Chained CPI Protections
The President’s Fiscal Year 2014 Budget demonstrates that we can make critical investments to strengthen the middle class, create jobs, and grow the economy while continuing to cut the deficit in a balanced way.
The President believes we must invest in the true engine of America’s economic growth – a rising and thriving middle class. He is focused on addressing three fundamental questions: How do we attract more jobs to our shores? How do we equip our people with the skills needed to do the jobs of the 21st Century? How do we make sure hard work leads to a decent living? The Budget presents the President’s plan to address each of these questions.
To make America once again a magnet for jobs, the Budget invests in high-tech manufacturing and innovation, clean energy, and infrastructure, while cutting red tape to help businesses grow. To give workers the skills they need to compete in the global economy, it invests in education from pre-school to job training. To ensure hard work is rewarded, it raises the minimum wage to $9 an hour so a hard day’s work pays more.
The Budget does all of these things as part of a comprehensive plan that reduces the deficit and puts the Nation on a sound fiscal course. Every new initiative in the plan is fully paid for, so they do not add a single dime to the deficit. The Budget also incorporates the President’s compromise offer to House Speaker Boehner to achieve another $1.8 trillion in deficit reduction in a balanced way. When combined with the deficit reduction already achieved, this will allow us to exceed the goal of $4 trillion in deficit reduction, while growing the economy and strengthening the middle class. By including this compromise proposal in the Budget, the President is demonstrating his willingness to make tough choices and his seriousness about finding common ground to further reduce the deficit.
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The Budget contains the President’s compromise offer to Speaker Boehner from December. As part of that offer, the President was willing to accept Republican proposals to switch to the chained CPI. But, the Budget makes clear that the openness to chained CPI depends on two conditions. The President is open to switching to the chained CPI only if:
The change is part of a balanced deficit reduction package that includes substantial revenue raised through tax reform.
- It is coupled with measures to protect the vulnerable and avoid increasing poverty and hardship.
The Budget contains two types of protections:
Benefit Enhancement for the Very Elderly and Others Who Rely on Social Security for Long Periods of Time
The benefit enhancement would be equal to 5% of the average retiree benefit, or about $800 per year if the proposal were in effect today.
It would phase in over 10 years, beginning at age 76, or (for other beneficiaries, such as those receiving Disability Insurance) in the 15th year of benefit receipt.
The benefit enhancement would begin in 2020, phasing in over 10 years for those 76 or older (or in their 15th year of eligibility or beyond) in that year.
- Beneficiaries who continued to be on the program for an additional 10 years would be eligible for a second benefit enhancement, starting at age 95 in the case of a retired beneficiary.
Because of the benefit enhancement for the very elderly, the Budget proposal would not increase the poverty rate for Social Security beneficiaries, and would slightly reduce poverty among the very elderly according to SSA estimates.
Policy is Not Applied to Means-Tested Benefit Programs
Means-tested benefit programs are not included in the switch to the chained CPI. Programs that would not be included are:
- The Supplemental Security Income (SSI) program, meaning that the lowest-income seniors and people with disabilities generally would not be affected.
- Means-tested veterans’ pensions as well as the Montgomery GI Bill-active duty or the post-9/11 GI Bill benefits.
- The Supplemental Nutrition Assistance Program (SNAP) and child nutrition programs.
- Pell Grants.
- Poverty guidelines.