President Obama’s FY 2015 budget will not include a proposal to adopt a so-called chain-weighted Consumer Price Index (CPI). The chain-weighted provision, one way to measure inflation, would have moderated the growth in cost-of-living adjustments (COLAs) for some entitlement programs such as Social Security and slowed the adjustment of tax brackets, which are also indexed to inflation. Put simply, adoption of the chain-weighted measure of inflation would have simultaneously lowered the cost of entitlement programs while raising new revenues.
The combination of less spending on entitlements and more revenues would amount to savings of around $400 million over ten years. That’s not enough to address our long term fiscal problems but it’s a start – one that some thought would enjoy bipartisan support. The chain-weighted provision also has the added advantage of being, according to many economic analysts, a fairer gauge of inflation and consumer response to higher prices. This paper, from the Moment of Truth Project, makes the case for the superiority of the chain-weighted measure.
The President had included a chain-weighted provision in his FY 2014 budget. The question is, why did he drop it this year? Some liberal Democratic Senators have made it clear they oppose the chain-weighted CPI, opting instead for an inflation measure that would increase cost-of-living adjustments. Their argument is not based on economic accuracy; they simply want to expand entitlement payouts.
Moreover, Congress just recently repealed, and on a bipartisan basis, a COLA adjustment for military retirees – a provision that it had overwhelmingly passed shortly before as part of the 2013 budget compromise. One can argue that this volte-face was primarily driven by a desire not to single out veterans. Nevertheless, Congress’s action demonstrated for all who care to see that any kind of COLA adjustment that reduces entitlement spending, however economically justified, is a tough sell – one that Republicans and Democrats have little stomach for undertaking.
Demographers have famously compared the life stages of the Baby Boom generation to a swallowed pig making its way through a python. Now as the Boomers move to and past retirement age, they may be too far through the snake to accept arguments for moderating the growth of retirement programs. Could the President’s decision to drop his chain-weighted CPI proposal be an early sign that the nation – or at least older Americans who reliably vote – simply don’t care about America’s future?