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Chained what?

December 19th, 2012 · No Comments · Blog

As the President and Congress are negotiating to avoid the fiscal cliff, the latest proposals include cuts to Social Security, including changing how the annual COLA (cost of living adjustment) is calculated.

This would disproportionately affect the most vulnerable Americans — people with disabilities, seniors and retirees.

Proponents of the new proposal support a wonky, arcane way to calculate the annual COLA, called the “Chained CPI.”

COLA is currently linked to the Consumer Price Index, which responds to market changes. The Chained CPI attempts to factor assumptions that spending habits change when things get more expensive – that people will shift shopping behavior to buy cheaper things. Hence the cost of living is not as high as market forces demand.

According to the Social Security Administration, the chained CPI would reduce the annual increase in Social Security checks by about 0.2 to 0.3 percent a year.

Lisa Ekman, Health & Disability Advocates

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