Tags: COLA | CPI-W | Social | Security

Government Data Show Social Security COLA Too Low

By    |   Wednesday, 17 Oct 2012 07:36 AM

Social Security cost-of-living adjustments (COLAs) are based on the Consumer Price Index for urban wage earners and clerical workers (CPI-W). According to a Congressional Research Service study, this group represents about 32 percent of the total U.S. population and their spending patterns are much different than that of the average senior citizen.

Seniors spend more on utilities and medical care than the average wage earner does, and those expenses reduce discretionary income. Seniors spend an average of 12.5 percent of their income on healthcare, much more than the 5.9 percent burden that the average wage earner does. In dollar terms, the average senior household is spending about $4,600 a year on healthcare, while the average younger family is spending only $2,800.

Utility expenses and healthcare tend to grow faster than overall inflation does, which means the COLA is lower than it should be if it is truly meant to help Social Security beneficiaries maintain their standard of living.

The Bureau of Labor Statistics created an experimental CPI for seniors and learned that from 1982 to 2009, the annual increase in their cost of living averaged 3.2 percent a year, about 0.3 percent a year more than reported by the CPI-W.

Over the years, this small difference has had a large impact. Had benefits been indexed to the cost of living for senior citizens, the average benefit would be about $90 a month more than it is now.

Paying an accurate COLA to Social Security beneficiaries would cost less per year than the government spent on green technology stimulus funding for companies like Solyndra.

A fair COLA could be paid for without increasing the deficit if the government stopped spending $25 billion a year maintaining vacant buildings and actually eliminated $60 billion a year of fraud in healthcare — fraud that everyone agrees has been part of the system for years.

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MichaelCarr
Paying an accurate COLA to Social Security beneficiaries would cost less per year than the government spent on green technology stimulus funding for companies like Solyndra.
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