There is a full-fledged drive to cut social security benefits by lowering the annual cost of living adjustment for people already receiving benefits. The plan involves changing the index for calculating the cost of living. The new index, which is known as the "chained consumer price index" (CCPI), typically shows a rate of inflation 0.3 percentage points less than the CPI currently used to adjust benefits.
A reduction of 0.3 percentage points in benefits may seem small, but this will accumulate through time. After being retired ten years, benefits will be almost 3% lower with the CCPI. After 20 years, the loss will be near 6%, and after 30 years, the reduction in benefits will be close to 9%. This is a serious loss of income for seniors, the vast majority of whom rely on social security for most of their income.
The justification for the change in the benefit formula is that the CCPI takes account of the substitutions that consumers make in response to changing prices. The classic story is that if the price of beef rises and the price of chicken doesn't, people will buy more chicken and less beef. The CCPI takes this switching from beef to chicken into account in calculating inflation. The current CPI does not.
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