In new analysis, the Cato Institute’s Romina Boccia and Tyler Turman argue that Congress applies a double standard to inflation adjustments, using a more accurate measure for taxpayers’ income brackets while relying on outdated measures that increase federal benefit spending.

The authors highlight several findings:

  • Congress applies a double standard: The 2017 tax law adopted chained CPI for income-tax brackets, increasing federal revenues relative to the previous formula. Meanwhile, Social Security and other benefit programs continue using older inflation measures that overstate increases in the cost of living.
  • The costs are substantial: Switching Social Security to chained CPI could save $188 billion over the next decade, while similar changes to other benefit programs could save more than $90 billion.
  • A more accurate alternative exists: Chained CPI better accounts for how consumers adjust their spending as prices change, providing a more accurate measure for adjusting benefits and eligibility thresholds.

With Congress considering another reconciliation bill during the upcoming lame-duck session, Boccia and Turman urge lawmakers to adopt chained CPI for other inflation-adjusted benefit programs. They also support reforming Social Security’s inflation formula, though budget rules prohibit doing so through reconciliation.

If you’re interested in speaking with Romina about Congress’s inflation double standard, its fiscal implications, or potential reforms, I’m happy to connect you.

Best,

Ryan Carver
Media Relations Manager
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Cato Institute
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