WASHINGTON — Part of President Barack Obama’s nearly $3.8 trillion spending plan is a policy change that could affect Social Security checks and veterans’ benefits paid to hundreds of thousands of Mainers.
The proposal is likely to face opposition from advocacy groups and some Democrats in Maine, including U.S. Reps. Chellie Pingree and Mike Michaud.
“For folks trying to make ends meet, what may seem like a few dollars in Washington could be critical for people in Maine,” said Lori Parham, state director of the AARP in Maine.
The proposal would change the way the government calculates cost-of-living adjustments for programs such as Social Security. In a compromise aimed at working toward a “grand bargain” on spending and deficits with Republicans, Obama has offered to switch to something known as the chained consumer price index, or chained CPI.
The consumer price index is the way the government keeps track of how prices change on commonly purchased goods and services. Chained CPI is another way of making that calculation by assuming that as prices fluctuate, consumers adapt by changing their buying habits.
The most common example is if the price of beef rises, many consumers will buy more chicken or pork. As a result, cost-of-living adjustments under chained CPI tend to be slightly lower than the traditional consumer price index. It’s only a small percentage difference year-to-year, but it compounds over time and can result in significant savings for the federal government.
The nonpartisan Congressional Budget Office estimated that using chained CPI would save the government $127 billion through 2023 in reduced Social Security benefits alone. That figure would rise to $216 billion — and achieve $340 billion in deficit reductions — if chained CPI were applied to other government programs, including to military pensions.
The Obama administration’s budget would seek to minimize effects for lower-income Social Security recipients and veterans.
The AARP recently estimated that switching to chained CPI would reduce Social Security benefits to the 200,000-plus recipients in Maine by $580 million over the next decade. Veterans benefits would be reduced by $94 million during that time.
Pingree praised Obama for seeking to cut the deficit by reducing tax deductions for the wealthy. But she strongly disagrees with a switch to chained CPI. Pingree is married to S. Donald Sussman, majority share owner of MaineToday Media, publisher of the Portland Press Herald.
“Seniors did not create the deficit and the budget shouldn’t be balanced on their backs,” Pingree said in a statement. “They have worked hard and contributed to Social Security all their lives and shouldn’t face cuts to their benefits.”
Michaud was not available to comment Wednesday, but he has opposed past proposals to use chained CPI and was one of dozens of House members to say so in a February letter to the president.
Independent Sen. Angus King suggested he may be open to the shift, however, as long as there are “escape hatches” for lower-income individuals. But he said in an interview that he wanted to read the details.
“It isn’t an option that I prefer,” King said. “On the other hand, if it is part of a ‘grand bargain’ that solves the long-term budget problem and gets us out of this crisis-to-crisis budgeting, then it is something that we have got to consider.”
It was unclear where Republican Sen. Susan Collins stood on the issue on Wednesday. She was scheduled to attend a White House dinner Wednesday evening with the president and about 10 other Republicans.
Washington Bureau Chief Kevin Miller can be contacted at 317-6256 or at:
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