President Drops Chained CPI Proposal From Federal Budget

FEBRUARY 21, 2014: Heeding calls from retiree advocates (including our Association) and Democratic Leaders, President Obama has dropped a provision from his federal budget proposal that would have used the chained CPI to calculate Social Security COLAs.

Last year Obama embraced the chained CPI in an attempt to win Republican support for a bipartisan federal budget agreement. Democrats and retiree advocates and labor officials were furious at the move, due to the regressive treatment of seniors under the chained CPI. Our Association strongly opposes the chained CPI, conveying such to the Massachusetts Congressional Delegation and the White House.

US Senator Elizabeth Warren and Congressman Bill Keating have been particularly vocal in their opposition to the chained CPI. However, it should be noted that all 9 Massachusetts Congressmen and two US Senators have remained firmly opposed to such a plan.

Last year, Keating addressed our Association’s annual meeting and called the chained CPI “a bad idea that is harmful to retirees.” For her part, Warren took the fight to the floor of the Senate late last year, calling for an expansion of Social Security and condemning any attempt to reduce retiree COLAs.

As we have reported in the Voice, the chained CPI alters the annual COLA calculation and lowers the increase. Arguments have been made, by our Association and others – including leading economists – that the current CPI calculation does not accurately reflect the cost of inflation on retirees. The cost of medical care, insurance and housing costs tend to be higher for retirees than the general population as a whole.

“We’re very happy that the White House has taken the chained CPI off the table. This measure would have hurt retirees by lowering the annual COLA, all in the name of entitlement reform,” said Association Legislative Liaison Shawn Duhamel. “A strong case can be made that the Social Security COLA (and subsequent pension COLA) is artificially low. And this is certainly the case when you correctly factor in healthcare costs.

“Our Congressional delegation did a great job of getting their message to the President. This is a case where grassroots activism paid off.”