WASHINGTON (AP) — A new estimate calculates the government would cut the deficit by $340 billion over the coming decade just by using a stingier definition of inflation.
The Congressional Budget Office estimates that changing to the new, lower inflation adjustment known as chained CPI would curb federal spending by $198 billion over 10 years, mostly due to lower cost-of-living increases for Social Security benefits and federal pensions.
It would also increase tax revenues by $142 billion over a decade because tax brackets would be adjusted for inflation more slowly.
The concept behind chained CPI is that consumers substitute lower priced alternatives for goods whose costs spike.
President Barack Obama has supported the idea in the past in failed budget talks. But many Democrats are dead set against the idea.