Social Security Cuts Weighed by Lawmakers Under Change in Inflation Gauge
7 July 2011, by Brian Faler and Heidi Przybyla (Bloomberg)
http://www.bloomberg.com/news/2011-07-07/social-security-cuts-weighed-by-lawmakers-under-change-in-inflation-gauge.htmlExcerpt:President Barack Obama and lawmakers are considering cutting Social Security and increasing revenue by changing the way the government measures inflation.
Four senior congressional aides said lawmakers are discussing using an alternative yardstick to gauge inflation, known as the “chained consumer price index,” to determine annual cost-of-living adjustments for millions of Americans.
The idea may rile both Democrats and Republicans, because it could mean paring Social Security by $112 billion over 10 years, raising taxes by $60 billion and cutting pension and veterans’ disability payments by $24 billion, according to estimates by the nonpartisan Congressional Budget Office and the Joint Committee on Taxation.
Advocates say the change is needed because the government’s current measure of inflation overstates how quickly prices rise.
“There hasn’t been any economist anywhere that says we shouldn’t do that,” said Senator Tom Coburn, an Oklahoma Republican who was one of the so-called Gang of Six lawmakers that tried to develop a long-term debt plan. “We need a CPI that truly reflects what’s happening in the economy, not what’s good for the politicians.”
The idea, which was discussed both as part of a series of debt talks led by Vice President Joe Biden and by the Gang of Six, resurfaced yesterday during a meeting between Treasury Secretary Timothy Geithner and House Democrats, according to a congressional aide. Democrats pressed Geithner on the issue and he didn’t rule it out, according to the aide.
