Briefing Paper #320
A perennial suggestion in the debate over the future of Social Security is to change the price index that is used to determine the annual cost-of-living adjustments (COLAs) to recipients’ benefits. This change has wide appeal among policymakers for two reasons. First, the specific suggested change—using a “chained” consumer price index (CPI), described in more detail below— is all but guaranteed to lower growth in Social Security benefits, which could aid efforts to reduce the federal budget deficit. Second, these reductions would not be specifically legislated but would arise from what is characterized as a technocratic “improvement” in economic measurement.
This report analyzes the merits of changing the method for calculating the Social Security COLA in this way.
