Federal groups oppose shrinking benefits through ‘chained CPI’

December 18, 2012
(Carolyn Kaster/AP)

The nation’s largest federal-worker union has joined a chorus of stakeholder groups railing against proposals to reduce the deficit by trimming federal retirement benefits. 

The American Federation of Government Employees released a statement Tuesday expressing opposition to any plans to adopt a “chained-CPI” formula for determining the annual benefit rates for federal workers, military personnel, veterans, the disabled and Social Security recipients. 

On Monday, National Active and Retired Federal Employees Association president Joseph Beaudoin sent a letter to Congress arguing against the same index and urging lawmakers to reject any plans to use it.

“Proposals to substitute a chained CPI calculation for the current index are unfair and will reduce significantly earned retirement benefits,” Beaudoin said.  

The Federal Workers Alliance also began a 36-hour blitz on lawmakers Tuesday calling on federal employees to write, call and visit policymakers in person to voice opposition to cuts that would affect the federal workforce. The group represents 20 government-employee unions. 

President Obama this week expressed openness to the chained CPI during deficit-reduction negotiations with Republican leaders, according to an AP report on Monday.  

“President Obama could not have picked a worse or more regressive item in the House Republican budget than the chained CPI,” said AFGE president J. David Cox, Sr.  

Washington Post congressional reporter Ed O’Keefe explained how chained CPI works on Monday, noting that it tweaks the inflation formula just slightly but results in big savings over the long run, perhaps more than $100 billion over a decade. 

Proponents and many economists say chained CPI serves as a more accurate measure of inflation than the current CPI-W index the government uses.  

Opponents say chained CPI fails to account for the steep and steady rise in healthcare costs, which have far outpaced inflation in recent decades.

Beaudoin said in his letter to Congress that “moving to the chained CPI is going in the wrong direction.” He advocated switching to an index known as the CPI-E, which reflects consumer prices for people 62 years or older and would actually increase benefit rates above their current level. 

With so much talk about austerity, Congress is unlikely to satisfy NARFE’s wishes for higher benefits. But the association is doing what it can to stave off cuts. 

“Proposals to substitute a chained CPI calculation for the current index (CPI-W) are unfair and will reduce significantly earned retirement benefits,” Beaudoin said.

Switching to a chained CPI would affect more than just benefits. It would change tax formulas as well, bumping some payers into higher brackets.

“The chained CPI hits our nation’s most vulnerable twice,” Beaudoin said.  

A report from the Tax Policy Center estimated that most Americans would pay just over $100 per year with the chained CPI. The biggest increases would affect families making $30,000 to $40,000 per year.

Millionaires would feel virtually no impact on their taxes, but that’s because they have already reached the top bracket. 

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Josh Hicks covers Maryland politics and government. He previously anchored the Post’s Federal Eye blog, focusing on federal accountability and workforce issues.
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