From The Washington Post: http://www.washingtonpost.com/blogs/federal-eye/wp/2013/04/18/how-would-chained-cpi-affect-your-benefits/
by Josh Hicks
on April 18, 2013
A House Ways and Means subcommittee on Wednesday held a hearing to examine the impacts of using “Chained CPI” to slow the growth in entitlement spending and increase tax revenue.
President Obama has put Chained CPI on the table as part of his proposal to cut entitlements in exchange for higher taxes, but many Democrats think that deal gives away too much to Republicans.
All this probably leads our readers to wonder: What is Chained CPI, and how would it affect me?
Before we jump too far into the weeds on this, readers should know that the National Active and Retired Federal Employees Association published a calculator that estimates how chained CPI would affect individuals over time, based on the size of their annual benefit.
Now for the details.
Chained CPI is shorthand for the “Chained Consumer Price Index for All Urban Consumers.” It’s an inflation measure that essentially ties tax rates and entitlement spending to the rise in prices over time.
The government currently uses a different inflation measure to calculate Social Security benefits, applying the CPI-W, or “Consumer Price Index for Urban Wage Earners and Clerical Workers” to its formula.
Using Chained CPI instead of CPI-W would slow the rate of growth for entitlement benefits and cause people to enter higher tax brackets more quickly — because the income parameters for each bracket would rise more slowly.
Continue reading at: http://www.washingtonpost.com/blogs/federal-eye/wp/2013/04/18/how-would-chained-cpi-affect-your-benefits/
