Federal-employee, veterans groups assail proposal to limit COLAs

Friday - 11/9/2012, 8:49pm EST

Congress returns this week and is expected to begin work on an alternative to the across-the-board budget cuts, known as sequestration, slated to go into effect in January.

But some federal-employee groups and veterans organizations say a legislative proposal that would result in lower cost-of-living adjustments for federal and Social Security retirees is a non-starter.

President Barack Obama's 2010 debt-reduction panel first proposed the idea of switching to a "chained" Consumer Price Index method of calculating inflation that would, in effect, curtail future benefits for retirees.

On a conference call hosted by the National Committee to Preserve Social Security and Medicare, Sen. Bernie Sanders (I-Vt.) said changing the CPI formula would result in "significantly less generous" annual cost-of-living adjustments that make sure retirement benefits keep pace with inflation.

Under the chained CPI, seniors who retire now at 65 would see their benefits cut by about $560 dollars a year by the time they reach 75, Sanders said. By the time they reach 85, they would see their benefits cut by about $1,000 annually.

"Many folks in Washington want to see this program implemented now," said Sanders, who was joined on the call by representatives from federal-employee and veterans organizations. "We're not talking about 10 years from now. We are talking about now."

'Chained' basics

Inflation is currently calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as (CPI-W). Each year, the Bureau of Labor Statistics measures the difference in price of a number of key goods and services.

The chained CPI, on the other hand, assumes that people often substitute lower-cost alternatives, especially during tough economic times — which means smaller annual benefit increases.

Many economists consider the chained CPI more accurate, according to the Center on Budget and Policy Priorities, a bipartisan think tank that supports the move to the chained CPI. However, "The policy clearly amounts to a reduction in future Social Security benefits, which many find objectionable," analysts at the think tank wrote in a February 2012 report.

Retiree and veterans groups also criticize the option because the amount by which benefits are reduced continues to grow each year that a person draws on benefits. Sanders said this would particularly harm the very elderly and longtime disability beneficiaries, which often includes veterans.

NARFE: Proposal would 'short-change' feds, vets

Julie Tagen, the legislative director of the National Active and Retired Federal Employees Association (NARFE), said she's very concerned about how a move to a chained CPI would affect federal retirees, who often live on tight fixed incomes. With the government's veteran-hiring preferences, many current and retired federal employees are also veterans, she added.

"These are people who have devoted their lives to both fighting and working for our country," Tagen said. "We believe it's not right to short-change them after all they've given to America. How can we, in good conscience, ask them to give even more?"

Even some backers of the proposal, including the CBPP, have indicated concern about the proposal's effect on retiree benefits.

The think tank said the chained CPI would be reasonable only if was included as part of a "comprehensive" deficit-reduction package. The group also advocated including a modest bump for long-time Social Security beneficiaries, who would be most most vulnerable to progressively lowered benefits, and recommended individuals receiving disability benefits be exempt from the chained CPI altogether.

Sanders said he understands Congress must find ways to reduce the deficit.

"But one idea that the American people do not want to hear about is telling seniors and disabled Americans that we're going to cut their benefits."

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