Avoid chained CPI, federal employee groups urge White House

October 9, 2013

Source:  http://www.federaltimes.com
By: Sean Reilly

A coalition of federal employee, retiree and veterans groups pressed the Obama administration on Wednesday to avoid changing the government’s formula for calculating cost-of-living increases for pensions and other benefits.

“We’re all concerned about this [chained consumer price index] proposal,” Robert Silverman, president of the American Foreign Service Association, said at a news conference outside the Capitol. The union, which represents State Department diplomats, is one of several groups worried that the administration could embrace the less generous inflation measure as part of a long-term deficit reduction deal with congressional Republicans.

“It should not be a part at all of any budget negotiation,” Rep. Jan Schakowsky, D-Ill., said.

The administration proposed adopting the chained CPI in its fiscal 2014 budget request, saying that most economists agree it is a more accurate inflation gauge than the standard CPI because it accounts for consumers’ tendency to switch to cheaper items when the price of other goods rises. Over the next decade, the switch to a chained CPI would cut projected future deficits by at least $230 billion, according to the request.

But critics counter that the chained CPI doesn’t account for medical costs which make up a larger share of expenses for older people than for the population as a whole. Over time, they say, using the chained CPI to calculate cost-of-living-increases for pensions and Social Security benefits could cost recipients thousands of dollars that they would otherwise receive under the standard CPI.

On Wednesday, Schakowsky said that she didn’t know whether the White House intends to put the chained CPI on the table in any budget talks. The administration’s immediate priorities are persuading GOP lawmakers to raise the nation’s borrowing limit in time to avoid a potentially crippling default and pass the stop-gap spending resolution needed to reopen the government.

But in a Wednesday opinion piece published in The Wall Street Journal, House Budget Committee Chairman Paul Ryan, R-Wis., called on the White House to negotiate “modest reforms” to entitlement programs and the tax code.

Outside groups are also urging all sides to look past this month’s bitter stalemate to begin tackling long-range financial challenges. On Thursday morning, for example, the bipartisan organization, No Labels, is holding an event at the Capitol with more than 40 lawmakers billed as “Stop Fighting, Start Fixing!” No Labels has not taken a position on the chained CPI, according to a spokeswoman.

Other participants in Wednesday’s news conference included Sen. Bernie Sanders, I-Vt., the National Active and Retired Federal Employees Association (NARFE), the Military Officers Association of America and the National Committee to Preserve Social Security and Medicare.