October 05, 2015

Fix Social Security’s Bad Math

CPI for elderly is most accurate measure for calculating Social Security COLAs

By Rep. Mike Honda (D-Calif.) and Richard Fiesta

For only the third time in 40 years, the Social Security Administration (SSA) announced this month that there will be no cost-of­-living-­adjustments (COLAs) for seniors in 2016. How can it be, when we hear heart­breaking stories of seniors who must choose between paying for life­saving medications and their rent due to skyrocketing costs, that no adjustment will be made to ensure that they can enjoy the retirement they earned?

The answer is simple: We are using the wrong formula to determine whether or not seniors receive accurate COLAs that reflect their financial realities. Currently, Social Security uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI­W), which takes into greater account factors such as transportation and fuel prices, apparel, and education that disproportionately affect younger Americans. There was a nearly 30 percent drop in gas prices in the past year which directly impacts the CPI­W but primarily affects younger citizens.

The truth is that the consumption patterns of seniors are very different from those of younger people. The CPI does not adequately take into account the expenditures of retirees, most glaringly healthcare and housing costs. That is why we need to be using the CPI­E, or CPI for the Elderly (CPI­E). The CPI­E is the most accurate and sensible measure of the real costs that retired Americans face.

From December 1982 through December 2011, the CPI­E rose at an annual average rate of 3.1 percent, compared with increases of 2.9 percent for both the CPI­U and the CPI­W. This indicates that the elderly have been losing purchasing power at the rate of roughly 0.2 percentage points per year by federal retirement programs not using the CPI­E.

To leave the nearly 65 million American retirees who rely on Social Security benefits, including eight million who collect Supplemental Security Income, hanging out to dry is inexcusable.

Social Security prevents approximately 26 million seniors from falling below the poverty line each year. When one is on a fixed income – that right now is a mere $14,000 per year on average – dealing with the ever­-increasing costs of healthcare, prescriptions, and housing creates a situation that breaks the promises made 80 years ago when Social Security began.

In contrast to the recent no­-COLA announcement, if we use the CPI­E, internal information from the Bureau of Labor Statistics shows that seniors would receive a 0.6 percent increase in the coming year. Furthermore, it would affect the years to come. Since next year’s COLA calculations will still be affected by the decline of CPI­W in the third quarter of 2015, we expect a small or zero COLA again in 2017. Furthermore, proposals to use a chained CPI could mean that we will see actual decreases.

Let us say that again: Using the CPI­E would give seniors a COLA in 2016, and could prevent further, unfair, and inaccurate adjustment in the future.

When there is a commonsense solution that will work RIGHT NOW, we must take action. We have a viable standard at our fingertips to ensure that seniors’ benefits do not diminish over time. We only need the collective will to act.

This year marks the 80 anniversary of Social Security, a true success story for millions of Americans. But now, we need people to stand up and call on government to honor the promise of Social Security by using the correct and fair formula for determining their benefits. Decisions like this will have a lasting impact on the lives of seniors now and in the future.

We have promised our older Americans a safe and stable retirement, and it is up to us to honor that promise. Eighty years ago, we came together, and we must come together now, as President Franklin Delano Roosevelt said, “to place the security of the men, women and children of the Nation first.” We have an opportunity and the moral responsibility to do the same now, and the very first, proven step we must take is to implement the CPI­E to accurately and fairly calculate benefits for American retirees.

Honda represents California’s 17 Congressional District and has served in the House since 2001. He sits on the Appropriations Committee. Fiesta is executive director of the Alliance for Retired Americans.

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11 thoughts on “Fix Social Security’s Bad Math”

  1. I am a 73 year old widow who is struggling to make ends met. I live on my SS solely. I am better off then most as my house is paid for and my car is paid for. However my house is 45 years old and requires constant maintenance and my car is a 1999 which needs regular maintenance.
    By the time I pay my property tax, home owners insurance, car insurance, medical bills and utility bills my $1200.00 is gone and I have very little left for food. My medicare and supplemental insurance is taken from my monthly SS check leaving me $940.00 to pay the above. I used to be able to contribute to a few charities each month but not anymore. My sole gift is to the Wounded Warriors and even then not every month. I am making it but there are thousands that are not. I have worked since I was 15. I have paid my share and then some. We need HELP!!!!

  2. The government knows it, but refuses to fix it because it “saves money”. What they SHOULD do is base the increase on the top 500 CEOs who get a pay raise each year and use THAT percentage for the seniors benefit raise. If that was the case, a lot of CEOs would get a smaller raise each year…lol

    1. We should get the same “automatic increase in our checks that the House and Senate does. They make more and more and take more and more away from us.

