2012 COLA Will Still Be Based On CPI-W, Not Chained-CPI-U Amounts

The debt ceiling bill, which was passed by the House of Representatives yesterday, is expected to pass the Senate and be signed by the President today. There is no provision in the current bill to cut or change Social Security. Therefore, current law and regulations will still apply for the 2012 COLA.

The bill does require that the House and Senate set up a 12 member panel to discuss further cuts and (hopefully) revenue enhancements (Tax The Rich!!) This panel will meet and is required to come up with something by December. If they do not, then automatic triggers will allegedly go off and cut spending, both defense and non-defense. There is supposedly a trigger that would cut some Medicare expenditures, but not payments to Medicare beneficiaries or their medical treatment sources. The legislation is available at Budget Control Act of 2011. It is a .pdf file, 71 pages long. The triggers are referred to in a couple of sections as ‘Sequestrations,” and are vaguely described.

The following is a summary of the bill provided by House Speaker Boehner.  You’ll recognize the Republican slant — Boehner is clearly selling the bill to his Teabaggers — but it’s basically accurate.

Summary of the Revised Budget Control Act of 2011

Washington (Aug 1)

The final agreement to cut spending and avoid default meets Republicans’ criteria to (1) cut government spending more than it increases the debt limit; (2) implement spending caps to restrain future spending; and (3) advance the cause of a Balanced Budget Amendment – all without tax hikes on families and job creators. It is largely consistent with the bill House Republicans passed last Friday, and reflects the principles of Cut, Cap, & Balance. Here is more information on the measure:

NO TAX HIKES

Same as the House-passed bill, the measure includes no tax hikes, a key principle that Republicans have fought for since day one. As further protection against any tax hikes, the Joint Committee of Congress (described below) will be scored on a current-law baseline. The committee would have to raise taxes by more than $3.5 trillion above today’s rates before it would begin to count as ‘deficit reduction.’ Since that is unlikely, there is little chance the Joint Committee will produce a bill that increases taxes.

CUTS THAT EXCEED THE DEBT HIKE

The final agreement is the same as the House-passed bill by including spending cuts that would exceed the amount of the increased debt authority granted to the President. The bill would cut and cap discretionary spending immediately, saving $917 billion over 10 years – as certified by the nonpartisan Congressional Budget Office CBO) – and raise the debt ceiling by less – $900 billion – to approximately February. Congress must vote to cut spending FIRST. Then, the President may ask for debt authority of up to $900 billion, which will be subject to a vote of disapproval by the House and Senate that can be vetoed by the President.

CAPS TO CONTROL FUTURE SPENDING

The final agreement is the same as the House-passed bill by imposing spending caps that would establish clear limits on future spending and serve as a barrier against government expansion while the economy grows. Failure to remain below these caps will trigger automatic across-the-board cuts (otherwise known as sequestration). This is the same mechanism used in the 1997 Balanced Budget Agreement. The one difference between this and the House-passed bill: the House bill had a firewall that separated defense from non-defense spending. Now the firewall separates security spending from non-security spending. This would be for FY 2012 & 2013, and allows Republicans to protect defense funding while cutting other security spending, such as foreign aid.

BALANCED BUDGET AMENDMENT

The bill advances the cause of a Balanced Budget Amendment by requiring the House and Senate to vote on the measure after October 1, 2011 but before the end of the year, allowing the American people time to build sufficient support for this popular reform. This is the same as the House-passed bill. Also, similar to the House-passed bill, the measure authorizes the President to request a second tranche of debt limit increase of $1.5 trillion if the Joint Committee’s proposal is enacted OR if a Balanced Budget Amendment is sent to the states.

