Congressman Eliot Engel (D-NY-16) 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 year's COLA increase was 1.7 percent. In 2012, the COLA 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)
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. President Obama's Fiscal Year 2014 budget proposed using "Chained-CPI-U.'
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. From 1982 through 2011, CPI-E ran at an average annual rate of 3.1 percent. That compares with a 2.9 percent rate with the CPI-W.
"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. Chained CPI-U and CPI-W fail to adequately capture the types of costs regularly incurred by older Americans. CPI-E is a much more accurate formula for calculation. We must protect Social Security for future generations," 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."