Multiple news organizations are reporting that House Speaker John Boehner included the so-called chained Consumer Price Index in his latest proposal to President Obama seeking to avert the fiscal cliff.
This would put a big dent in the deficit — perhaps raising more than $290 billion over a decade — but it would hit federal and military retirees right in their pensions. Economists say the chained CPI is a more accurate method of determining inflation that is usually 0.25 to 0.30 percentage points lower than the current method. Adopting it for pensions, Social Security benefits and other indexed portions of the government’s budget would, over time, dramatically lower cost-of-living adjustments. The change would mean only a few hundred dollars at first for federal retirees. But its effect would compound over time, until eventually federal retirees would likely earn tens of thousands of dollars less than they would under the current system.
As Federal Times reported last week, several federal employee groups had been fearing momentum was building on Capitol Hill to adopt the chained CPI. They oppose such a change, and say federal employees have already contributed $103 billion to deficit reduction over the next decade.