Dem proposes separate inflation adjustment for seniors on Social Security

By Pete Kasperowicz - 03/08/13 04:44 PM ET

Rep. Peter DeFazio (D-Ore.) on Thursday reintroduced legislation that would create a new inflation calculation that would be used to create bigger cost-of-living adjustments (COLAs) for seniors on Social Security.

DeFazio has introduced similar legislation for the last few Congress's, and last year his proposal attracted 30 cosponsors.

His Consumer Price Index for Elderly Consumers Act, H.R. 1030, would require the government to stop using the Consumer Price Index for workers (CPI-W) as it calculates COLAs for Social Security recipients. DeFazio argues that CPI-W takes into account goods and services that working people buy, but does not reflect the mix of goods and services that seniors buy.

DeFazio argues that over the last two decades, the price of goods and services used in the CPI-W calculation has increased 90 percent. But he says the price of a more representative mix of things that seniors buy, such as prescription drugs, has increased 105 percent in that same time period.

That means the COLAs now being used for Social Security are not enough to keep pace with the rising costs of items seniors buy, DeFazio argues.

His bill would create a new "CPI-E" inflation calculation that would include more of the items seniors buy, and thus create a larger inflation adjustment for Social Security recipients.

In the last Congress, DeFazio rejected a proposal to reduce the federal budget deficit by basing inflation adjustments on chained CPI, which takes into account the substitutions that consumers make when items they usually buy become more expensive.

Chained CPI would reduce the rate of inflation for social programs. But DeFazio said that makes no sense for people who use these programs.

"They're saying because people buy cheaper junk, we should change the CPI," he said in a House floor speech. "That means the senior, by the time they reach 85 in this brave new world of the chained CPI, will get 100 bucks less a month in their Social Security — not too good. Veterans would see their benefits also be restrained and go down about the same amount."