Many economists consider the chained CPI a more accurate measure of inflation because it takes into account the adjustments in consumption that people make in response to price changes.
But under chained CPI, the rate of inflation would rise more slowly than it does now. That means that people who receive government benefits adjusted to inflation would see their benefits grow more slowly each year than under the current method.
CBO says, for instance, another $33 billion could be generated by moving all government programs serving millions of people with disabilities, veterans or people in poverty onto the chained CPI. That would include roughly 8 million people who receive benefits from Supplemental Security Income, which helps low-income people with disabilities. Another 3.2 million people receive disability benefits from the Veterans Administration.
In recent weeks, advocates for people with disabilities and veterans had been getting increasingly vocal and pressuring lawmakers and the administration to spare them from potential future cuts.
“These are real people who at the end are going to be impacted by these actions,” said Curtis Decker, executive director of the National Disability Rights Network. Cutting benefits or changing the inflation measure “are going to impact people who are in pretty bad shape already.”
According to CBO, a person who retires at age 62 would be getting 3 percent less in benefits by age 73 under the chained CPI.
But people who receive disability checks from Social Security could feel more pain than retirees, said Monique Morrissey, an economist at the left-leaning Economic Policy Institute. “If you’re disabled at age 30, you’re going to be receiving benefits longer, and therefore the potential percentage decline in your benefits is greater,” she said.
Morrissey said it could have a double impact because federal poverty guidelines are pegged to inflation, so a stingier inflation measure may leave people ineligible for food stamps, school meals and other programs.
And neither the current inflation measure nor the chained CPI takes into account that seniors and people with disabilities spend a greater share of income on health care expenses, which rise much faster than inflation, she said. “What’s really behind this is an attempt to raise revenues on the one hand and reduce benefits on the other in a stealthy fashion,” she said.
Still, analysts who support the measure say it would more accurately reflect the benefits that people are entitled to.
“There are not nearly enough wealthy people to solve the entitlement probably by taxing them,” said Jim Kessler, a co-founder of Third Way, a middle-of-the-road research group. “You can’t get there. There are some places where benefits are going to have to be trimmed to make sure these programs stay afloat.”
Ben Weyl and Steven T. Dennis contributed to this story.
Visitors get their first look at the American Veterans Disabled for Life Memorial, which opened to the public on Monday, Oct. 6, 2014. The new memorial is located off Independence Ave. SW between the Rayburn House Office Building and HHS. Buy photo here.