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Home Publications Blogs Social Security Monitor Letter to Senator Crapo on Chained CPI Comments

Letter to Senator Crapo on Chained CPI Comments

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Written by Dean Baker   
Wednesday, 13 July 2011 09:00

The Honorable Mike Crapo
239 Dirksen Senate Office Building
Washington, DC 20510

Dear Senator Crapo:

During a recent interview, you were quoted as saying "I don’t see how anybody can argue against having accurate formulas," regarding a change to using the Chained CPI-U to make cost-of-living adjustments to Social Security benefits.

It is not clear that the chained CPI is more accurate than the current measure. The Bureau of Labor Statistics (BLS) has found that an experimental elderly index (CPI-E), that tracks the consumption patterns of people over age 62, actually shows a higher rate of inflation for the elderly than the CPI currently used for adjusting Social Security benefits.

While the CPI-E is not a full index since it does not look at the specific items bought by the elderly and the specific outlets they use for their shopping, there is no reason why BLS could not construct a full CPI-E. Given that you "don’t see how anybody can argue against having accurate formulas," it would seem that you should support having Congress instruct BLS to construct a full CPI-E. For my part, I don’t know whether this measure would show a higher or lower rate of inflation than the current CPI used for indexing benefits, but it would be a more accurate measure.

As it stands, switching to a chained CPI would undoubtedly mean a cut in scheduled benefits, regardless of whether or not it involves a more accurate cost-of-living adjustment. Using this measure of the CPI would reduce benefits for retirees by 3 percent in 10 years, 6 percent in 20 years and 9 percent in 30 years. We know that the vast majority of retirees are struggling to make ends meet already. Social Security benefit cuts of this magnitude seem like a major step in the wrong direction.

I hope that you will have the time to review the indexation issue more carefully. I would be happy to provide you additional background on the topic if it would be helpful.

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