Fair COLA Legislation Has Strong Support in the House
Cost-Of-Living Adjustment (COLA) cuts are likely to be back on the Congressional agenda soon - perhaps by end of this year. Although Congress (undoubtedly fearing voter backlash) dropped debate over privatization of Social Security that dominated much of 2005, COLA cuts continue to remain bubbling on the back burner. The Congressional Budget Office (CBO), in a little-noticed report on the long-term budget outlook, cites COLA cuts as one of only three options to cut Social Security costs.
In recent years, COLAs have fallen behind in protecting the spending power of retiree benefits. Since 2002, the Medicare Part B premiums (doctor's and hospital outpatient services) increased on average by about 13% annually. Yet, over the same period, COLAs increased on average only 2.6% annually.
Join the Nationwide Social Security COLA Protest
Some economists, including retired Federal Reserve Chairman Alan Greenspan argue that Social Security and other beneficiaries of government programs are overpaid because the CPI overstates the rate of inflation. Greenspan said, in testimony on the CPI, that "There is almost a 100 percent probability that we are overcompensating the average Social Security recipient for increases in the cost of living." They say a more slowly growing "chained" indexing method should be used to calculate COLAs.
TSCL and other proponents of a fair COLA say that the annual adjustment is failing its original mission of protecting the spending power of retiree benefits. The COLA should be determined instead by using an index that more accurately reflects the higher portion of income that seniors and the disabled must spend on health care than younger workers, using the Consumer Price Index for the Elderly (CPI-E).
TSCL is pushing for legislation that would use the CPI-E to calculate the annual COLA and more than 100 Members of Congress have signed on in support. We urge you to ask your Member of the House to support "The Consumer Price Index for Elderly Consumers Act" H.R. 3601 introduced by Representative Bernie Sanders (VT). To find out if your Representative supports Fair COLAs, click here: http://www.tscl.org/NewContent/102609.asp.
Sources: "The Long-Term Budget Outlook," The Congressional Budget Office, December 2005. Cost of Living Adjustments, Social Security Administration, October 14, 2005. "2006 Medicare Trustees Report, May 1, 2006. "2006 Social Security Trustees Report, May 1, 2006. Testimony of Federal Reserve Chairman Alan Greenspan On The Consumer Price Index Before the Senate Finance Committee, January 20, 1997.
June 2006
