Maybe one way to find common ground on the problems we face is to consider one issue at a time. Instead of trying to reform all of Social Security all at once, we could focus on Social Security Cost of Living Adjustments (COLA).
Folks will remember that in 2016 there was no COLA adjustment, and for 2017 it is only a minor 0.3 percent adjustment. Social Security COLA is not some abstract government calculation. Many of the growing number of local seniors make purchasing based on their Social Security benefit.
Social Security COLA calculations rely on the Bureau of Labor Statistics Consumer Price Index, which measures the average change in the prices paid by urban consumers for a representative market basket of consumer goods and services. If the price of the basket of goods increases, inflation increases.
The treatment of the contents in the basket of goods leads to different CPI results and different COLA calculations; the higher CPI, the higher COLA. The most general CPI measure is the CPI for All Urban Consumers, and it represents the spending habits of about 87 percent of the population. A subset of CPI-U is CPI for Urban Wage Earners and Clerical Workers (CPI-W), which represents about 32 percent of the U.S. population and is used for the current Social Security COLA calculation.
One option under consideration is to replace CPI-W with CPI-P, the Chained Consumer Price Index for all Urban Consumers. The difference between CPI-W and CPI-P is that the basket of goods changes over time with CPI-P. The thinking is that as the prices of the individual items in the basket change, consumer spending changes. If the price of product A increases, consumers might substitute a different product for A. The month-to-month substitution has the effect of decreasing the rise in inflation.
The BLS also publishes an experimental price index for Americans 62 years of age or older. Senior expenses for prescriptions and health care are greater than the rest of the population and factoring medical prices into CPI-E provides a more accurate estimate of senior inflation than.
The BLS compared CPI-E with CPI-W for the twelve year period from December 1997 through December 2009 and found that CPI-E rose 36.1 percent, CPI-W rose 33.8 percent while CPI-P would have risen less than CPI-W.
The CPI-E Act of 2017 was recently introduced in Congress to base the Social Security COLA on CPI-E instead of CPI-W. To summarize the press release, the reasoning behind the bill is to make that calculation fairer to seniors by reflecting the real rising costs for seniors. Over the period from 1982 to 2011, CPI-E rose 3.1 percent annually compared to 2.9 percent using CPI-W.
The Senior Citizens League, Social Security Works and the National Active and Retired Federal Employees Association support the bill. Groups such as the Association of the United States Army, the Association of the United States Navy, Blinded Veterans Association, Iraq and Afghanistan Veterans of America (IAVA), National Senior Citizens Law Center and the Veterans of Foreign Wars, joined the National Association to Preserve Social Security and Medicare in a letter to Congress explaining why CPI-P hurts veterans, retirees, and the disabled.
CPI-E is the clear choice for Social Security reform. Rep. Tom Rice has said Social Security needs reform, and I sat in on his phone-in town hall during which he voiced concern for the elderly in our district. The CPI-E Act of 2017 is the chance for Rice and other members of Congress to make a lasting contribution to the well-being of Social Security beneficiaries.
The writer lives in Myrtle Beach.