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Senior Citizen Politics

First Public Hearing Underway on Chained CPI Proposed to Slow Future COLA for Senior Citizens

Republican chair of House Ways and Means subcommittee on Social Security issued news release blasting Treasury secretary; in opening says reducing COLA only would be called ‘benefit cut’ in Washington

April 18, 2013 – The first congressional hearing on the budget cuts to Social Security proposed by President Obama is underway. Rep. Sam Johnson (R-Tx), chair of the Social Security panel of the House Ways and Means Committee, released his opening statement and the prepared testimony of witnesses. The Texas Republican also released a news release this morning accusing Treasury Secretary Jack Lew of making “conflicting statements” about the Chained CPI before the full committee.

(See today's news release attacking Treasury Secretary Lew below this news report on the hearing.)

The hearing today is the first public hearing on the Chained CPI proposed by President Obama as a means of reducing future cost-of-living adjustments for seniors.

Following are the prepared remarks by Rep. Johnson as the hearing began this morning.



Welcome to the first in the Committee’s hearing series on the President’s and other bipartisan entitlement reform proposals.

Americans deserve action to protect and preserve Social Security.   

According to the Social Security Board of Trustees, beginning in 2033, Social Security will be unable to pay full benefits.  In other words, when today’s 47-year-old workers reach their full retirement age in 2033, they and everyone else already receiving benefits face a 25 percent benefit cut unless Congress does its job and fixes Social Security.  

The inclusion of using a more accurate measure of inflation in President Obama’s budget is a welcome acknowledgement that we must take action to make sure that Social Security is there for future generations.  

The purpose of this hearing is to have a full discussion of a policy with wide bipartisan support – more accurately measuring inflation in order to help fix Social Security.

Congress passed the first benefit increase in 1950 and later increased benefits 10 other times before passing a law in 1972 that created a formula to determine cost of living adjustments or COLAs automatically.   

The Social Security COLA increases benefits each year that there is inflation.  If there is no inflation, there are no COLAs as was the case in 2009 and 2010.  But if prices should fall, benefits cannot be reduced.  

At the time automatic COLAs were enacted, the Bureau of Labor Statistics or BLS, only produced one measure of inflation, which remains the inflation measure used to determine Social Security COLAs today.  However BLS has since developed other measures including the chained consumer price index or chained CPI, which we will discuss today.  

The President’s own budget says, “Most economists agree that the chained CPI provides a more accurate measure of the average change in the cost of living than the standard CPI.”  

In testifying before the full Ways and Means Committee last week, Treasury Secretary Jack Lew stated, “The chained CPI is a more accurate measure of inflation in that it does a better job of reflecting the substitution of goods in response to relative price changes.”  

Today, we will hear from the Commissioner of BLS why that is.  

Some say using the Chained CPI to measure inflation would result in a benefit cut, but that’s just plain false.  

The truth is that benefits will continue to grow, only more slowly than under the current less accurate measure.  Only in Washington, would that be called a benefit cut.  

That said, I fully recognize and am sensitive to the impact this change could have on some beneficiaries’ pocketbooks, especially those who receive benefits for a long time.  But the fact of the matter is the current measure overstates inflation, and ignoring that is simply unfair to our children and grandchildren who rightly expect us to make sure that Social Security will be there for them.     

Let me be clear:  determining the adequacy of Social Security benefits, especially for those who are most vulnerable, is an important discussion to have.  And we will as part of this hearing series on bipartisan entitlement reforms.   

The President likes to say that if we agree on a policy, then we should act and not let our differences hold us up.  

We owe it to every American to carry out our responsibility and carefully examine each bipartisan policy option.  And we will through this hearing series.


Focus Of The Hearing

The hearing will examine proposals by the President and bipartisan groups to more accurately measure inflation. 

Witness List and Testimony

Following is a list of witnesses for the hearing with links to their prepared testimony

The Honorable Erica L. Groshen,
Commissioner, accompanied by Michael W. Horrigan, Ph.D., Associate Commissioner, Office of Prices and Living Conditions, Bureau of Labor Statistics, Department of Labor

Jeffrey Kling, Ph.D.
Associate Director for Economic Analysis, Congressional Budget Office

Ed Lorenzen
Executive Director, The Moment of Truth Project, Committee for a Responsible Federal Budget
(Truth in Testimony)

Nancy Altman
Co-Chair, Strengthen Social Security Coalition
(Truth in Testimony)

Charles P. Blahous III, Ph.D.
Trustee, Social Security and Medicare Boards of Trustees
(Truth in Testimony)


Original Hearing Advisory: Chairman Johnson Announces Hearing on the President’s and Other Bipartisan Entitlement Reform Proposals



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News Release by Rep. Johnson

Lew’s Conflicting Statements on Chained CPI – an Example of What's Wrong in Washington

If it is “better” policy, then let’s do it, Mr. President


April 18, 2013Included in the President’s budget proposal was a change to the way Social Security measures inflation – moving from the current measure to the chained Consumer Price Index.  As Treasury Secretary Lew stated during his testimony before the Ways and Means Committee on the President’s budget, “The Chained CPI is a more accurate measure of inflation in that it does a better job of reflecting the substitution of goods in response to relative price changes.”  Additionally, he noted that this provision was included in the President’s compromise offer to Speaker Boehner during discussions on the fiscal cliff.

Unfortunately, Secretary Lew also noted that the President “is not prepared to do something like chained CPI” unless taxes are increased above and beyond the tax increase at the start of the year.  

According to the Social Security Administration actuaries, using the chained CPI to determine Social Security cost of living increases would solve 20 percent of the Social Security shortfall and allow Social Security to pay full benefits for an additional two years.  If this policy is good for the long-term health of the Social Security program, it should not be held hostage for more political demands.

Chained CPI has broad bipartisan support and is not a Republican idea or a Democratic idea.  In fact, the Washington Post editorial board noted that, “Mr. Obama too often casts entitlement reform as a concession to extract Republican assent to higher taxes, rather than a worthy end in itself.  This is especially odd regarding his proposed new cost-of-living measurement for Social Security: Mr. Obama’s own budget documents say that it’s ‘more accurate’ than the measurement now in use.  Isn’t ‘more accurate’ better?”

Americans expect that Congress and the President work together and provide solutions to strengthen and preserve Social Security for current beneficiaries and future generations.  The President has repeatedly called on Congress to act on policies we can agree on.  We must take action now, and enact meaningful reforms to secure the future of this vital safety net.  That is why this morning, the Ways and Means Social Security Subcommittee will hold a hearing examining the use of the chained CPI to measure inflation.


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