FAQ: How “Chaining the COLA” Cuts Your Social Security

FAQ: How “Chaining the COLA” Cuts Your Social Security

TSCL Mounts Nationwide Effort Fighting COLA Cuts

A major move is underway to reduce government spending on Social Security by cutting the growth rate in annual cost-of-living adjustments (COLAs).  What would it cost you?  Here are answers to some of your most frequently asked questions:

Q:  What is the "chained" CPI?

A:  Through 2012, annual COLA increases have been tied to the increase in the consumer price index for Urban Wage Earners and Clerical Workers (CPI-W).  Deficit reduction plans would switch to a more slowly-growing CPI known as the "chained" CPI to determine COLAs.  Traditional CPIs measure the increase in prices.  But the chained CPI doesn't.  It measures consumer spending when prices go up.  For example if the price of beef goes up, it assumes people switch to less costly choices, like chicken.  The chained CPI measures inflation as growing less slowly than traditional indexes.

Q:  How would switching to the chained CPI cut Social Security?

A:  Even small tweaks in inflation can save the government hundreds of billions over time.  Using the chained CPI would reduce the measured rate of inflation, and the amount of money you would receive in your COLA every year.  The Congressional Budget Office has estimated that moving to the chained CPI would cut government spending on Social Security by $112 billion over the first 10 years alone.

Q:  The change looks so small.  I've read that it would cut benefits just .03 of a percentage point.

A:  The switch is insidious for that reason.  But a .03 of a percentage point reduction can make a huge difference to what you receive in Social Security, especially as you get older.  The following chart illustrates the impact over the first ten years on a married couple that receives $2,500 per month in Social Security benefits today.  After ten years the cut would reduce benefits by $88 per month, and by nearly $5,475 over that period.



How “Chained” CPI COLA Cut Compounds Over Ten Years

Year Monthly Benefit

Under Current Law


Monthly Benefit Using “Chained” CPI Monthly Difference Annual Difference
2012 $2,500.00 $2,500.00 $0 $0
2013 $2,535.00 $2,527.50 (-$7.50) (-$90.00)
2014 $2,570.50 $2,555.30 (-$15.20) (-$182.30)
2015 $2,606.50 $2,583.40 (-$23.10) (-$276.80)
2016 $2,653.40 $2,622.20 (-$31.20) (-$374.80)
2017 $2,706.50 $2,666.70 (-$39.70) (-$476.70)
2018 $2,766.00 $2,717.40 (-$48.60) (-$583.20)
2019 $2,829.60 $2,771.80 (-$57.90) (-$694.40)
2020 $2,894.70 $2,827.20 (-$67.50) (-$810.20)
2021 $2,961.30 $2,883.70 (-$77.50) (-$930.60)
2022 $3,029.40 $2,941.40 (-$88.00) (-$1,055.80)
Total over ten years (-$5,474.60)



Q:  What other ways would I be affected by this Chained COLA?

A: Your benefits would drop further as rising Medicare costs take a bigger portion of Social Security payments.  This is already occurring even under current law, but the problem would be accelerated if Social Security benefits grow more slowly, and if Medicare cuts make seniors pay more for their healthcare.

Q:  What can I do?

A:  TSCL is adamantly opposed to "Chaining the COLA" and continues to fight it.  TSCL is gathering the signatures of thousands of seniors.  Should the plan achieve passage, TSCL is prepared to lead a national repeal campaign of the same kind that resulted in the immediate repeal of "Medicare Catastrophic" in the late 1980s.  To sign a petition or to learn how you can take part in our campaign, visit TSCL on the web at www.SeniorsLeague.org.