U.S. Senators Barbara Mikulski (D-Md.) and Sherrod Brown (D-Ohio) today introduced the Consumer Price Index for Elderly Consumers Act, which would change the annual cost-of-living adjustment (COLA) formula for Social Security to more accurately reflect the expenses of seniors. The legislation maintains the social contract with seniors by protecting Social Security benefits from proposals before the deficit reduction Super Committee to change the formula used to calculate COLAs.
"Protecting Social Security preserves the social contract we have with our seniors," Senator Mikulski said. "Social Security shouldn't be in the debate about how to reduce our debt or our deficit. It didn't cause our debt. It didn't cause our deficit. We must ensure the safety and solvency of Social Security so that benefits are based on the reality of how our seniors live and what their costs are. Social Security must be undeniable, reliable and inflation proof, which is why I've cosponsored the Consumer Price Index for Elderly Consumers Act."
Because of the method by which inflation is calculated, seniors and other Social Security recipients did not receive a COLA in 2010 and 2011, even though the price of prescription drugs, food, energy, and other necessities continued to rise.
"Because of an outdated and flawed formula, seniors are seeing their energy, food, and prescription drugs costs rise, while their Social Security checks remain stagnant. With two-thirds of seniors depending on Social Security for the majority of their income, too many seniors are being forced to choose between heating their homes or filling their prescription drugs," Senator Brown said. "Last month, the Social Security Administration announced that seniors would get their first cost-of-living adjustment increase in more than two years. But while seniors will finally receive a COLA in 2012, the increase is less than it should be. It is time to give seniors the level of benefits they deserve -- and that starts with fair COLAs. The current formula used to calculate COLAs for Social Security recipients actually measures the costs of younger, employed individuals--and simply does not reflect a retirees' true expenses, which can include high prescription drug bills.
"Comparing retired seniors to employed clerical workers is like comparing apples to oranges," Brown added. "That's why we should change the formula to better reflect the real cost of living for seniors in Ohio and across the country. We need to reduce the deficit, but not on the backs of senior citizens. Since Social Security is financed separately from the rest of the federal budget, it should be addressed separately as well."
Social Security COLAs are calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W was chosen as the measure of inflation because it was the only measure available at the time the automatic COLA was established in 1972. The CPI-W measures changes in the prices of goods and services purchased by those who earn more than half their income from clerical or wage occupations. However, the CPI-W formula only represents about 32 percent of the U.S. population and does not accurately represent the inflation experience of older Americans. According to the Congressional Research Service, between 1982 and 2009, the cost of living under the CPI-W rose at an average rate of 2.9 percent, while the cost of living for seniors--as measured by an experimental CPI-E--rose at a rate of 3.2 percent.
The legislation would formalize a Consumer Price Index for the Elderly (CPI-E). The CPI-E would take into account seniors' specific consumption habits, including increased prescription drug and energy costs, and would be used to determine the COLA for Social Security benefits.
Mikulski and Brown's bill comes amid recent proposals--known as the "Chained CPI" or the "CPI-U"--before the Joint Select Committee on Deficit Reduction would make further changes to the CPI-W that would negatively affect seniors. The Chained CPI would slash Social Security benefits by hundreds of dollars per year and effectively impose a tax increase that would heavily impact seniors and other low-income families.
Senator Mikulski has taken to the Senate Floor to speak out against Chained CPI. Video is available here: http://mikulski.senate.gov/media/video/11-15-2011.cfm ; http://mikulski.senate.gov/media/video/11-10-2011.cfm
"I don't think Social Security should be in the debate about how to reduce our debt or our deficit," Senator Mikulski said. "I think everything that caused our debt should be on the table. Social Security did not cause our deficit. Social Security did not cause our debt. While the Super Committee is charged with looking at a more frugal government, we must maintain the social contract between the American people and their government. I oppose the Chained CPI. Under Chained CPI, the older you get, the less you will get. The older you get, the worse it will get. It's not giving up Whole Foods. It's seniors with no food."
The legislation is supported by the National Committee to Preserve Social Security and Medicare, the AARP, the AFL-CIO, the United Steelworkers, the UAW, the Alliance for Retired Americans and National Nurses United.