Several years ago, as President Barack Obama negotiated with Republicans over the budget, readers of liberal websites were subjected to ponderous explanations of “chained CPI,” a proposed alternative to the Consumer Price Index that would calculate inflation as growing more slowly. Pitched as a more accurate measurement of inflation, the chained CPI was really an attempt to reduce the deficit on the backs of senior citizens: The net effect would have been a heavy benefit cut for Social Security, which only made sense if you thought the elderly were getting too sweet a deal with their $1,360 a month in average benefits.
Now, chained CPI is back. And the new iteration, proposed as part of the Republican tax bill, is also a Trojan horse. It would establish the proposition that a “better” inflation measure exists and should be employed across the government. Even if this specific legislation doesn’t touch Social Security, make no mistake: It puts Social Security under threat.
Inflation indexing is critical to your wallet. Because prices go up year over year, the government compensates by raising federal benefits to match changes in the cost of living. The government also indexes tax brackets annually, in line with inflation. If it didn’t, the purchasing power of your benefits would erode over time, and because inflation corresponds to wage increases, you would hit higher tax brackets faster.
Measuring inflation might seem simple enough: Compare what everything costs in 2017 to what it cost in 2016, and the net change is the Consumer Price Index. But it’s a consistent source of controversy among economists because indexes can vary depending on what goods you measure or which population you study. Social Security uses a CPI for “urban wage earners and clerical workers,” and the tax code uses one for “all urban consumers.”
– New Republic