Social Security Benefits Are Eroding, Thanks to an Inadequate Cost of Living Adjustment (COLA)

On October 15, the Social Security Administration will announce some news that will be distressing to more than one in four households: there will be no Social Security cost of living adjustment ("COLA") for 2016. This is no small matter. The purpose of the annual adjustments is to ensure that Social Security's benefits don't lose value over time. They are intended to keep seniors and other beneficiaries afloat, to allow them to tread water. But they are not floating; they are sinking.

You would be hard pressed to find a senior who has not seen the cost of medical care, prescription drugs, food and other necessities go up. You would also be hard pressed to make the case that Social Security benefits are too generous. Averaging just around $16,000 a year, they replace just 40 percent of a medium-income worker's wages. Modest though they are, Social Security benefits are vitally important. Two-thirds of seniors rely on their Social Security benefits for half or more of their incomes. Social Security constitutes virtually all of the income of one-third of senior beneficiaries. The dependence is even higher among workers who have become disabled.

The zero automatic adjustment has happened only twice before, in 2010 and 2011. All three zero years, 2010, 2011, and now 2016, will have occurred during the Obama administration. When there was no COLA in those other years, emails blaming the Democrats flew around the internet, but the President and Congress have nothing to do with the size of the adjustment. It is all done mechanically by a measure known as the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). 

Ironically, though Social Security is paid to workers who have reached old age, and generally retired, who cannot engage in substantial work as a result of serious and permanent disability, or who have died leaving survivors behind, the CPI-W measures only the cost of living of urban workers. People not working are not in the category of people whose cost of living is measured by the index. But it was the only measure that was available in 1972, when the automatic adjustments were enacted, and it has never been changed.

The shortcomings of the measure for Social Security are obvious. Moreover, the same inadequate index is used for other programs for seniors and people with disabilities, including military retirement benefits, veterans' compensation, civil service retirement benefits and the means-tested Supplemental Security Income program.

People who are working and, indeed, the general population, have substantially different spending patterns than seniors and people with disabilities. Seniors and people with disabilities spend more on health care and long-term care — where prices rise faster — and less on clothing, recreation, and other items — where prices tend to rise more slowly — than younger, healthier Americans.

Shockingly, rather than make the automatic adjustment tailored to the spending of seniors and people with disabilities, and therefore more accurate, some prominent Republicans — including a number of Republican presidential candidates — want to make the adjustments more miserly. Apparently, a zero increase is just not low enough. 

And they go even further. Not satisfied to simply let benefits slowly and inexorably erode over time, most Republicans running for President want to speed up the process, calling for cutting benefits substantially, as well as dismantling the program outright.

Fortunately, Democratic candidates for President have a very different approach to Social Security. Senator Bernie Sanders and Governor Martin O'Malley both have Social Security plans that expand benefits and then ensure that they do not erode by enacting a more accurate cost of living measure.

The debate over Social Security is not about affordability; it is about our values. Let's have an honest discussion this electoral cycle. The question is do we want to expand benefits, keep them the level they are and fully fund them, cut benefits, or dismantle the program. Let's stop the scare tactics and lies that the United States – the wealthiest nation in the history of the world — somehow can't afford these modest benefits.

As part of that honest discussion, let's acknowledge that benefits are both being cut now, as a result of changes being phased in now, and are eroding over time, as a result of inadequate cost of living adjustments. Let's not pretend otherwise.

Perhaps this year, when voters seem fed up with establishment candidates spouting Washington sound bites we can finally have a fact-based, honest conversation about Social Security. Let's not talk of "saving" Social Security through some "bipartisan" commission or other device designed to avoid political accountability. Even worse, let's not allow those seeking our vote to refuse, as Carly Fiorina has done, to state their views on this program that affects us all. No secret plans on Social Security. Let's finally force our politicians to be open and honest about Social Security. As numerous polls make clear, this is a debate those favoring expanding Social Security are eager to have. Bring it on.