WASHINGTON — Buried in President Barack Obama’s nearly $3.8 trillion spending plan is a policy change that could affect the size of Social Security checks and veterans’ benefits paid to hundreds of thousands of Mainers.

The proposal is likely to encounter opposition from advocacy groups and some Democrats in Maine, including U.S. Reps. Chellie Pingree and Mike Michaud.

“For folks trying to make ends meet, what may seem like a few dollars in Washington could be critical for people in Maine,” said Lori Parham, state director of AARP in Maine.

The proposal would change the way the government calculates cost-of-living adjustments for programs such as Social Security. In a compromise aimed at working towards a “grand bargain” on spending and deficits with Republicans, Obama has offered to switch to something known as the “chained consumer price index,” or “chained CPI” for short.

The consumer price index is the way the government keeps track of how prices change on commonly purchased goods and services. “Chained CPI” is another way of making that calculation by assuming that as prices fluctuate, consumers adapt by changing their buying habits.

The most common example given is if the price of beef increases, many consumers buy more chicken or pork. As a result, cost-of-living adjustments under chained CPI are often lower than the traditional consumer price index.

While only a small percentage year-to-year, the difference compounds over time and can result in significant savings for the federal government.

The nonpartisan Congressional Budget Office estimated that using chained CPI would save the government $127 billion through 2023 in reduced Social Security benefits alone. That figure would rise to $216 billion — and achieve $340 billion in deficit reductions — if chained CPI were applied to other government programs, including military pensions.

Although the Obama administration’s budget would seek to soften the blow or minimize effects for lower-income Social Security recipients and veterans, groups opposed to using chained CPI were denouncing the switch before it was announced formally.

AARP recently estimated that switching to chained CPI would reduce Social Security benefits to the 200,000-plus recipients in Maine by $580 million over the next decade. Veterans’ benefits would be reduced by $94 million during that time.

“There are a lot of people saying this is just a small tweak, but it really is a larger issue,” Parham said.

Pingree, D-1st District, praised Obama for seeking to cut spending by reducing tax deductions for the wealthy; but she strongly disagrees with a switch to chained CPI. Pingree is married to S. Donald Sussman, majority shareowner of MaineToday Media, publisher of the Kennebec Journal, the Morning Sentinel and the Portland Press Herald.

“Seniors did not create the deficit and the budget shouldn’t be balanced on their backs,” Pingree said in a statement. “They have worked hard and contributed to Social Security all their lives and shouldn’t face cuts to their benefits.”

Michaud, D-2nd District, was not available Wednesday to comment on the president’s specific proposal; but he has opposed past proposals to use chained CPI and was one of dozens of House lawmakers to say so in a February 2013 letter to the president.

Independent U.S. Sen. Angus King, of Maine, suggested that he may be open to the shift, as long as there are “escape hatches” for lower-income individuals; but he said in an interview that he wanted to read the details.

“It isn’t an option that I prefer,” King said. “On the other hand, if it is part of a ‘grand bargain’ that solves the long-term budget problem and gets us out of this crisis-to-crisis budgeting, then it is something that we have got to consider.”

It was unclear where U.S. Sen. Susan Collins, R-Maine, stood on the issue on Wednesday. With Republicans more supportive of chained CPI than Democrats — and with Obama seeking compromise on spending issues — it was likely to come up during a dinner at the White House on Wednesday evening attended by the president, Collins and about 10 other Republicans.

 

Kevin Miller — 317-6256
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Twitter: @KevinMillerDC