ABSTRACT

Inflation-Indexing Elements in Federal Entitlement Programs [September 13, 2011]   [open pdf - 306KB]

"In recent months, various proposals have been discussed in the context of ways to reduce federal budget deficits. One of the proposals, for example, is the use of a different measure of consumer price change to index various provisions of federal programs, including cost-of-living adjustments (COLAs). For example, under current law, the Social Security COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Under the proposal, the Social Security COLA would be based instead on the Chained Consumer Price Index for All Urban Consumers (Chained CPI-U or C-CPI-U). Because the goal of the Chained CPI-U is to better reflect how consumers change their buying habits in response to changes in prices, supporters of the proposal argue that it is a more accurate measure for computing COLAs and making other automatic program adjustments. Because the Chained CPI-U typically has risen more slowly than either the CPI-W or the 'regular' CPI-U, however, opponents view the proposal as a backdoor way of reducing benefits. […] This report does not evaluate the best measure of consumer price change for making automatic inflation adjustments in federal entitlement programs. In addition, broader issues, such as the technical aspects of different measures of consumer price change, potential implications of using an alternative measure of price change to index various elements of major federal entitlement programs, and the indexing of other items (for example, the federal poverty threshold and parameters of the tax code) are beyond the scope of this report."

Report Number:
CRS Report for Congress, R42000
Author:
Publisher:
Date:
2011-09-13
Series:
Copyright:
Public Domain
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Via E-mail
Format:
pdf
Media Type:
application/pdf
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