Congressman Eliot Engel (D-NY-17) urged his Congressional colleagues to support his Guaranteed 3% Cost of Living For Seniors Act, which would guarantee a minimum three percent increase annually in COLA for Social Security recipients. This comes following the announcement of a 1.7% increase for recipients next year.
The cost of living increases are tied to inflation numbers, which have been relatively low for the past year. This has resulted in the 1.7% increase, one of the smallest increases since the automatic adjustments became law in 1975. In 2012, the adjustment was 3.6 percent and there was no increase in 2010-11. The Social Security Act of 1973 specifies the formula to determine the COLA. (http://www.ssa.gov/oact/cola/latestCOLA.html)
"Social Security has been a vital lifeline to America's seniors for generations, and the COLA has worked quite well over time to help people manage their budgets. However, a small tweak would make it even better. We must protect Social Security for future generations -- by keeping it from privatization. By improving the COLA formula, we bolster the short and long term health of this incredibly important program," said Rep. Engel. "Millions of seniors are reliant upon Social Security for their livelihood, and have counted on sufficient COLA increases for decades. We must change the calculation formula to avoid the mistaken policy of assuming seniors' expenses haven't risen."
The COLA formula is currently based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which reflects the purchasing patterns of people who earn at least half of their income from wages. Rep. Engel's legislation would mandate using another index of the Bureau of Labor Statistics, the Consumer Price Index for the Elderly (CPI-E). This is geared towards capturing inflation among those over 62, and is a better indication of seniors' spending habits. The CPI-E would have provided seniors a COLA in both 2010 and 2011.