Both Parties Divided Over GOP 'Cliff' Idea; Proposal Would Reduce Federal Spending and Raise Tax Collections By Using a Different Index for Inflation Adjustments
Republican leaders are pushing what looks like a relatively painless method of slowing federal spending, one that alters how the government calculates annual cost-of-living increases for an array of programs.</br></br>Senate Minority Leader Mitch McConnell (R., Ky.) recently highlighted the idea, which is known as "chained CPI," as an example of the kind of changes needed to avert spending cuts and tax increases set to begin in January. House Speaker John Boehner (R., Ohio) included it in his recent deficit-reduction proposal.</br></br>President Barack Obama has in the past signaled openness to switching inflation measures to shore up Social Security. And several centrist Democrats have endorsed the idea, too.</br></br>But as with much of the "fiscal cliff" negotiations, nothing is as simple it appears. Even this seemingly technical change has become caught in the ideological gaps between the two sides.</br></br>Under the Republicans' proposal, the government would stop pegging benefits to versions of the consumer price index that measure the change in prices for a hypothetical fixed basket of goods, the standard measure of inflation. Instead, the government would use the chain-weighted CPI, which tends to rise slower because it recognizes that consumers will buy less of goods whose prices are rising rapidly. For example, if the price of chicken rises more than the price of beef, families might buy less chicken and more beef.