Multiple Budget Functions
Use an Alternative Measure of Inflation to Index Social Security and Other Mandatory Programs
CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.
|Billions of Dollars||2021||2022||2023||2024||2025||2026||2027||2028||2029||2030||2021–
|Change in Outlays|
|Other benefit programs with COLAsa||0||-0.7||-1.6||-2.4||-3.2||-4.1||-5.0||-5.9||-6.7||-7.5||-7.8||-37.0|
|Effects on SNAP from interactions with COLA programsb||0||0.1||0.1||0.2||0.3||0.4||0.4||0.5||0.6||0.6||0.7||3.1|
|Other federal spendingd||0||*||-0.2||-0.2||-0.3||-0.4||-0.5||-0.6||-0.7||-0.7||-0.7||-3.7|
|Change in Revenuese||0||*||*||*||*||*||*||*||*||-0.1||-0.1||-0.2|
|Decrease (-) in the Deficit||0||-3.1||-8.0||-13.0||-18.1||-23.8||-29.7||-35.9||-42.2||-49.0||-42.2||-222.7|
Cost-of-living adjustments (COLAs) for Social Security and many other parameters of federal programs are indexed to increases in traditional measures of the consumer price index (CPI). The CPI measures overall inflation and is calculated by the Bureau of Labor Statistics (BLS). In addition to the traditional measures of the CPI, BLS computes another measure of inflation—the chained CPI—which is designed to account for changes in spending patterns and to eliminate several types of statistical biases that exist in the traditional CPI measures. Under current law, the chained CPI is used for indexing most parameters of the tax system, including the individual income tax brackets. The chained CPI-U has grown by an average of about 0.25 percentage points more slowly per year since 2001 than the traditional CPI measures have, and the Congressional Budget Office expects that trend to continue.
This option would expand the use of the chained CPI. It would be used to index COLAs for Social Security and to compute inflation-indexed parameters of other federal programs.