Weâ€™re all aware that Social Security recipients wonâ€™t receive a Cost of Living Allowance (COLA) in 2011.
"Why IS that, Chuck?"
Well, there has to be a Cost of Living Increase (COLI?) to trigger a COLA, and there hasnâ€™t been one in 2010 (nor was there in 2009). From the Social Security COLA FAQ page: â€œBy law, Social Security and Supplemental Security Income benefits increase automatically each year if there is an increase in the Bureau of Labor Statisticsâ€™ Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), from the third quarter of the last year to the corresponding period of the current year.Â This year there was no increase in the CPI-W from the third quarter of 2008 to the third quarter of 2009.â€ AND there was none between 2008 and the third quarter of 2010, either.
â€œWHUT?!? Who told you that lie? Food costs more, fuel costs more, medicine costs a LOT more. How was there no increase?!?â€
Yeah, yeah, okâ€¦ calm down. The Consumer Price Index includes stuff that DIDNâ€™T increase, and in many cases decreased. For instance, the cost of housing is includedâ€¦ and the cost of housing, ON AVERAGE, has declined since 2008â€¦ by a bunch. The problem is, of course, that for most seniors, housing is not a changing cost of living. Weâ€™re mostly affected by the commodities sort of stuff, which, except for the cost of oil, HAS increasedâ€¦ especially the cost of medical care. BUTâ€¦
â€¦weâ€™re now about even with 2008, ON AVERAGE. If youâ€™ll follow this link, and look at the last three rows, youâ€™ll see that by October 2008, we had already begun our decline from the July 2008 high of 216.3 to our modern recessionary low of 204.8, achieved in December 2008. Since that date, the CPI has been steadily increasing, but, since the third quarter (July â€“ September) is the defining quarter, we get stuck with comparing one quarter too early. If we were comparing 4th quarters, weâ€™d never have lost COLA at all, because by the 4th quarter of 2009, the CPI-W was well above the 2008 4th quarter CPI-W. And so is 2010â€™s.Â A graph is found here.
BUTâ€¦ (yes, again a â€œbutâ€) we have NOT, in fact, quite caught up to where we were in the 3rd quarter of 2008. Absent the feared â€œdouble-dipâ€ recession, we will have done so (and then some, I imagine) by 3rd quarter 2011. The good news is that the â€œdeflationâ€ was only a six-month event, and the economy has been â€œreinflatingâ€ ever since. The bad news is that itâ€™s an uneven reinflation.Â Commodities and medical costs are inflating again.Â Housing costs... not so much.
â€œWell, Chuckâ€¦ is it fair or not?â€
â€œI dunnoâ€¦ probably not entirely, but we benefited from the housing inflation that affected us less than the folks who had to move occasionally, or who had their rent raised regularly (although those things applied to many of us, as well).Â In any case, Iâ€™d like to see the CPI-W run without housing costs included, for Social Security COLA purposes. I believe we might see a different expression.Â But fair or not, COLAs are designed to catch people up for what they've lost to inflation, in a VERY broadly-based calculation, in a given previous year.
I can tell you what it's NOT.Â It's NOT happening because "Democrats don't care, because they still see this as welfare."Â It's NOT because the Republicans are blocking funding to try to make the Democrats look bad (might backfire, dontcha think?)Â It's not some agency whim, a decision taken because our budget can't stand the strain.Â Nope, THIS is the way the Social Security COLA was DESIGNED to work.
BTW â€“ more good news. Youâ€™re not going to see a Part B Medicare increase.Â There's a "hold harmless" clause (see the Social Security FAQ link, above).
I'm a senior, and I'm smart enough to figure this out.Â I'll bet most of us are.