Be wary of politicians bearing gifts.
The “Fair COLA for Seniors Act of 2021” introduced in the House of Representatives on July 1 by Rep. John Garamendi (D-CA) would require Social Security to use the experimental Consumer Price Index for the Elderly (CPI-E) instead of the Department of Labor’s Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to calculate the annual COLA, which supporters say would lead to a more equitable cost of living adjustment for seniors. H.R. 4315 would increase benefits and ensure that cost of living adjustments in Social Security reflect what Garamendi said, in a press release, “were the real rising costs for seniors and disabled Americans.”
Source: ‘Fair COLA for Seniors Act of 2021’ Introduced in House – 401K Specialist
It’s not what it appears to be and here’s why.
it does not matter what CPI formula that the government uses. The way they round down the increase, you lose buying power. My military pension that started in August 1995 has increased from $1,026 to $1,768. The CPI-U shows it at $1,823, for the same period. Maybe they should be using CPI-U.
Over the years, the methodology used to calculate the CPI has undergone numerous revisions. According to the BLS, the changes removed biases that caused the CPI to overstate the inflation rate. The new methodology takes into account changes in the quality of goods and substitution. Substitution, the change in purchases by consumers in response to price changes, changes the relative weighting of the goods in the basket.2 The overall result tends to be a lower CPI. However, critics view the methodological changes and the switch from a COGI to a COLI as a purposeful manipulation that allows the U.S. government to report a lower CPI.
Smart move by the D’s. Create a false narrative that changing the way the COLA will is calculated will be the answer to saving the elderly from certain poverty and then use it against the R’s if they oppose it. Good political strategy even if it does hasten the demise of social security. Just setting the stage for 2022 elections.