Some analysts say there may be no Cost Of Living Adjustment (COLA) for Social Security beneficiaries this year.
I can’t get over how much attention is paid to the annual COLA. It’s merely supposed to hold beneficiaries harmless, not to improve their purchasing power. Of course there are issues with whether the current COLA formula is fair but if the cost of living goes down without a cut in benefits, recipients are better off even though they won’t believe it.
Your statement that they are better off even though they won't believe it is thin. On a (relatively) fixed income, the issue is the assumption no costs go up if the cost of living goes down. Or that as costs go down, extra cash emerges. That's simply not true. It depends on what your costs are, how controllable they are and the assumption that one has savings from items whose real price has gone down to play with. For example, gasoline is cheaper, meaning savings for those with a car, savings that can go towards other things. But if you don't drive, then there are no savings to be redistributed, and if the foods in your diet go up, you simply have less to spend. Doesn't seem to be "better off even if they don't believe it".
ReplyDeleteI was kind of sympathetic to the point of view until the snide conclusion. Very short sighted.
@4:29
ReplyDeleteNot sure if you have been following the blog long, but Charles is aware of the disparity between COLA as to the general population, and the actual costs experienced by beneficiaries.
As to whether the cost of gasoline being cheaper benefits beneficiaries, it actually does even if the beneficiary doesn't drive personally. Retail costs are intrinsically linked to the price of oil because a ton of the cost is transportation cost, food in particular because they are high volume, low price materials.
The economics of COLAs, which one to use, whether they are statically valid are long standing issues. I simply take issue with "recipients are better off". They might not be any worse off, but better? They are "gaining"? Sorry, saying they are better off is flippant at best. I expect better.
ReplyDelete@9:47
ReplyDeleteSure, and I think actually making a unique formula for social security recipients (maybe even a unique formula for retired recipients and another for disabled recipients) would be far more appropriate. For example, education, personal transportation, and medical costs are weighted to the average worker's expenses, not a disabled or retired person's expenses. Adjusting CPI in these areas would probably result in a significant net increase.
As to using the term "gaining" as being flippant, how so? If the cost of living decreases 1-2% due to an economic downturn, which isn't unprecedented, benefits don't decrease because COLA cannot go negative by law. That's a net 1-2% gain.