Chained CPI or Consumer Price Index is a time series measure of price levels of consumer goods and services created by the Bureau of Labor Statistics. This index is not currently used by any U.S. programs, but is often discussed as a possible reform because many economist believe it better measures inflation and reduces the federal defecit through a combination if spending cuts and increased revenues. The Chained CPI is used to measure Cost of Living Adjustments (COLA), overestimating inflation leads to a higher than actual living adjustment.
The shift to a Chained CPI would harm low income children and the elderly the most. A long list of means tested benefits currently use non-Chained CPI, to adjust eligibility standards or benefit amounts. According to the Congressional Research Service in addition to Social Security these other programs rely on non-Chained CPI; Medicaid, SSI, the Earned Income Tax Credit, the Child Tax Credit, SNAP or food stps and child nutrition programs including school meals. According to the CRS more than 50 other programs tied to the federal income poverty guidelines use unChained CPIs.
The government currently calculates Social Security COLA each year based on how inflation effects urban wage earners and clerical workers. Known as CPI-w. This index measures changes in the prices of a fixed basket of goods that are deemed to be representative of regular purchases by wage earners. The Chained CPI assumes that as prices increase consumers make substitutions in what they purchase.
It would hurt people her arent in a position to switch to other goods and services when prices rise. Medicare premiums and out of pocket expenses eat up much of the elderlys budgets, this would force them to go without medical care that they dont have money for. It is food or medical care. Simpson-Bowles recomendations on Social Security attempted to soften the impact on elderly by proposing a minimum Social Security income . If it fell below the minimum because of the Chained CPI you would be paid this minimum income. Thus is not being proposed for other programs.
The fact that Democrats and Republicans fight over this shows the different political philosophies. One, Democrats, is to protect the poor and elderly and the other, Republicans, hurt the poor and elderly to protect wealthy from paying higher taxes. The sad truth is that the wealthy can buy better protection than the poor, which lets you know why nothing gets done in Congress. With so many other places we can make cuts and get revenue this should be left alone.
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