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Chained CPI Proposal Takes Aim at America’s Seniors and Veterans

FOR IMMEDIATE RELEASE   Contact: Jessica Klement
March 20, 2013 703-838-7760
  jklement@narfe.org


Alexandria, VA – Joseph A. Beaudoin, president of the National Active and Retired Federal Employees Association (NARFE), responded today to reports that President Obama will include the chained CPI proposal in his forthcoming fiscal year 2014 budget proposal:

“We are disappointed to learn the president's first proposed budget since his reelection will embrace a policy designed to balance the budget by cutting the earned benefits of America's seniors, veterans and those with disabilities. If President Obama endorses the chained CPI inflation formula to calculate the cost-of-living adjustments for Americans, as has been reported, he will be turning his back on the populations most in need of assistance.
 
“Don’t be fooled by economists and politicians who claim that switching to the chained CPI formula for Social Security benefits, retirement annuities and disability insurance is 'painless.' While the short-term reduction in benefits may be modest, the long-term reduction will be substantial. While all retirees and those receiving disability benefits will be adversely affected by the chained CPI, due to its snowballing nature, those who retire at a younger age (the military), those who receive disability benefits, those who are the poorest and those who live the longest will be hit the hardest. The average annual Social Security benefit is only $15,000; how much more can these seniors afford to give? 
 
“Proponents of the chained CPI often obscure the reductions in benefits by characterizing the chained CPI as a ‘more accurate measure of inflation’ or a ‘technical adjustment.’ But both the current index (CPI-W) and the chained CPI fail to accurately reflect the costs most seniors face. Notably, they do not account for how much more seniors spend on health care. Americans age 65 and older spend roughly 13 percent of income on health care compared to 5 percent spent by those under that age. But measures that take this into account, notably the CPI-E, would result in higher cost-of-living adjustments. This a clear sign that moving to the chained CPI is going in the wrong direction.
 
“If the chained CPI also is used to adjust tax brackets, it will result in a tax bias against lower- and middle-class working Americans. According to a Joint Committee on Taxation report, by 2021, the tax liability for those with incomes between $10,000 and $20,000 would increase by 14.5 percent, and incomes between $20,000 and $30,000 would increase by 3.5 percent. Meanwhile, the wealthiest Americans with incomes of $1 million and above would see an increase of only 0.1 percent.
 
“Is President Obama really proposing that we roll the budget burden onto the shoulders of America’s most vulnerable? This is not the message we heard on the presidential campaign trail. We urge the White House not to include the chained CPI in the president’s budget.”
 
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The National Active and Retired Federal Employees Association (NARFE), one of America’s oldest and largest associations, was founded in 1921 with the mission of protecting the earned rights and benefits of America’s active and retired federal workers. The largest federal employee/retiree organization, NARFE represents the retirement interests of nearly five million current and future federal annuitants, spouses and survivors. 
National Active and Retired Federal Employees Association
NARFE (National Active and Retired Federal Employees Association)
606 N. Washington St., Alexandria, VA 22314, Phone: (703) 838-7760, Fax: (703) 838-7785. © Copyright 2012 NARFE

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