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GOP mulls cutting COLAs to save defense funding

Jun. 13, 2013 - 06:00AM   |  
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A key Republican said Thursday he’ll propose cutting cost-of-living adjustments for Social Security recipients and military and federal civilian retirees in an effort to find more money for defense programs.

Sen. Jim Inhofe of Oklahoma, the Senate Armed Services Committee’s ranking Republican, said passing the 2014 defense budget may be impossible unless the bill undoes sequestration, and one way to do that is to make a controversial revision in how cost-of-living adjustments are made.

Savings would come from adjusting how the Bureau of Labor Statistics calculates the Consumer Price Index, a measure of the cost of goods and services that in turn is used to determine the COLA. The revised COLA calculation, known as chained CPI, would slightly reduce annual adjustments by taking into consideration the tendency of consumers to substitute cheaper items when faced with higher costs. For example, someone might buy peaches if the price of oranges goes up.

The revised calculation was included in the Obama administration’s 2014 budget, but only as an option as part of a larger budget agreement. The administration has not backed the idea of using it solely to protect defense spending.

The nonpartisan Congressional Budget Office calculates that chained CPI would save $339.8 billion over 10 years and reduce annual COLAs by 0.3 percent to 0.5 percent.

Inhofe’s first opportunity to propose a chained CPI amendment would come when the defense bill reaches the Senate floor. A date for taking up the bill has not been set, but it will not happen before mid-July.

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