The myth of COLAs, bad math and the effect of compounding
When the federal government dips into the consumer basket of goods and services and calculates how much the cost has changed from the prior year and then raises Social Security by a comparable percentage amount, that is a cost of living adjustment, or COLA for those who favor acronyms.
That happens every year. It was in all the papers.
Now, when Congress takes that same percentage and applies it to their $170,000-a-year salaries, as well the salaries of federal judges, assorted bureaucrats, agents and all those at the federal trough, it is bad math. (Pay no attention to the 27th Amendment.)
The cost of living, of keeping up with the Joneses, did not increase the same for the retiree and the congressman.
Due to incredibly bad math, for years the rich have been getting richer and the poor have been barely keeping up. Yes, the cost of living goes up, and occasionally, as we may soon discover, goes down. The point is: How do you calculate it?
Do the math. If the poverty line for a family of four is $20,000 a year, to keep it simple, and the price of goods and services goes up 5 percent, that means that family needs to rake in an extra $1,000 to keep its collective noses above the poverty line, to keep up with the cost of living.
So, did the cost of living for your congressman go up 5 percent or $8,500? No, it went up $1,000 just like the family living at the poverty level.
Do the math. If the poor family gets a 5 percent hike every year for 10 years their income will go from $20,000 to $31,000 or $11,000. The congressperson will see a salary increase from $170,000 to $277,000, or $107,000.
So if Congress and the rest of our federal minions deserve a cost of living adjustment give it to them. Calculate the average income of the average Social Security recipient, currently a little more than $12,000 a year, and apply say 5 percent for inflation, which comes to $600, and give them all a $600-a-year increase. Fair enough. Class dismissed.
