Sanders: No Chained CPI to Appear in Obama Budget

By on January 16, 2015 in Retirement with 6 Comments

President Obama will not pursue adding the chained CPI to his next budget, according to Senator Bernie Sanders (I-VT).

“It is my understanding that the chained CPI will not be in the president’s budget,” Sanders said in a Capitol Hill press conference.

Obama had previously used the chained CPI in his 2013 budget proposal, but dropped it in subsequent budget proposals because of the backlash that it sparked.

What is the Chained CPI?

While the usual consumer price index (CPI) deals with the rise and fall in fixed items, a “chained CPI” would also consider  choices people may make as a result of changes in their behavior. For example, if the price of beef goes up, many people will buy chicken instead because it may be a substitute that costs less. Also, when the price of a product goes up, people will probably buy less of that product.

The chain weighted CPI incorporates changes in both the quantities and prices of products. When it comes to calculating costs for multibillion dollar programs like Social Security, a chained CPI is likely to mean that benefit increases do not rise as much. Over time, benefits, payments, and pensions that are adjusted with CPI calculations could all fare differently under chained CPI rules.

For more information on how a chained CPI could impact your federal retirement benefits, see How Bad is the “Chained CPI?”

© 2016 Ian Smith. All rights reserved. This article may not be reproduced without express written consent from Ian Smith.

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Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce. Ian also has a background in web development and does the technical work for the FedSmith.com web site and its sibling sites.

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