Over the past several days, I have read some articles about the fact that next year's Social Security benefit payments will not be increasing as they normally do to keep up with inflation. This is what is known as the cost of living adjustment (COLA). According to some politicians and advocates, with rising health care costs, seniors are getting the short end of the stick unless an increase is in order.
Then came the voice of reason from Chuck Blahous at the Hudson Institute. In his Washington Post piece from today, Mr. Blahous noted that this year, Social Security benefit checks increased 5.8 percent – the largest increa
se since 1982. When one considers the fact that the Consumer Price Index has dropped due to the recession and falling prices, benefit payments are keeping pace well above inflation. Furthermore, although Medicare Part B premiums increase as benefit checks increase, for most seniors, this will not be the case, due to a “hold harmless” provision. Bottom line: Seniors will be no worse off next year than they are this year; in fact, they will be better off.
But without a full understanding of how COLA works, many advocates and politicians will see this as a reason to increase benefit payments regardless of reality. This would mean growing an already massive unfunded liability in senior entitlement programs that would be passed on to younger workers. Let's hope the voice of reason prevails.