Obama Will Not Include COLA Reductions in FY15 Budget

Charles Dharapak/AP

This story has been updated with additional comment.

President Obama will not tinker with federal retirees’ cost-of-living adjustments in his fiscal 2015 budget, which is scheduled for release in early March.

Obama proposed switching to a chained Consumer Price Index -- a formula that slows the rate of inflation growth and in turn, reduces federal retirees’ and Social Security beneficiaries’ COLAs -- in his fiscal 2014 budget. He first pitched the change during the 2012 fiscal cliff negotiations.

A move to the chained CPI is still on the table in hypothetical future budget negotiations, White House spokesman Josh Earnest said at a press briefing on Thursday, but it will not be in the president’s fiscal 2015 budget.

Advocates for switching to the chained CPI have argued that the formula offers a more accurate measure of how people substitute one item for another in the face of a price increase. Democratic lawmakers and federal employee advocates have disputed that logic, however, and voiced their opposition to the change just before the White House announcement.

“Contrary to claims by proponents, the chained CPI is not a more accurate measure of inflation,” National Active and Retired Federal Employees Association President Joseph A. Beaudoin said in a Feb. 19 statement. “A true measure of inflation for beneficiaries of Social Security and other federal retirement programs would take into account the rising health-care costs experienced by seniors.”

Beaudoin said if any changes were made to CPI, it should be to make COLAs higher.

Led by Rep. Allyson Schwartz, D-Pa., 117 members of the House wrote to Obama in a Feb. 19 letter to urge him not to again include the chained CPI in his budget, saying the switch would be “devastating” to federal retirees and senior citizens. Schwartz on Thursday praised Obama’s decision.

“This is a major victory,” Schwartz said. “Ruling out chained CPI was clearly the right thing to do. I applaud President Obama for his important decision to protect our nation's seniors, veterans and individuals with disabilities.”

After waging a successful fight recently to repeal planned cuts to the COLAs of working-age military retirees, the military community joined the chorus against a new round of reductions.

“By not adopting the chained CPI,” said Military Officers Association of America President Norbert R. Ryan, Jr., “you are protecting the benefits of more than 3.2 million disabled veterans; 350,000 surviving spouses and children who have lost a loved one in battle or as the result of a service-connected disability; the pensions of 310,000 extremely-low income veterans; and 9 million veterans receiving Social Security benefits.”

Obama previously only agreed to the chained CPI under the condition that Republicans accept additional tax revenues, a quid pro quo the GOP has consistently showed no interest in.

House Speaker John Boehner, R-Ohio, criticized the omission of the chained CPI in the president’s upcoming budget proposal. “This reaffirms what has become all too apparent: the president has no interest in doing anything, even modest, to address our looming debt crisis,” said Brendan Buck, Boehner’s press secretary. “The one and only idea the president has to offer is even more job-destroying tax hikes, and that non-starter won’t do anything to save the entitlement programs that are critical to so many Americans. With three years left in office, it seems the president is already throwing in the towel.”  

Federal employee groups have consistently opposed moving to a chained CPI. In October, NARFE held a rally that featured more than 40 shoeboxes with more than $100,000 worth of coupons, collected by NARFE members from all 50 states to represent the average financial loss to retirees under the proposed calculation.

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