Social Security COLA at Risk with Chained CPI Proposals

October 16th, 2012 | Jackie Tortora

Today’s announcement that Social Security recipients will receive a modest increase (1.7%) in their cost-of-living adjustment (COLA) was a small but welcome boost for seniors who are seeing prices increase on necessities, from health care to food. However, even this modest increase could be jeopardized if proposals floating around in Washington to “tweak” the current COLA formula by tying it to the so-called “chained CPI” are passed.

Senior advocates and retirement experts say the current formula, the CPI-W, is already inadequate. Higher health care costs and expenses seniors face are not accurately addressed in the CPI-W.

The Alliance for Retired Americans Executive Director Edward Coyle says:

The current formula, used for today’s announcement, already badly understates the inflation experienced by seniors and disabled Americans, who make up the majority of Social Security beneficiaries. However, the change some in Congress want would exacerbate this flaw in a way that is particularly damaging for women who, because of their greater life expectancy, receive benefits over a longer period of time.

The National Committee to Preserve Social Security and Medicare says:

The typical 65-year-old, who filed for benefits at 62, would lose about $130 per year in benefits. By the time that senior reaches 95, the annual benefit cut will be almost $1,400, which is a 9.2 percent cut.

The AFL-CIO, along with the Strengthen Social Security coalition, sent a letter to Congress today expressing its opposition to the chained CPI:

The purpose of an inflation adjustment is to ensure that the value of Social Security and other modest but vital benefits does not erode over time. The proposal to switch to the chained CPI would, over time, slash the benefits of both current and future beneficiaries. Specifically, it would cut the basic benefit—currently averaging a modest $13,500 for all beneficiaries—and break the bipartisan promise not to cut the benefits of current seniors.

Although some in Congress may say this is a modest tweak or a change to more accurately reflect inflation, nothing could be further from the truth.

A chained CPI means cuts are larger the longer you receive benefits.

Says the Strengthen Social Security coalition:

One of the most problematic aspects of the chained CPI is that the cuts are larger the longer you receive benefits – meaning that the chained CPI would disproportionately hurt many women, veterans, people with disabilities, and others. For example, veterans wounded in combat and others disabled at young ages would be disproportionately hurt. Seniors, especially women, who live long lives would also be hurt disproportionately.

The AFL-CIO Executive Council supports an across-the-board increase in Social Security benefits.

This post originally appeared in AFL-CIO Now on October 16, 2012.  Reprinted with permission.

About the Author: Jackie Tortora recently joined the AFL-CIO as the blog/social Media editor. Before that, she was a Social Security and Medicare advocate for a national seniors’ organization.

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3 Responses to “Social Security COLA at Risk with Chained CPI Proposals”

  1. Marsha Sutryk Says:

    I hate to tell you this, but the CPI-W for the trailing 12 months in the September BLS is 2.0. The Chained CPI is 1.7. Somebody made a mistake. I am as angry as I csn be. Please check the BLS for yourself. You will find this information on page 4 of the BLS released at 8:30 a.m. on Tuesday, October 16, 2012.

    I know that Senator Kaye Bailey Hutchinson has been pushing for using the Chained CPI, but I csnnot believe that the Democratic Senate would approve it. I am hoping that the 1.7 is a mistake. Nothing is open today, so I will be contacting the White House, my Senators and my Representative on Monday. Senator Hutchinson’s comment was that the Chained CPI would save a little money, and if the cost of beef went up the elderly could “go to” eating chicken. The Senator can “go to” h…

    I have a Masters degree from Loyola University in Pastoral Studies. I worked for the Catholic Church at a very modest salary, and I have been a widow for 30 years. I guarantee you that I live on a shoestring. I, certainly, hope that they did not sneak something through the Congress. I did check the Social Security website and they are still saying that they use the CPI-W, but, as stated above, the CPI-W for the trailing 12 months at the close of the third quarter (September 30) is 2.0.

    Best regards,

    Marsha Sutryk

  2. Marsha Sutryk Says:

    I hate to tell you this, but the CPI-W for the trailing 12 months in the October BLS is 2.0. The Chained CPI is 1.7. Somebody made a mistake. I am as angry as I csn be. Please check the BLS for yourself. You will find this information on page 4 of the BLS released at 8:30 a.m. on Tuesday, October 16, 2012.

    I know that Senator Kaye Bailey Hutchinson has been pushing for using the Chained CPI, but I csnnot believe that the Democratic Senate would approve it. I am hoping that the 1.7 is a mistake. Nothing is open today, so I will be contacting the White House, my Senators and my Representative on Monday. Senator Hutchinson’s comment was that the Chained CPI would save a little money, and if the cost of beef went up the elderly could “go to” eating chicken. The Senator can “go to” h…

    I have a Masters degree from Loyola University in Pastoral Studies. I worked for the Catholic Church at a very modest salary, and I have been a widow for 30 years. I guarantee you that I live on a shoestring. I, certainly, hope that they did not sneak something through the Congress. I did check the Social Security website and they are still saying that they use the CPI-W, but, as stated above, the CPI-W for the trailing 12 months at the close of the third quarter (September 30) is 2.0.

    Best regards,

    Marsha Sutryk

  3. Marsha Sutryk Says:

    I must apologize for erroring in my comment earlier today regarding the COLA. I thought that the COLA was taken from the September 30 CPI-W which is 2.0. Further research indicates that the COLA is an averaging of the 3 months of the 3rd quarter. The sverage is 1.66, which, rounded up is 1.7, so it is correct. I guess I am paranoid, but that does not mean that they are not out to get us.

    When you have a candidate running for President that looks straight at the camera and avows that he has been for or against something, and always has been, and the next week looks straight at the camera and says just the opposite, you do start to feel paranoid. Just because I am paranoid does not mean that they are not out to get us (just a little humor). Anyway, sorry for muddying the waters, but at least I learned something, and I passed along the information to all of you as to how they determine the COLA in the event you did not already know.

    It, certainly, seems to me that the cost of living has gone up far more than 1.7 in the last year. What do you think?

    Best regard,

    Marsha Sutryk

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