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Why the Chained CPI is Harmful to the Most Vulnerable Americans

This week the U.S. House Committee on the Budget held a hearing on the progress of the War on Poverty. While poverty remains painfully high as the United States struggles to recover from the worst recession since the Great Depression, social insurance and safety net programs are lifting millions out of poverty. And the nation’s most effective anti-poverty program is Social Security. Without Social Security, a staggering 25 million more Americans – and half of women 65 and older would fall below the poverty line.

Despite the critical importance of Social Security to Americans’ economic security, lawmakers are considering cutting Social Security benefits by switching to the chained consumer price index (CPI) to calculate the annual cost-of-living adjustment (COLA) for Social Security and other programs. But the chained CPI would actually lower the cost-of-living adjustments and the cuts would get deeper every year

Because women tend to live longer than men and rely more on already modest benefits, the switch to the chained CPI would especially hurt women. President Obama’s chained CPI proposal includes some measures to mitigate the impact on the oldest and poorest, but it fails to adequately protect women. For example, by age 75, the typical single elderly woman with an initial benefit of $1,100 per month ($13,200 per year) would lose the equivalent of five days’ worth of food each month. The gradual bump-up in benefits under the President’s plan would reduce the cuts—but her benefit would not be restored to current law levels unless she lived to 104.

The chained CPI is not a more accurate measure of inflation; in fact, even the current CPI underestimates inflation for the elderly and people with disabilities—the vast majority of Social Security beneficiaries—because it fails to take account of their higher health care spending.

The House Ways and Means Committee has asked the public to comment by August 10 on using the chained CPI to calculate Social Security benefits. If you agree that cutting benefits that are vital to keeping millions of Americans out of poverty is a bad idea, go here to let the Committee know what you think.

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