By the TSCL Legislative Staff
As this issue goes to press, Federal Reserve Chairman Alan Greenspan is expected to retire January 31, 2006, after 18 years at the Fed. He used his last speeches to warn Congress of the possible severe consequences to the economy if soaring federal deficits are not brought under control. He emphasized that Social Security and Medicare promises likely cannot be met and that "we will have to make significant structural adjustments in the nation’s major retirement and health programs."
In the past, the Social Security Cost-Of-Living Adjustment (COLA) is one of the first places both retiring Chairman Greenspan and Congress have turned for such "significant structural adjustments." TSCL believes this will continue in 2006 given growing public pressure to cut the burgeoning federal deficit.
Federal Reserve Chairman Greenspan has repeatedly said "we are overcompensating the average Social Security recipient for increases in the cost of living." He urged Congress to adopt an alternate price index to calculate annual Cost of Living Adjustments (COLAs), the new, more slowing rising "chained Consumer Price Index" (CPI).
Adopting the chained CPI to calculate the annual COLA would indeed be a "significant structural adjustment." An ongoing study of the chained CPI by Advisor editor Mary Johnson has found that the chained index can vary enormously from the CPI currently used to calculate the COLA, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). In 2006, for example, retirees received a COLA of 4.1%. Had the chained CPI been used seniors would have received a COLA of just 3%. Over the past five years for which data is available the CPI-W has been about 22% higher than the chained CPI.
TSCL is fighting any proposal that would cut COLAs. We believe the annual COLA is too low as it is now and does not accurately reflect the portion of income that seniors must spend on health care costs. TSCL is working for legislation that directs the government to use a "seniors’" CPI, The Consumer Price Index for Elderly Consumers (CPI-E), to calculate the annual COLA. TSCL grass roots TSCL membership have helped get over 106 Members of the House to sign onto fair COLA legislation, H.R. 3601 in the House. This formidable number of co-sponsors signed on in only five months.
Please help us continue to build on this success. Please contact your Representative and ask him or her to support a more fair COLA by signing on as a co-sponsor to "The Consumer Price Index for Elder Consumers Act," H.R. 3601.
Sources: Budget Policy, remarks by Chairman Alan Greenspan, Federal Reserve, December 2, 2005. The Consumer Price Index, Testimony of Alan Greenspan before the Senate Committee on Finance, January 30, 1997.
February 2006
