By Tom Prettyman
One of the most serious threats facing Nevada’s seniors and veterans is an acronym you’ve probably heard recently: chained CPI. It’s a policy you’re going to be hearing a lot more of as the budget debate continues to heat up in Washington.In his most recent budget, President Obama proposed changing the formula used for determining annual cost-of-living adjustments (COLAs) that seniors, veterans and those with disabilities receive in benefits, including Social Security, federal and military retirement, disabled veterans’ benefits and disability insurance benefits. The flawed formula is the chained CPI (consumer price index), and it’s gaining steam.Supporters of the chained CPI claim it is a “painless” fix that would add $230 billion to the U.S. budget over the next decade. Even though the short-term reduction in benefits would be modest, the long-term reduction would be substantial.We cannot let ourselves be fooled. There is no painless way to save $230 billion. And it is unacceptable that the President and some in Congress suggest burdening some of the most vulnerable Americans with a $230 billion price tag under the disguise of a modest change.Let’s take a look at what the chained CPI would do to the benefits of a middle-class Nevadan living on a fixed income. If a 65-year-old in Las Vegas worked for an annual salary of $43,000 before retirement, under the chained CPI formula he or she would lose up to $40,000 throughout his/her retirement. For someone whose annual Social Security benefit is only $15,000 (the average), a sacrifice of that size is hardly “painless.”The bottom line is that after 30 years of a compounded chained CPI formula, an individual’s benefits would be 9.4 percent lower than they would have been under the current inflation formula, the CPI-W.To make matters worse, proponents of the chained CPI often minimize the reductions in benefits by saying the chained CPI is a “more accurate measure of inflation” or just a “technical adjustment.” But both the current formula used to calculate COLAs (CPI-W) and the chained CPI fail to accurately reflect the costs most seniors face. Specifically, neither one accurately accounts for how much more seniors spend on health care.Americans aged 65 and older spend roughly 13 percent of their income on healthcare compared to 5 percent spent by younger Americans. If there’s going to be any change to the formula, it should follow the common sense approach of the CPI-E formula which accounts for seniors’ healthcare costs and more accurately raises cost-of-living adjustments.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.As a former federal employee with 28 years of service with the Department of Defense, I understand that getting our fiscal house in order is important. But attempting to balance the budget must not be performed on the backs of the elderly, veterans and the disabled.This issue is too important to ignore. We must take the time to understand the impact of this damaging proposal and voice our opposition to our elected officials before it’s too late and the chained CPI becomes law.
Tom Prettyman spent 28 years with the Department of Defense and is currently President of the Nevada Federation of NARFE.