents and survivors. It currently pays benefits to over 9 million veterans – about 4 in 10. The average retirement benefit of a veteran receiving Social Security was about $15,500 in 2010. Adopting the chained CPI would significantly reduce those benefits, by changing the manner in which COLAs are determined. A veteran with average earnings retiring at age 65 would get nearly a $600 benefit cut at age 75, and a $1,000 cut at age 85. By age 95, when Social Security benefits are probably needed the most, that veteran would face a cut of $1,400 – a reduction of 9.2 percent.

Not only would a Social Security COLA cut hurt veterans and their families; it is also misguided policy. Social Security is self-financed by the contributions of workers and employers. In effect, it belongs to its contributors. It is separate from the rest of the budget. To use it to reduce the federal deficit, which it did not cause, or effectively to fund other parts of the government or to help maintain tax breaks unrelated to Social Security, is to break the promise of Social Security.

• VA Disability Compensation Benefits: Veterans are generally eligible for VA disability compensation benefits if they become disabled due to injuries or illnesses sustained during, or as a result of, military service. There were 3.2 million veterans receiving these benefits in 2010. A veteran receiving VA disability compensation due to a service-connected disability rated at 100 percent is currently entitled to receive $32,076 a year. Under the chained CPI, which is a cut in the formula traditionally used to determine the COLA for VA benefits, a disabled veteran who started receiving benefits at age 30 would have their benefits reduced by $1,376 at age 45, $1,821 at age 55 and $2,260  at age 65.
• VA Pension Benefits: Veterans with low incomes who are either permanently and totally disabled, or age 65 and older, may be eligible for pension benefits if they served during a period of war. More than 310,000 veterans received VA pension benefits in 2010. The current benefit for a veteran is just $11,830 a year. Under the chained CPI, VA pension benefits for veterans aged 65 and older living in poverty would be reduced by $341 at age 75, $672 at age 85 and $993 at age 95.

Social Security and veterans’ benefits need to be based on an accurate measure of inflation. The current COLA formula understates the true cost-of-living increases faced by seniors and people with disabilities because it does not take into account their higher share of spending devoted to health care, and that health care prices rise much more rapidly than overall prices. Although veterans who have service-connected disabilities and those receiving pension benefits are eligible for VA health care, they may still be impacted by rising out-of-pocket health care costs. Adopting the chained CPI would make the situation worse.

Instead, Social Security and VA benefits should be based on a formula that takes account of these higher health care costs called the CPI-E (Experimental CPI for the Elderly) developed by the Bureau of Labor Statistics. The CPI-E rises at a slightly faster rate than the formula currently used to calculate the COLA, and at a still faster rate than the proposed chained CPI, providing a modestly more generous COLA for seniors and people with disabilities. 

We agree that political leaders need to restore fiscal discipline, but we believe it should be done with great care and without reneging on this country’s promises to veterans, including the promises of Social Security and VA disability compensation and pension benefits – all of which are modest in size.  Many veterans who rely on these programs live on fixed incomes and very tight budgets. For them, every dollar of hard-earned benefits counts in meeting basic expenses, attaining quality of life, and building a better future for themselves and those who depend on them. For many of them, reducing the annual COLA would mean real sacrifice. We ask that you not do that for those who have already sacrificed so much for this great country.

Thank you for your serious consideration of our views. We look forward to working with your Administration on this important matter.

Sincerely,

American GI Forum

AMVETS

Blinded Veterans Association

National Military Family Association

Paralyzed Veterans of America

VetsFirst, a program of United Spinal Association

Vietnam Veterans of America

VoteVets.org