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A Smart Deficit Reduction Idea That May Actually Happen

The Wall Street Journal has a nice little scoop about a potential deficit fix emerging out of the debt ceiling talks:

One idea floated in the talks is to curb the rise of federal benefits in a raft of programs by using a different measure of inflation to calculate annual cost-of-living adjustments. President Obama's deficit reduction commission recommended using a variation of the Labor Department's consumer-price index that tends to rise more slowly. Using the other measure also would raise revenues because it would slow the rise of tax brackets and deductions, which are adjusted according to increases in the CPI.
According to two congressional aides familiar with the Biden negotiations, use of the alternate measure is being ``seriously discussed.'' The measure, called the chain-weighted CPI, adjusts for the way consumers change their shopping habits as prices rise. For instance, motorists overall tend to drive less if gasoline prices jump dramatically.
The Committee for a Responsible Federal Budget, a nonpartisan group, estimates using the chained CPI would reduce the deficit by $300 billion over ten years. But that estimate assumed the proposal would curb the growth of Social Security benefits, and it's not clear that would be supported by Democratic negotiators who have pledged not to cut retirees benefits. It's also unclear whether Republicans would see the use of the chained CPI as an unacceptable tax increase, but when asked Tuesday about the idea, House Majority Leader Eric Cantor (R., Va.) did not rule it out.
The impact of such a move would depend on how broadly the change was applied to federal programs that are adjusted for inflation. The commission, for example, recommended switching from the CPI to the chained CPI to calculate certain Medicare payments to hospitals, which would reduce the growth of such spending.

Who's in favor of changing the CPI this way? Well, you have conservative Reihan Salam. Centrist deficit hawks like the Committee for a Responsible Federal Budget and the Washington Post editorial page. Then you have a bunch of center-left economists endorsing it. You can read any of those links if you want more explanation.

In general, the notion that "everybody knows" what to do about the deficit and we just need political willpower is wrong, but this seems to be one case where everybody really does know what to do.