07/21/2011 11:56 am ET Updated Dec 06, 2017

Peter DeFazio: Social Security Hit Hard By Chained CPI (VIDEO)

WASHINGTON -- Rep. Peter DeFazio (D-Ore.) took to the House floor Wednesday to decry efforts being made by President Barack Obama and the Gang of Six to adopt a chained consumer price index for Social Security.

DeFazio detailed how the new price index will hurt seniors and the middle class. While the plan would save $4 trillion over 10 years, it would would cause major cuts to be made to Medicare, Medicaid and Social Security, leaving many low- and middle-income groups with even more financial problems -- and hitting African-American women, veterans and seniors particularly hard.

Opponents of the change note that even the current price index isn't appropriate for seniors, who have not received a cost-of-living adjustment in two years, despite the fact that their medical costs have been rising faster than general inflation. The new index would further depress payments.

"Seniors will pay more, working people will pay more, veterans will pay more," DeFazio said. "Rich people? Nah. Not so much. But it would save $4 trillion."

WATCH DeFazio's remarks:

President Obama has received a great deal of opposition since he announced his desire for a "big deal" on the budget that would involve major cuts to Social Security. Because Social Security is financed by its own designated tax and does not contribute to the deficit, many are arguing that Social Security cuts should be taken off the bargaining table.

Here are some of DeFazio's remarks on the plan proposed by Obama and the Gang of Six, first posted by DailyKos:

What is a chained CPI? Well, the pointy heads like Mr. Furman who work for President Obama say "we're [...] overstating inflation with the way we adjust, so there's something called 'substitution effect,' so when prices of things go up, you buy something cheaper so that means there isn't inflation."

Well, no. Wait a minute. The think you used to buy is more expensive so you're buying something else. In the pointy head economics world this makes sense. So let's see how this would work for someone on Medicare. Okay, you can't afford your heart bypass so instead you'll say to the doctor "look, I can't afford the copay on the heart bypass, why don't you do a hernia instead?" That's substitution, and in Mr. Furman's world this makes sense.

Now what this would do to seniors on Social Security -- we already understate inflation, and seniors haven't gotten a COLA for the lat two years. Tell me the price of prescription drugs and medical care hasn't gone up over the last two years. We need, in fact, a different measure for seniors, for Medicare, for veterans for others who consume more health care and more essentials which the CPI doesn't measure. It just measures junk that people buy. That's all it measures. And they're saying because people will buy cheaper junk we should change the CPI.

That means a senior, by the time they reach 85 in this brave new world of the chained CPI will get $100 less a month in their Social Security. Hmmm, not too good. Veterans would see their benefits also be restrained and go down about the same amount.