Social Security Disability: Proposed Change to Cost of Living Increases May Negatively Affect Social Security Beneficiaries

The Social Security Administration periodically increases benefits under so-called “cost of living adjustments” (COLAs).  These are adjustments that account for both inflation and general increases in the costs of goods and services over time.  Many other government programs—including the salaries of the members of Congress themselves—receive COLAs.

Currently, Social Security COLAs are calculated under one particular and technical method, known as “Consumer Price Index (CPI) W.”  According to many economists, though, CPI-W is not the most accurate reflection of cost of living changes in America.  Instead, these individuals suggest, the Social Security Administration should switch to a different consumer price index, C-CPI-U, or, as it’s being referred to in the media, “chained CPI.”

In recent weeks, both President Obama and members of Congress have mentioned the switch to chained CPI as one of a number of potential changes they could accept making to Social Security.  Chained CPI, in addition to supposedly better reflecting the true cost of living, would save the Social Security Administration a good deal of money.

Critics of the change, however, note that the solvency of the Social Security Administration—though crucial—is not the only policy consideration at play.

“People tend to get poorer as they get older,” said Dean Baker (co-director of the Center for Economic and Policy Research in Washington), speaking at a March 11 AARP event on chained CPI.  “This is a very, very important point in the context of the chained CPI.”

All demographics helped by Social Security—seniors and the disabled alike—tend to have tighter budgets.  A COLA that fits the nation as a whole (and that affords less than the current system) might not work as well for them.

“A lot of people call a switch to the chained CPI a technical change,” said Rebecca Vallas, an attorney speaking about the change’s impact on Supplemental Security Income and Social Security Disability Insurance.  “I would argue that, for people for whom this is their sole—or majority—source of income, it is significantly more than a technical charge.  It is a huge cut in your household income.”

It still remains to be seen, however, if the change will actually take place.

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