U.S. Sen. Bernie Sanders, I-Vt., recently referred to the "chained Consumer Price Index" as an economic, moral disaster. Never a truer word was uttered.
It is easy for our eyes to glaze over when we see terms like CPI, chained-CPI and COLAs (cost-of-living adjustments). But please don't. This insidious legislation is on the verge of being signed into law and will significantly affect your livelihood and/or the livelihood of your parents.
In order to prevent the collapse of the U.S. budget, some in Congress have proposed tampering with the formula that is used to decide how much America's seniors, veterans and vulnerable receive in support. If the chained-CPI proposal passes, the budget may stay afloat a little while longer, but American seniors on fixed incomes will be floundering as their benefits decrease more and more with each passing year.
The Consumer Price Index is an economic measure used to assess the rate of inflation and changing price levels. It takes a virtual "basket" of consumer goods, including groceries, housing, gasoline and clothing, and tracks the average prices of the basket components over time. An overall rise in the basket price indicates increasing inflation in the economy.
The federal government uses the CPI to index certain benefits, such as Social Security payments, as well as to set the limits of income tax brackets.
Some economists say that the currently used CPI formula does not accurately assess the reality of today's economy because it does not account for changes in demand when prices rise and fall. If, for example, the price of canned salmon goes up, they say many consumers will simply switch to the less-expensive canned tuna, rather than buying less salmon or going without.
To account for this type of substitution, these economists have suggested a new formula - the chained CPI - which lowers the annual adjustment rate of today's conventional CPI by an average 0.3 percentage points. The reduced COLA will have the effect of raising prices even more so that, over time, even tuna will become unaffordable for some consumers. Before long, successive substitutions could force vulnerable seniors on fixed income to go without.
I understand that scenario doesn't sound like the end of the times. But what if we're not talking tuna? What if the cost instead is something far bigger and important -like health care.
The truth is that the current formula for calculating Social Security COLAs does not accurately reflect the spending patterns of senior citizens. It short-changes them because seniors by-and-large aren't spending their money on fancy cars, big-screen televisions, laptop computers or iPads. Instead, a disproportionate amount of their income goes to pay highly inflated prices for health care and prescription drugs, the cost of which is not included in the computation of the CPI. A more realistic measure of inflation for seniors would increase benefits, not cut them. Clearly, the chained CPI is moving in the opposite direction.
In addition, the chained-CPI would cut the benefits of more than 3.2 million disabled veterans in this country. Permanently disabled veterans who started receiving disability benefits from the Department of Veterans Affairs at age 30 would see their benefits cut by more than $1,400 a year at age 45, $2,300 a year at age 55 and $3,200 a year at age 65.
Former Sen. Alan Simpson and former White House Chief of Staff Erskine Bowles have estimated that the government could save roughly $300 billion over 10 years by adopting chained-CPI. Wall Street billionaires and other supporters claim that changing the CPI is merely a "minor tweak." Tell that to the millions of senior citizens trying to survive.
Furthermore, there is a reason why every major organization representing senior citizens, working families, veterans and women is strongly opposed to the chained-CPI. They understand, as do the vast majority of Americans, that working families have suffered enough during this recession, and that it is time for the large corporations and the wealthy to play a significant role in reducing the deficit.
It's time for citizens to wake up and voice our opposition to our elected officials before Congress pulls another fast one on the middle class.
Unfortunately, few outside the Beltway fully understand the long term consequences of this complicated policy. It is a devious and underhanded way to wage class warfare against working families. And it is dangerously close to going into law as a last-ditch attempt to fix the U.S. budget.
We must not balance the budget on the backs of the elderly, the veterans, the children, the sick and the most vulnerable people in America. There are fair ways to reduce the deficit - let's start by closing tax loopholes that allow the wealthiest corporations to skirt paying their fair share. Eliminating offshore tax-havens alone could conservatively raise an estimated $100 billion yearly.
Contact your House representatives and Senators and tell them not to include the chained-CPI in any debt-reduction legislation.
Thomas DeFiore, of Hammonton, retired in 2008 after a 41-year career as an aerospace engineer with the U.S. Navy and the Federal Aviation Administration. He is the legislative officer of the N.J. Federation of the National Active and Retired Federal Employee Association.
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