      If anything should tell people something it should be the nomination of Donald Trump. The Bush’s, Mitt Romney’s, the Clinton’s, and all the other long-time rich politicians families, do not want anyone else to join the elite club. After all, we are just to stupid little peons. They have definitely showed us what they think in this election.

      Whoever heard of a party actually running ads against its own party. Cruz ran around stealing as many electoral votes as possible. Hillary received hers all up front. Hillary has said she will continue on with Obama’s policies. How many people 62-65 are voting for her? So in the next 8 years – you can bet that you will not a cola raise at least 3-6 times you will not get an increase in your social security.

      For a party that claims there is a war on women, why beat up on the retired? Most women that have been on social security for a long time, either had low paying jobs, sometimes no jobs(which means they collect even less) or they collect off of their husbands. Hillary and Obama are “scraping by” are they?

      Time for the elites to go.

  3. I live on my CSRS which is tied to Social security raises. The formula is wrong. My rent goes up , my utilities go up, my insurance goes up, all my necessities go up, but no raise due to stupid formula. 3 times the past ten years out of 40, under Obama administration no raise to keep up with my rising bills. Government treating retirees as badly as the wounded warriors. I have to look into cheaper housing, move to another state because I can’t keep up with the rising expenses and no retirement raises. I am going from living frugal to have to move and change my diet. Gasoline has nothing to do with me when I was working or retired, and now lower gas prices cause no increase in my retirement and I have to resort to eating cheaper crap and can’t afford my rent or electric or utility bills. . Where are the rich politicians?

  4. It appear again that the repubian want to put the in the donut hole again.WE as seniors has to fight the good fight.We cannot afford the same old mess that these people want the working poor to have.Let us rise up and fight good fight at the polls.We have stay focus on the real issues facing this nation.

  5. I agree with all those who say that the same items that are used to determine cost of living for younger working adults do not apply to retirees. My biggest problem is that I worked for the Postal Service and I worked under Social Security prior to the Postal Service. My Social Security is only $164 a month and when I did get a COLA it was only $3.00. I’m barely able to keep up with the increases in my utilities, food costs, and medical increases. Each year my deductibles for my health increase much more than the pitiful COLA increases. A new formula is needed as well as a change in how they deduct from my Social Security.

  6. I hear you all suffering seniors living on S.S only! It is a travesty – crime to leave us seniors in such a financial hole! Our secondary insurance Blue Cross & Blue Shield paying off what Medicare doesn’t just jacked up premiums for year 2017 by %100%. From $120 to 240 per month – me and my wife will have to fork over $480 a month so we do not go bankrupt and go living under the bridge. Absolutely awful system where we have hardly any voice and considering that we had Democrats at helm it is irony – joke,,,, so much waste in the government – so much spending on the wars and I and you will get between $1.00 to maybe $5.00 monthly increase next year??? Jokers!!!

  7. I prayed so hard for this election to rid the Obama and Clinton machine. I will give our new president a chance to accomplish all the things he has said he would do. I am a 76 male and my wife 75,and we live on Social Security. We have 3 daughters who are mentally challenged and 2 have lived us since birth. I feel so fortunate compared to some of the comments i have read here. Our Government has wasted and borrowed so much of our hard earned money and never payed it back and we as the people of this great country never really said anything. Now is the time with a new President and a new Administration to let our Reps know how we feel. I have never really heard of Alliance for Retired Americans but now after receiving some literature and looking up on internet I am going to look into becoming a member. To all of the people who live on Social Security regardless of Race,Religion i ask God to look down and see the poor,sick, and those in need and lift up their spirits and give them hope that our great nation will rise up and Make America Great Again.

    God Bless

  8. I am 70 years of age and my “younger” husband still works in a factory. The owners are go Christian people, so they are good to him.
    We live in a small Colorado apartment complex with one bed, a small bath, small kitchen and a small front room area. Our complex, like many others, has been bought out by Canadians, who say they their intent is to upgrade and improve the property – which also means a huge increase in the rent, which we can’t afford because my husband doesn’t make must working in the plant.
    My SS brings in $694mo. helps with groceries and extras. We are not frivolous spenders. We had hoped to move into a little house before our declining years. Now, we’re hoping that we still have time for a house of our own were we canspend our retiring years. We can’t afford anymore rent increases.

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