Chained CPI
Leland Loudenback

Nakhon Ratchasima, Thailand

#1 Apr 8, 2013
The COLA measurement used today for social security is the average of the third quarter CPI-W. The Bureau of Labor Statistics (BLS) has calculated a new index (CPI-E) which measures the CPI for the elderly. CPI-E is consistently higher than the CPI-W, meaning the CPI for the elderly is higher than the adjustments being made today. Now, Obama has found another index know as the chained CPI. This index is consistently lower than either the CPI-E or CPI-W (based on BLS calculations over the past 12 years). So, it only makes sense that social security should be using chained CPI and not the real Inflation for elderly (CPI-E) or inflation for wage earners (CPI-W). This is nothing more than a quasi mathematical exercise for federal budget purposes and has nothing to do with expenses for consumers. However, Obama can claim that using the chained CPI results in savings to federal budgets in the out years and thus the deficit can be reduced in the long term. He also claims medical costs will decrease with "Obamacare" (something that remains to be seen). But, if he is right and medical care costs decrease, so will the CPI-E index as well. It only makes sense to me to allow one prediction to come true first before making federal budget predictions based on a new index, called chained CPI.

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