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Continued: Social Security benefits to go up by 1.5 percent in 2014; increase among lowest in years

  • Article by: STEPHEN OHLEMACHER , Associated Press
  • Last update: October 30, 2013 - 2:46 PM

Over the past year, medical costs went up less than in previous years but still outpaced other consumer prices, rising 2.4 percent, according to the Bureau of Labor Statistics. Housing costs went up 2.3 percent.

To save money, Congress has considered adopting a new measure of inflation called the chained CPI, which would, on average, result in slightly smaller COLAs most years. President Barack Obama has supported the idea in previous budget talks with House Speaker John Boehner, R-Ohio, making it one of the few issues the two agree on.

Many economists argue that the chained CPI is more accurate because it assumes that as prices increase, consumers switch to lower cost alternatives, reducing the amount of inflation they experience. The White House has called it a "technical change," though many advocates for older Americans are pledging to fight it.

The issue could come up again as part of a new round of budget talks that began Wednesday on Capitol Hill. Following the recent government shutdown, House and Senate leaders formed a new committee that is trying to reach a budget deal for next year and beyond. The committee has a deadline of mid-December.

If the chained CPI were in use today, next year's COLA would still be 1.5 percent. That's because the differences between the two inflation measures are smaller when the COLA is small.

"Proponents of a stingier COLA formula claim the chained CPI is more accurate. However, in truth it is a benefit cut for millions of current and future retirees, veterans, people with disabilities and their families," said Max Richtman, who heads the National Committee to Preserve Social Security and Medicare.

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