December 17, 2012
Emily Ryan
(202) 639-6421

AFGE: Chained CPI Deal Harmful for Federal Workers, Middle Class

(WASHINGTON)—The American Federation of Government Employees today responded to the proposed deal to avert sequestration by switching to a chained Consumer Price Index (CPI), saying it will do more harm than good for federal employees and middle class families.

“President Obama could not have picked a worse or more regressive item in the House Republican budget than the chained CPI,” AFGE National President J. David Cox Sr. said. “This element of the proposed deal to avert sequestration is unconscionable; it will create far more harm for federal employees and other middle class families than almost any other of the despised proposals from Paul Ryan’s House Budget. Chained CPI not only cuts benefits to the most vulnerable and neediest Americans, it also is less accurate than the currently used measure of inflation. And chained CPI will lead to income tax increases for working and middle class families, a direct violation of the President’s promise to protect them from any tax increases.”

AFGE urges all lawmakers of both parties in the Senate and the House to reject the President’s capitulation on chained CPI.

“This move marks a shameful abandonment of his campaign promises to protect the middle class and the needy from tax increases or harmful benefit cuts,” Cox said. “The currently used measures of inflation from the Bureau of Labor Statistics, the CPI-U and the CPI-W, already understate inflation for the elderly. This change will cause a large hit to federal pensions, Social Security benefits, Veterans’ benefits, and federal benefits to poor children and the disabled. It also will raise taxes substantially on the poor and middle class, while leaving the rich untouched.”

According to an analysis by the Center for Economic and Policy Research, using chained CPI for indexing income tax brackets would mean raising taxes 14.5 percent for those earning between $10,000 and $20,000 a year and 69 percent of the tax increases due to chained CPI-indexing would come from households earning less than $100,000.

“Other elements of switching to chained CPI are equally staggering in their cruelty and unfairness to the poor and near-poor,” Cox added. “Federal retirees, whose average pensions under the Federal Employees Retirement System (FERS) are just $13,000 will suffer substantial declines in living standards under chained CPI. The average Social Security recipient, who at age 65 receives just $15,000 per year, will suffer cuts of $650 a year by age 75 and $1,130 a year by the time s/he turns 85.”

Using the chained CPI for federal pensions, Social Security, income tax indexation, Veterans’ benefits, or any other federal benefit program is both wrong and unnecessary and AFGE will work to defeat the inclusion of this proposal in any final budget agreement.

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