The Chained Consumer Price Index

Included in President
Obama’s December 17th proposal to avert the fiscal cliff was a significant
change to government benefits, most notably Social Security. The President
conceded to Republican demands to change the method currently used to measure
inflation, which determines the cost of living adjustment (COLA) for Social
Security and other federal programs.  The President’s proposal would mean
that inflation would now be measured using the chained Consumer Price Index
(chained CPI), which would replace the current CPI formula.  Although not
included in the final fiscal cliff bill, the chained CPI is very much still on
the table as a bargaining chip during the upcoming deficit reduction talks

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