ENTITLEMENT REFORMS & SAVINGS

The final agreement is the same as the House-passed bill by creating a 12-member Joint Committee of Congress that is required to report legislation – by November 23, 2011 – that would produce a proposal to reduce the deficit by at least $1.5 trillion over 10 years. Each chamber would consider the proposal of the Joint Committee on an up-or-down basis without any amendments by December 23, 2011. Similar to the House-passed bill, if the Joint Committee’s proposal is enacted OR if a Balanced Budget Amendment is sent to the states, the President would be authorized to request a debt limit increase of $1.5 trillion. As further protection against any tax hikes, the Joint Committee will work off a current-law baseline. The committee would have to raise taxes by more than $3.5 trillion above today’s rates before it would begin to count as ‘deficit reduction.’ Since that is unlikely, there is little chance the Joint Committee will produce a bill that increases taxes.

The final agreement sets up a new sequestration process to cut spending across-the-board – and ensure that any debt limit increase is met with greater spending cuts – IF the Joint Committee fails to achieve at least $1.2 trillion. If this happens, then the President may request up to $1.2 trillion for a debt limit increase (note: this is less than the $1.5 trillion cited above). Assuming the President is able to increase the debt limit by $1.2 trillion (contingent upon the congressional disapproval process), then across-the-board spending cuts would result that would equal the difference between $1.2 trillion and the deficit reduction enacted as a result of the Joint Committee.

The across-the-board spending cuts would apply to FYs 2013-2021, and apply to both mandatory and discretionary programs. The final agreement specifies that total reductions would be equally split between defense and non-defense programs. The across-the-board cuts would also apply to Medicare. However, several programs would be exempted from across-the-board cuts, including Social Security.

The sequestration process does NOT trigger increased revenues. It can only result in spending cuts, not tax increases.

Note: Crude oil prices are slipping, from about $99 to about $95 in the last week to ten days. This will slow the increase in gasoline prices, or even cause them to drop, which could in turn affect the July CPI-W.

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4 Responses to 2012 COLA Will Still Be Based On CPI-W, Not Chained-CPI-U Amounts

  1. MiHi says:

    Well OF course the price of oil is dropping right now! The oil companies pull this stunt EVERY year where they raise, raise, raise all through most of the year EXCEPT for this tiny window every Summer where it will go down.

    And when that small window (which just so happens to be the window where the next year’s COLA is calculated), expect the oil companies to start jacking up the price of oil again.

    This is a deliberate scam to gyp people on Social Security out of a reasonable COLA every year, and I’m surprised that no one else has noticed this cruel, deliberate pattern yet.

    • Enzo says:

      Yes I agree, and that is another reason why Obama MUST go home. He does not care for the middle class people. I think he thiks Republican, therefore welcome Mitt Romney to the White House in 2012.

      • revenuer says:

        Enzo,

        I/m not trying to tell you who to vote for. It is not my or anyone else’s place to do so. I will, however ask you to research your candidate well before you decide. I read an article on MSN last night which discussed Romney’s huge personal fortune of $250,000,000. Most of it was garnered from stock market transactions. The reports were contradictory on whether or not he is divesting himself of stocks via the blind trust which all politicians are bound to use when they rum for office. Many of the stocks under discussion are from corporations for whom he made favorable votes in the past. A quick Google would find it. He has stated flatly at the Iowa State Fair that corporations are “people” and have the same rights as living individuals. Again, a quick search would hit that.

        Romney stands with the other conservatives on cutting Social Security. All of the Republicans have veered sharply to the right to emulate the teabaggers so that they can attempt to present a united front. Again, please take a moment to find out his position on that. Obama is not great, but he has never directly threatened to pull our livelihood out from under us. He will be more likely to respond to voter pressure on this because he has to court the middle class base in order to win his positions before the election.

        I really dislike always being in the position of voting against someone I really dislike and for someone I dislike a little less, but it seems that this is the way it has been since I was a kid. I started at a very young age in political years, perhaps 12 and now in political years I am 150. (Small joke) Believe me, political years are worse than dog years. At least you can trust dogs.

    • IA says:

      This is the same thing I have been telling family members for a while now, they think I am imagining things. Glad to see someone else observe what I have to.

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