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Senators endorse lower COLAs for retirees

A bipartisan group of a half-dozen senators Tuesday presented a deficit-reduction proposal that would mean smaller annual cost-of-living adjustments for federal and military retirees.

The so-called Gang of Six said the government should switch to the so-called chained Consumer Price Index to set all inflationary adjustments, including COLAs, for federal and military pensions and Social Security payments.

The senators’ plan would cut deficits by about $3.7 trillion over a decade. President Obama called the plan good news and said it appeared to be a balanced approach, though he said the White House was just starting to review its details.

“It would not match perfectly with some of the approaches we’ve taken, but I think that we’re on the same playing field,” Obama said. “My hope is that we can start gathering everybody over the next couple of days to choose a clear direction and to get this issue resolved.”

The Gang of Six consists of Sens. Mark Warner, D-Va.; Saxby Chambliss, R-Ga.; Kent Conrad, D-N.D.; Mike Crapo, R-Idaho; Dick Durbin, D-Ill.; and Tom Coburn, R-Okla. Coburn had previously broke with the gang in May because of disagreements over entitlement programs — and on Monday, he released his own proposal to cut the deficit by $9 trillion — but he rejoined the group in endorsing this plan.

The chained CPI switch would take effect in 2012 as part of an initial $500 billion “down payment,” according to an outline of the plan released Tuesday. The gang also wants to freeze congressional pay and sell unused federal property.

The government currently uses the Consumer Price Index for Urban Wage Earners and Clerical Workers — the CPI-W — to adjust pensions. But economists say the CPI-W overstates inflation because it doesn’t take into account the fact that most consumers change their buying habits as the costs of goods go up.

The chained CPI is viewed as a more accurate measure of inflation, and would grow about 0.25 percentage point more slowly each year than the CPI-W. Its effect would compound and cost retirees thousands of dollars in COLAs as the years go by.