A Chained CPI could be a heavy burden on disabled

As we noted last week, there are funding issues with Social Security Disability. The program is looking at a shortfall next year. While critics of the program like to suggest all number of reasons for this shortfall, suggesting that it has only come about recently, in fact, it has been projected for more than 20 years.

One of the proposals to "fix" this and other aspects of this funding has been the institution of a "chained-CPI." The Consumer Price Index (CPI) is device the Social Security Administration (SSA) uses to determine the Cost of Living Adjustment (COLA) that Social Security beneficiaries receive and when SSA applies a COLA, it increases the amount of money in their monthly payments.

This is necessary because of inflation, which typically increase a few percent every year. Without a COLA, SSD beneficiaries would see the purchasing power of their monthly payment slowly erode, as inflation reduced the effective value of their benefits.

The Chained-CPI that is suggested by the critics of the program would actually lower the rate of increase, meaning your benefit check would increase, but at a lower rate. The CPI is calculated by choosing a "market basket of goods" and tracking the increase in the cost of those items. The Chained CPI assumes that as some prices increase, consumers turn to lower cost items.

Of course, the problem for many on a program like SSD, who are already purchasing the least expensive items, is that this Chained CPI begins to make real cuts to their benefits.

The other issue with the Chained CPI is that it does not reflect the fact that for the elderly and the disabled, medical products and healthcare related purchases are likely to make up a larger percentage of their expenditures, and the rates of increase for those items tend to be higher than ordinary consumer products.

There is a CPI (the CPI-E) that does account for these purchases, but unsurprisingly, that is not the CPI that the politicians want to use.

Huffingtonpost.com, "Social Security Privatization: Then and Now," Max Richtman, May 7, 2015

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