On Thursday morning at AEI, AARP's David Certner and AEI's own Andrew Biggs convened to discuss the bipartisan proposal to use a Chained Consumer Price Index (Chained CPI) to calculate Social Security's annual cost-of-living adjustment (COLA). Certner explained that he opposes this policy because it would cut benefits for the oldest, most vulnerable Americans exponentially over time.
He further stated that as an off-budget program, Social Security reform should be addressed outside of budget negotiations. According to Certner, in the context of budget negotiations, Social Security reform would become an avenue for short-term deficit reduction, and would therefore fail to improve the program as a whole.
While Biggs agreed that the Chained CPI is bad policy, he did not agree that Social Security should be spared from budget discussions. Instead, he proposed alternative solutions to a Chained CPI. For example, he suggested that Social Security be reformed to incentivize people to work longer and claim benefits later by holding total lifetime benefits constant and increasing benefits at later ages. He also proposed basing Social Security’s COLA on a CPI for the elderly. Both speakers agreed that the Chained CPI would hurt older Americans and do little to fix long-term Social Security problems.
The Obama administration and House and Senate Republicans have reportedly discussed applying the Chained Consumer Price Index (Chained CPI) to the federal budget as part of a “grand bargain” to reduce deficits and debt. The Chained CPI is intended to be a better measure of inflation, but there is no agreement over whether it is a better basis for calculating Social Security cost-of-living adjustments and numerous other aspects of federal spending and the tax code. David Certner, legislative counsel and director of legislative policy for government affairs at AARP, and AEI’s Andrew G. Biggs will discuss how the Chained CPI should fit into our thinking regarding Social Security and the federal budget.
If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.