Fed groups blast possible fiscal cliff switch to less generous COLA formula

MovingtothechainedCPIwouldbe“unfair”and“reducesignificantlyearnedretirementbenefits,”accordingtoaDec.17letterfromtheNationalActiveandRetiredFederalEmployeesAssociationtomembersofCongress.PresidentObamaandHouseSpeakerJohnBoehner,R-Ohio,bothreportedlyhaveofferedproposalsthatincludeswitchingfromthecurrentformulatowhat’sknownasthechainedCPItocalculateannualcost-of-livingadjustmentsforfederalretireesandSocialSecurityrecipients.
TheresultwouldbelowerCOLAsforretirees,includingfederalandmilitaryretirees,overtime.Thechangealsowouldaffectveterans’benefitsanddisabilityinsurancebenefits.
It’shighlylikelythatanyfinaldealObamaandBoehneragreeonwillincludeaswitchtothechainedCPI.
COLAscurrentlyaredeterminedusingaformulathattakesintoaccountincreasesintheConsumerPriceIndexforUrbanWageEarnersandClericalWorkers,butsomeexpertsarguethatachainedCPI,whichtakesintoaccountmodificationsinpurchasinghabitsaspriceschange,providesaclearerunderstandingofinflation.
NARFEcriticizedthatassessment.“BoththecurrentindexandthechainedCPIfailtoaccuratelyreflectthecostsmostseniorsface,”theletterstated.“Notably,theydonotaccountforhowmuchseniorsspendonhealthcare,thecostofwhichcontinuestooutpaceinflationofotherconsumergoods.”ThegroupalsosaidusingthechainedCPIwouldincreasetaxesonlower-andmiddle-incometaxpayers.“Theaverage65-year-oldretiree,receivingabout$15,000inSocialSecuritybenefitsafterearninganaverageincomeofabout$43,000,wouldneedtohavesavedanadditional$28,000toaccountforthelostfutureincome,”NARFEstated.
TheAmericanFederationofGovernmentEmployeesalsocalledonlawmakerstorejectamovetothechainedCPI.“PresidentObamacouldnothavepickedaworseormoreregressiveitemintheHouseRepublicanbudgetthanthechainedCPI,”AFGEPresidentJ.DavidCoxsaidinastatement.Duringthepastfewyears,ObamareportedlyhasexpressedsupportforswitchingtoachainedCPI,atleastinprivatedeficitreductiontalks.ItalsowasconsideredbythejointcongressionalcommitteeondeficitreductionandendorsedbySimpson-Bowles.
Thisishowa2010memofromthenonpartisanCongressionalBudgetOfficeexplainstheformula:“ThechainedCPIgrowsmoreslowlythanthetraditionalCPIdoes:byanaverageof0.3percentagepointsperyearoverthepastdecade.Asaresult,usingthatmeasuretoindexbenefitprogramsandtaxprovisionswouldreducefederalspending(especiallyonSocialSecurityandfederalpensions)andincreaserevenues.”
AndthisishowaFebruaryarticlefromtheCenteronBudgetandPolicyPrioritiesputstheissueintocontext:“Manyofthefederalgovernment'sretirement,disabilityandincome-supportprograms--includingSocialSecurity,federalcivilianandmilitaryretirement,railroadretirement,[SupplementalSecurityIncome],andveterans'compensationandpensions--payannualCOLAsthatarelinkedtotheCPI.”Thelinewasincludedunderasubheadingthatread“UsingChainedCPIWouldAffectaNumberofProgramsandSaveSignificantAmounts.”
Noneofthisiswelcomenewstoretireeswhoalreadyaren’treceivinganoverlygenerousCOLAin2013.Federalretireeswillreceivea1.7percentcost-of-livingadjustmentin2013,accordingtofigurestheBureauofLaborStatisticsreleasedinOctober.AndtheCOLAamountthatrecipientsactuallyendupwithisaffectedbyMedicarePartBpremiums,sincethosepremiumsaredeductedfromSocialSecuritypayments.TheCentersforMedicareandMedicaidServicesannouncedinNovemberthatthe2013monthlypremiumswouldincrease5percent,somostretireeswillendupwithlessthanthe1.7percentCOLA.
ObamareportedlyistryingtoexcludedisabilitybenefitsunderSocialSecurity’sSupplementalSecurityIncomefromtheproposedswitchtoachainedCPI,aswellasprovideanincreaseinbenefitstoretireeswhoreachtheageof85,accordingtoTheWashingtonPost.
TherehasbeenmoremovementtowardafiscalcliffdealduringthepastfewdaysasthecalendarnearstheNewYear’sdeadline.Nevertheless,thetwosidesremainfairlyfarapartoncraftingadealthatcontainsacombinationofmutuallysatisfactorytaxrevenueincreasesandspendingcuts.BoehnersaidduringaTuesdaymorningpressconferencethattheGOPwasputtingtogetherlegislationforashort-termdealtoavoidsomeoftheexpiringtaxcuts;hesaidhehopedtobringittothefloorbytheendofthisweek.“Atthesametime,wearegoingtocontinuetotalktothepresident,wearealsomovingtoPlanB,”thespeakersaid.
It’snotclearwhetherthePlanBRepublicanseventuallycomeupwithwouldincludeprovisionstoavoidsequestration,theautomaticgovernmentwidespendingcutsscheduledtostartonJan.2,2013.Boehnersaidduringthepressconference,however,thatthebillhewantstobringtothefloorthisweekwillnotdealwiththesequester.
TheWhiteHousedefendeditsproposalasbalancedandreasonable,shortlyafterBoehner’spressconference.“Thespeaker’s‘PlanB’approachdoesn’tmeetthistestbecauseitcan’tpasstheSenate,andthereforewillnotprotectmiddle-classfamilies,anddoeslittletoaddressourfiscalchallengeswithzerospendingcuts,”saidWhiteHousespokesmanJayCarney.“Thepresidentishopefulthatbothsidescanworkoutremainingdifferencesandreachasolutionsowedon’tmisstheopportunityinfrontofustoday.”


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