The proposal would represent a reversal for Obama. In contrast to his pledge to target tax increases at the wealthy, high-income families would largely be spared from tax increases that would result from changing the way inflation is measured. Until now, the administration has been adamant that Social Security does not add to the deficit and should not be a part of deficit-reduction talks.
Adopting a new inflation measure would allow policymakers to gradually cut benefits and increase taxes in a way that might not be readily apparent to most Americans. The inflation measure under consideration is called the Chained Consumer Price Index. On average, the measure shows a lower level of inflation than the more widely used CPI.
A Chained CPI assumes that as prices increase, consumers buy lower cost alternatives, reducing the amount of inflation they experience. If the price of beef increases while the price of pork does not, people will buy more pork. Or, as opponents mockingly argue, if the price of home heating oil goes up, people will turn down their heat and wear more sweaters.
There's no indication at this point whether Obama and congressional Republicans - and Democrats - will agree on the change, and, if they do, how broadly it might be applied. Another private meeting at the White House is set for Sunday.
The measure, if adopted across the government, would have a wide-ranging effect on taxes and benefits, and those changes would grow over time. The change would mean smaller annual increases in Social Security payments, government pensions, and veterans' benefits. Current payments would not be affected, but recipients would get smaller increases in the future.
