President Obama's budget proposal will include a change in the way the government measures inflation. That would bring in some additional tax revenue, but also reduce long-term benefits for Social Security recipients. The president says he'll only agree to the change if it's coupled with higher tax revenue, but neither seniors, nor Congressional Republicans, are happy about that idea.
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President Obama will release a new budget proposal on Wednesday. We already have some idea what will be in it and there are already protests about it from seniors and others who oppose reductions in spending for Medicare and Social Security. One flashpoint is a change in the way the government measures inflation. The switch is to something called a chained CPI or consumer price index and it would result in smaller cost of living adjustments for Social Security.
And critics are giving lawmakers an earful about that idea, as NPR's Scott Horsley reports.
SCOTT HORSLEY, BYLINE: Critics say the problem with the government's current inflation measure, the CPI, is that it doesn't reflect the way people actually shop. Marc Goldwein of the Committee for Responsible Federal Budget is one of those critics. He says when prices for one item go up, consumers will often substitute a different item. The inflation measure accounts for some of this shopping behavior, but not all of it.
MARC GOLDWEIN: In the late '90s, we fixed some of the worst problems with the CPI so that it would measure substitution from, say, a Granny Smith apple and a MacIntosh apple. But it still doesn't have the ability to measure the difference between an apple and an orange or a tangerine.
HORSLEY: As a result, Goldwein says, the CPI overstates the price increases that consumers actually pay. That's important because the government uses CPI to set cost of living adjustments for Social Security and other programs. If the government switched to a measure of inflation that grows more slowly, those benefits would grow more slowly, too.
At first, the difference would be small, just a fraction of a percentage point.
GOLDWEIN: But that compounds over time. Over ten years, that's more like three percent. Over 20 years, that's more like seven percent. And so, if you continue to use this index, it does have large long-term effects, even though the effect from each year to the next is very tiny.
HORSLEY: Over a decade, the switch would save Social Security nearly $130 billion. And because tax brackets and the standard deductions are also indexed to inflation, government revenues would rise by a similar amount. Supporters call this a technical fix to the inflation measure, but many seniors aren't buying it.
MAX RICHTMAN: It's much more than a technical fix. It is a reduction in benefits.
HORSLEY: Max Richtman is president of the National Committee to Preserve Social Security and Medicare. If anything, he says, the current measure of inflation understates seniors' costs, especially for things like health care.
RICHTMAN: I have done hundreds of town hall meetings. Every senior who is on Social Security knows the term COLA, cost of living adjustment, almost as well as they know the word Social Security. Believe me, this is not going to be an easy sell.
HORSLEY: White House spokesman Jay Carney says President Obama is including the inflation switch in his budget somewhat reluctantly in hopes of winning a larger deficit cutting deal. Carney says the president will also seek special protection for the oldest and poorest seniors.
JAY CARNEY: Let's be clear. This is a technical adjustment. It has been advocated by Republicans. It is not the president's ideal approach, but it is a serious compromise proposition.
HORSLEY: Richtman says his members want no part in such a compromise. They're planning to light up the switchboard on Capitol Hill this Wednesday when the president's budget comes out.
RICHTMAN: We know the president doesn't have to run for office again, but there are 435 members of the House and 33 or 34 senators, this cycle, that do have to run. And seniors vote. They have long memories. They know a cut when they see it.
HORSLEY: So while supporters of the new inflation measure boast about accurately reflecting the costs of apples and oranges, to these opponents, it's still a political lemon.
Scott Horsley, NPR News, the White House. Transcript provided by NPR, Copyright NPR.