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Social Security’s COLA at stake in ‘fiscal cliff’ talks?

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One of the proposals bandied about in fiscal cliff negotiations is to tweak to the cost of living adjustment (COLA) made to Social Security payments to take into account inflation. The COLA is currently tied to the Consumer Price Index (CPI). However, Republicans have suggested pegging the COLA to the chain CPI, which measures a lower rate of inflation based on consumer behavior. For instance, when the price of a staple, like beef, rises, consumers may substitute a cheaper meat, like chicken. It could result in a deficit reduction of $200 billion over 10 years.