I'm sure there are some folks here who understand all the differences between Cost of Living Adjustments, CPI, and chained cpi. I didn't, and probably still don't, but I've spent several hours reading about all of it on wiki and various other places and here's my simpleton's analysis...below the orange gizmo:
Let's say you go into the grocery store on January 5th, 2012, and buy a big basket of all the things you think you need, within your budget, to eat for a month. Let's say there's A amount of hamburger, B amount of bread, C amount of cheese, D amount of milk, E amount of fruits and vegetables...and so on. At the checkout, your basket comes to $300.
Next year on the 5th of January, 2013, you do the same thing purchasing exactly the same things in the same amounts and the bill is $309.00. Essentially, your cost of living has gone up 3%. Now, let's assume that on that 2nd trip you note that hamburger has gone from $2.99 a pound to 5.99 a pound and the peaches you bought before went from $0.99/lb to $1.99/lb. So you substitute an equivalent number of pounds of pink slime and bananas for what you used to buy. Your bill is now still $300. Your cost of living didn't go up at all. You aren't eating the same, or happy about it, but suddenly the new basket, with substitutions becomes the new standard. The "fixed contents" comparison is the real index of how prices have gone up, but leave it to the government to come up with a way to now change the basket and tell you there will be no cost of living adjustment. The new basket, and next years new basket with even more pink slime, no milk, no bread, etc., becomes the new standard...and this is the way the CHAINED cpi works. To carry it to the extreme...some years from now when your basket contains only beans and powdered milk, a small bag of salt, etc, for the same $300 the chained cpi will tell us things are still just dandy....no inflation here...you just "substituted" stuff...and you're perfectly fine...right?
This is the chained cpi...and the "basket" contains more than food...it's all kinds of "things" (taxes, insurance, rental equivalency of home ownership...)and essential services like medical care, phone service....etc.) The BLS (Bureau of Labor and Statistics) says these substitutions are necessary because, for example, if we used the cost of a long distance call ten years ago versus the cheaper cost today, we'd be over-estimating inflation. I can buy that...technology advances can actually make lots of things less expensive. OTOH, when you substitute a bag of beans for a pound of hamburger because you can no longer afford the hamburger, the "substitution" isn't really a change of choice in the market. And, if your Social Security COLA is based on cost of the new basket of crap versus the old basket of edible, usable, satisfying things...you're getting screwed...by the numbers.
I'm sure someone else can do a better job of explaining this. And, I know there are plenty of people among us already eating beans versus hamburger. I'm just trying to make a simple, if not totally technically correct, example. I hope it helps someone get the picture.
The chained cpi is a screwing. Obama has to know this. It's not chess, it's not compromise, it's a flat out stake in the heart of Social Security. And, who's to say that the calculation won't change later. I can see it now...the new basket of frozen bat shit and reconstituted urine maybe goes down in cost...and they'll want money back.