The new government inflation figures were more shocking than expected a week ago. And if record-high prices don’t go down, that will point to a higher Social Security cost of living 2023 route. Even with enhanced benefits next year, there’s still a growing campaign to modify the calculation of annual benefits adjustments.
New consumer price index data for May released on Friday shows inflation rose 8.6% over the last 12 months, marking the fastest increase since 1981.
That data is focused on urban residents. The CPI-W, or the Consumer Price Index for Urban Wage Earners and Clerical Workers, is used to calculate the Social Security cost of living adjustment annually. The result climbed to 9.3 percent during the last 12 months. Because of this, the cost of living adjustment (COLA) for 2023 could get 8.6 percent. The estimate came from The Senior Citizens League, a nonpartisan senior organization. That is the same as the league’s forecast last month.
The Social Security Administration’s chief actuary, Stephen Goss, said that next year’s COLA could be “closer to 8 percent,” more than twice the 3.8 percent forecast in the agency’s annual trustees report. The projection was based on data through mid-February.
The record-high increase depends on how inflation fares in the coming months.
The annual COLA is determined by comparing third-quarter data over the same three months of the previous year. So, the increase for next year will depend on CPI-W data for July, August, and September.
Social Security recipients expect a 5.9 percent increase in their benefits this year which is the highest in about 40 years. A higher COLA for 2023 would also break records. Committee for a Responsible Federal Budget said that might affect the projected insolvency dates for Social Security’s trust funds.
Calls for Change
There are increasing calls to change the measure for the annual increases to the Consumer Price Index for the Elderly(CPI-E), which some push for better estimates of the prices retirees pay. The supporters include the following:
- Senators Bernie Sanders and Elizabeth Warren. The two senators proposed a new bill to fix Social Security alongside a group of Democratic lawmakers. A new bill called the Social Security Expansion Act proposes changing the COLA measurement to the CPI-E.
- Another bill authored by Rep. John Larson, D-Conn., the Social Security 2100 Act, also proposes a switch to the CPI-E.
- President Joe Biden also advocated for this change and other Social Security reforms during his campaign.
- The Senior Citizens League has also called for changes to the CPI-E, created in 1987 by the U.S. Bureau of Labor Statistics at Congress’ instruction.
The changes would not represent a benefit increase, noted Nancy Altman, president of the advocacy group Social Security Works, in written testimony submitted for a December congressional hearing.
“It simply ensures that benefits will not erode, but will maintain their purchasing power over time,” Altman stated.
Had that measure been used for this year’s COLA, the increase would have been just 4.8%, instead of the 5.9% hike implemented, Center for Retirement Research at Boston College officials say.
Moreover, while the CPI-E has historically risen faster than the CPI-W, that difference has narrowed. To best measure the changing costs Social Security beneficiaries face, it may make more sense to use a different standard than the CPI-E, which reweights data collected for the population as a whole, according to the Center for Retirement Research.
