Everything you ever wanted to know about the inevitable switchover from the government’s current official measure of inflation to what is commonly referred to as the “chained CPI” is contained in this article by Alan D. Viard at the American Enterprise Institute.

And the reason why you’ve read the word “inevitable” twice already above is that this change is about as close as anything will come to a slam dunk as part of the nation’s budget debate. While decried by many as being part of the government’s intention to “mask” inflation, the broader substitution of items in the official shopping basket that the chained CPI represents does make a good deal of sense when looked at closely. But, much more importantly, its impact on the government’s bottom line is significant as detailed below.

By indexing tax brackets more slowly, a switch to the chained CPI would increase revenue. By reducing the COLA for federal benefit programs, the switch would also reduce benefit outlays. Both the revenue increase and benefit reduction would lower the deficit. In its most recent survey of deficit reduction options, the Congressional Budget Office presented budgetary estimates for a switch to the chained CPI and summarized the policy arguments for and against that change. Based on its expectation that the chained CPI will increase 0.25 percent per year more slowly than the CPI-U and the CPI-W in upcoming years, the CBO estimated that a switch would increase income tax revenue by $72 billion, reduce Social Security benefits by $112 billion, and reduce federal pensions and veterans’ benefits by $24 billion from fiscal 2012 through 2021.

The broader questions about measuring inflation (none of which you’re likely to hear during what little debate there will be on this subject) have much more to do with, for example, whether or not it’s a fair gauge to be used for social security recipients who have a shopping basket very different than the one  that either today’s CPI or the chained CPI represent.

Another subject you don’t hear anything about is how the decades-long trend of cheap imported goods offsetting the rising cost of domestic services to produce benign inflation have temporarily distorted any measure of inflation, a development that future policy makers will ultimately have to deal with as the great equalization of wages in a globalized economy causes U.S. living standards to fall for the foreseeable future.