Senate Majority Leader Harry Reid of Nevada speaks to reporters following the Democratic policy luncheon on Capitol Hill in Washington, Tuesday, Dec. 18, 2012. (AP Photo/Susan Walsh)
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Senate Majority Leader Harry Reid of Nevada speaks to reporters following the Democratic policy luncheon on Capitol Hill in Washington, Tuesday, Dec. 18, 2012. (AP Photo/Susan Walsh)
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Speaker of the House John Boehner, R-Ohio, joined at left by Rep. Cathy McMorris Rodgers, R-Wash., and House Majority Whip Kevin McCarthy, R-Calif., far left, as they speak to reporters about the fiscal cliff negotiations after a closed-door strategy session at the Capitol in Washington, Tuesday, Dec. 18, 2012. (AP Photo/J. Scott Applewhite)
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FILE - In this Sept. 26, 2012, file photo, President Barack Obama speaks at a campaign event at Bowling Green State University in Bowling Green, Ohio. A month after the bitterly fought election, Obama has his highest approval ratings since the killing of Osama bin Laden, according to an Associated Press-GfK poll, and more Americans say the nation is heading in the right direction now since the start of his first term. Obama’s approval rating stands at 57 percent, the highest since May, 2011, and up five points from before the election. And 42 percent say the country is on the right track. (AP Photo/Pablo Martinez Monsivais)
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House Speaker John Boehner of Ohio arrives for a news conference on Capitol Hill in Washington, Friday, Dec. 7, 2012, to discuss the pending fiscal cliff. Boehner said there's been no progress in negotiations on how to avoid the fiscal cliff of tax hikes and spending cuts and called on President Barack Obama to come up with a new offer. (AP Photo/Pablo Martinez Monsivais)
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House Speaker John Boehner of Ohio gestures as he speaks during a news conference on Capitol Hill in Washington, Friday, Dec. 7, 2012, to discuss the pending fiscal cliff. Boehner said there's been no progress in negotiations on how to avoid the fiscal cliff of tax hikes and spending cuts and called on President Barack Obama to come up with a new offer. (AP Photo/Pablo Martinez Monsivais)
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President Barack Obama, left, is introduced by Andrew N. Liveris, right, President, Chairman and Chief Executive Officer of The Dow Chemical Company, before Obama spoke at the Business Council dinner in Washington, Wednesday, Feb. 27, 2013.(AP Photo/Pablo Martinez Monsivais)
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FILE - In this Feb. 26, 2013 file photo, House Speaker John Boehner of Ohio speaks on Capitol Hill in Washington. With across-the-board spending cuts all but certain, Republicans and Democrats in the Senate are staging a politically charged showdown designed to avoid public blame for any public inconvenience or disruption in government services that result. (AP Photo/J. Scott Applewhite, File)
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FILE - In this Feb. 13, 2013, file photo, Jack Lew testifies at his confirmation hearing to be the new Treasury Secretary in Washington. The Senate confirmed Lew on Wednesday, Feb. 27, 2013, to be Treasury secretary, affirming President Barack Obama's choice of a budget expert at a time when Congress and the White House are at odds over sharp government spending cuts. (AP Photo/J. Scott Applewhite, File)
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President Barack Obama waves as he gets off Air Force One upon his arrival at Joint Base Pearl Harbor-Hickam, Honolulu, Hawaii, Wednesday, Jan. 2, 2013. The president is back in Hawaii for vacation after a tense, end-of-the-new-year standoff with Congress over the fiscal cliff. (AP Photo/Carolyn Kaster)
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A trader works on the floor at the New York Stock Exchange in New York, Wednesday, Jan. 2, 2013. The “fiscal cliff” compromise, for all its chaos and controversy, was enough to send the stock market shooting higher Wednesday, the first trading day of the new year. (AP Photo/Seth Wenig)
Stingier inflation gauge can cut deficit by $340B
WASHINGTON (
AP) — A stingier definition of inflation across the government would cut the deficit by $340 billion over the coming decade according to a new estimate released Friday.
The Congressional Budget Office estimates that changing to the new, lower inflation adjustment known as the chained consumer price index would curb federal spending by $198 billion over that time, 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 budget office's new study shows the new inflation measure having a somewhat bigger impact on the deficit than earlier estimates.
The concept behind the adjustment is that consumers substitute lower-priced alternatives for goods whose costs spike. So, for example, if the price of oranges goes too high for some consumers, they could buy alternatives like apples or strawberries if their prices were relatively more affordable. Some goods, however, such as gasoline or mortgage interest are not as easily substituted.
President Barack Obama has supported the idea in the past in failed budget talks, but only in the context of a broader bargain that would include new tax revenues. Many Democrats, however, are dead set against the idea, following the lead of powerful seniors groups like AARP.
Republicans generally support the idea and House Speaker John Boehner, R-Ohio, has repeatedly pressed it in his failed talks with Obama.
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