It’s not called a “Cost of Living Increase.” It’s called a “Cost of Living Adjustment.”
So when inflation leads to increases in the cost of living — which is most of the time — seniors on Social Security and others who expect government “COLAs” get annual raises.
And when economic hard times lead to falling home prices and a falling cost of living, the “adjustment” clause means taxpayers get a break — the cost of living “adjustment” means we actually get to send the recipients a smaller check, right?
Uh … wrong. Actually, the Social Security law says the “COLA” ratchet works in only one direction. The payments can’t be reduced.
So even though a more accurate assessment of this year’s cost of living might lead to smaller Social Security checks being mailed out in 2010 — for the first time in living memory — in fact the federal government has announced that (barring some political meddling this month) they will simply stay the same next year.
This isn’t a bad deal for the recipients. But that hasn’t stopped many from complaining.
First, many will see their monthly federal stipends actually drop, as premiums for the Medicare prescription drug program, which often are deducted from Social Security payments, are scheduled to go up.
Then there’s the problem with the way inflation and the “cost of living” are calculated. Seniors complain that more affordable home computers and other electronic gear and even lower energy bills are all very nice, but hardly compensate for increasing medical costs (rising faster than inflation) for those who spend a disproportionate amount of their income on health care. Nor are they likely to see much of a bright side to declining home values and shrinking stock portfolios, at precisely the time they are turning to those assets for income.
“For many elderly, they don’t feel that inflation is low because their expenses are still going up,” said David Certner, legislative policy director for AARP.
But consumer prices are actually down from 2008 levels, giving Social Security recipients more purchasing power, even if their benefits stay the same, responds Andrew G. Biggs, a resident scholar at the American Enterprise Institute. “Seniors may perceive that they are being hurt because there is no COLA, but they are in fact not getting hurt,” Mr. Biggs said.
Maybe. But if the cost of living is actually down, why did President Obama announce this week that federal employees won’t get a 2.4 cost-of-living raise this year — they’ll have to “settle” for a 2 percent raise?
For the answer to that we may have to turn to George Orwell’s “Animal Farm,” in which Squealer the Pig obligingly alters the seventh commandment to read: “All animals are equal … but some animals are more equal than others.”