Indiana News

Ball State Economist Explains Chained CPI

4/11/2013

President Obama is proposing the use of the chained consumer price index (CPI) which he says will help rein in the cost of Social Security.

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Those opposed to the chained CPI say it will mean smaller increases in Social Security checks over time.  Ball State Economist Mike Hicks says the chained CPI allows people to choose between similar products in places where they're cheaper.  He says many economists believe the current CPI overstates inflation because it doesn't take this into account.

Hicks says there's a belief that the chained CPI does a better job of capturing inflation and capturing what retired households buy.  However, he says that does mean Social Security payments will grow less slowly than the current rate.

Hicks says using the chained CPI may lower Social Security costs to a certain degree, but it's not enough to create solvency for the next 30 years.

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