The nearly 67 million people receiving the Social Security benefits they have earned will see their Social Security benefits increased by 3.2 percent in 2024 to offset the effects of inflation. It is imperative to understand that, though the nominal dollar amount a retiree receives will go up by an average of $59, this is not an increase. It is designed to help ensure that Social Security benefits do not erode over time, that beneficiaries tread water. Without it, they would drown.
The automatic inflation adjustment every January is one of Social Security’s most important features—not found in its private sector counterparts. The inflation offset is much needed. Many older adults, people with disabilities and all other people receiving Social Security have seen their costs increase significantly over the last year. For example, prescription drug prices for more than 1200 drugs rose an average of 15.2 percent between January 2022 and January 2023, way higher than inflation.
As important as the automatic inflation adjustment is, it undermeasures the inflation older adults and other people receiving Social Security experience. That is because the cost of living adjustment for Social Security is based on inflation experienced by workers, not by retirees and people with disabilities who are unable to work.
That index, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), was the only measure that the government produced in 1972, when Congress wisely decided to automatically adjust Social Security benefits every year to prevent their erosion. Because that measure was the only one available, that was the best Congress could do. It was better than nothing.
But workers and the public more generally have significantly different spending patterns from people receiving Social Security benefits and, therefore, experience significantly lower inflation. Older adults and people with disabilities spend more on health care, prescription medications, and long-term care—where prices continue to rise faster. They spend less on clothing, recreation, the latest technology, and other items—where prices tend to rise more slowly—than younger, healthier Americans. An accurate inflation adjustment is particularly important for women, Hispanics, and others who have longer life expectancies, on average.
Many members of Congress recognized the obvious shortcomings of the CPI-W when applied to Social Security. In 1987, our policymakers instructed the Bureau of Labor Statistics (BLS) to produce an index measuring the cost of living of the elderly. In response, BLS developed the Consumer Price Index for the Elderly (CPI-E), but Congress has not yet applied it to Social Security. It’s long past time to fix that. If it had applied the CPI-E this year, Social Security benefits would have increased 4.2 percent.
CPI-E is part of President Joe Biden’s plan to update and expand Social Security. It is the right policy. According to numerous polls, it also represents the will of the people. It is included in numerous bills to protect and expand Social Security, pending in Congress or soon to be introduced. One of those bills is the Social Security 2100: A Sacred Trust Act, sponsored by Representative John Larson (D-CT), Chairman of the Social Security Subcommittee, and cosponsored by over 175 of his fellow Democrats.
As important as it is to update the measure, the truth is that Social Security’s underlying benefits are too low. Those benefits are modest by virtually any measure, yet they are vital.
A Gallup poll found that 89 percent of Americans receiving Social Security rely on it to cover their expenses. Three out of five people 55 and older rely on Social Security as their principal income. For one fourth of them, Social Security is virtually their only income. Our Social Security system lifts more than 21 million Americans—including over a million American children—out of poverty and lessens the depth of poverty of millions more.
As essential as Social Security is in good economic times, it has been even more so in economic downturns and other times of trouble. Unlike savings, one can’t outlive their Social Security. Indeed, in its nearly ninety-year history, Social Security has never missed a payment.
Fortunately, the president and the Democratic Party are championing the need to not only update the cost of living adjustment but also increase the underlying benefits. Unfortunately, no Republicans have, so far, either cosponsored one of the many pending bills that expand benefits and update the cost-of-living adjustment. Nor have they introduced their own.
In fact, Republican politicians in Congress seem bent on cutting Social Security, or worse, ending it as we know it. Republicans have advocated eliminating the ironclad guarantee of those earned benefits. Last year, for example, Senator Rick Scott (R-FL) released a plan to require an affirmative vote on Social Security and Medicare every five years for these vital institutions to continue. Not to be outdone, Senator Ron Johnson (R-WI) wants to put Social Security and Medicare on the chopping block every year.
Kevin McCarthy (R-CA), who was Speaker of the House, took hostage the need to raise the debt limit. As ransom, he wanted cuts to “entitlements,” insider code for cuts to our Social Security and Medicare. He almost wrecked the national economy to get his way. The Republican Study Committee, which includes 70 percent of House Republicans, has proposed raising the retirement age and decimating middle class benefits.
Revealingly, when President Biden called them out at the State of the Union, these Republicans claimed he was lying. Having apparently learned to not be so direct in their plans, they are now pushing a behind-closed-doors commission, which would report a plan for Social Security right after the election. If established, its recommendations would have priority over other legislative business. They couldn’t be amended. Indeed, Congress would be required to vote on the commission’s recommendations right after the upcoming election, which would allow incumbents running for re-election to deny their support of drastic cuts to Americans’ earned benefits — and then vote for those highly unpopular and unwise cuts in the lame duck Congress.
Those who support Social Security should contact their representatives and urge them to oppose any commissions. Rather, they should support expanding Social Security and updating its cost-of-living adjustment.
After lifetimes of work, Americans have earned their Social Security. It is well past time they get a raise. Once Americans begin to receive their earned Social Security, they should be able to rely on the fact that those benefits will not erode as they age, but will maintain their purchasing power, even if they live to 100 or older.
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