Social Security Recipients Did Not Receive Cost-of-Living-Adjustments (COLA) in 2010 and 2011 Despite Rising Food, Energy, and Prescription Drug Costs

Recent Proposals Before Deficit Reduction “Supercommittee” Would Negatively Affect Seniors by Changing Formula Used to Calculate COLA Increases; Social Security Benefits Would be Slashed by Hundreds of Dollars Per Year 

WASHINGTON, D.C. – With the introduction of several proposals that would reduce Social Security benefits for seniors by changing the formula used to calculate annual cost-of-living adjustments (COLA), U.S. Sen. Sherrod Brown (D-OH) today joined the National Committee to Preserve Social Security and Medicare (NCPSSM) to announce the Consumer Price Index for Elderly Consumers Act.  The new legislation would change the COLA formula for Social Security to more accurately reflect the expenses of senior citizens. Because of the method by which inflation is calculated, seniors and other Social Security recipients did not receive a COLA in 2010 and 2011, even though the price of prescription drugs, food, energy, and other necessities continued to rise.

“Because of an outdated and flawed formula, seniors are seeing their energy, food, and prescription drugs costs rise, while their Social Security checks remain stagnant. With two-thirds of seniors depending on Social Security for the majority of their income, too many seniors are being forced to choose between heating their homes or filling their prescription drugs,” Brown said. “Last month, the Social Security Administration announced that seniors would get their first cost-of-living adjustment increase in more than two years. But while seniors will finally receive a COLA in 2012, the increase is less than it should be.  It is time to give seniors the level of benefits they deserve – and that starts with fair COLAs. The current formula used to calculate COLAs for Social Security recipients actually measures the costs of younger, employed individuals—and simply does not reflect a retirees’ true expenses, which can include high prescription drug bills.

“Comparing retired seniors to employed clerical workers is like comparing apples to oranges,” Brown added. “That’s why we should change the formula to better reflect the real cost of living for seniors in Ohio and across the country. We need to reduce the deficit, but not on the backs of senior citizens. Since Social Security is financed separately from the rest of the federal budget, it should be addressed separately as well.”

Social Security COLAs are calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).  The CPI-W was chosen as the measure of inflation because it was the only measure available at the time the automatic COLA was established in 1972.  The CPI-W measures changes in the prices of goods and services purchased by those who earn more than half their income from clerical or wage occupations.  However, the CPI-W formula only represents about 32 percent of the U.S. population and does not accurately represent the inflation experience of older Americans. According to the Congressional Research Service, between 1982 and 2009, the cost of living under the CPI-W rose at an average rate of 2.9 percent, while the cost of living for seniors—as measured by an experimental CPI-E—rose at a rate of 3.2 percent.

Brown’s legislation would formalize a Consumer Price Index for the Elderly (CPI-E). The CPI-E would take into account seniors’ specific consumption habits, including increased prescription drug and energy costs, and would be used to determine the COLA for Social Security benefits.  Brown also released county-by-county information on the number of Social Security recipients aged 65 and above across Ohio.

Max Richtman, the president and CEO of the NCPSSM, joined the call to outline the Consumer Price Index for Elderly Consumers Act. Brown was also joined by Belle Likover, a senior citizen from Northeast Ohio, who discussed the hardship of living without a COLA increase for two years straight and explained why Brown’s bill is necessary to help seniors make ends meet when costs rise.

“Seniors across this nation understand how important having an accurate measure of their real costs is to their day-to-day survival.  Under the current formula, seniors received two years of zero COLA’s even though their expenses continued to rise.  Now some suggest even that amount was too much. Rather than proposing formulas designed to cut benefits, like the chained CPI currently being considered by the Super Committee, Congress should pass a formula created specifically for the beneficiaries served.  The CPI-E legislation proposed by Senator Sherrod Brown would offer inflation protection that accurately represents the expenses seniors face each year,” said Max Richtman, President and CEO of the NCPSSM. “There has been a lot of talk about the need to find a more accurate COLA formula.  We agree, however, the proposed chained CPI isn’t it. Not only is this formula less accurate for seniors than the current method it will in fact cut projected benefits for current and future retirees.  If accurate inflation protection is truly our goal, the CPI-E is the formula created specifically to address the costs facing America’s seniors and should be adopted by Congress.” 

Brown’s bill comes amid recent proposals—known as the “chained CPI” or the “CPI-U”—before the Joint Select Committee on Deficit Reduction would make further changes to the CPI-W that would negatively affect seniors. The chained CPI would slash Social Security benefits by hundreds of dollars per year and effectively impose a tax increase that would heavily impact seniors and other low-income families.

In addition to NCPSSM, Brown’s legislation is supported by the AARP, the AFL-CIO, the United Steelworkers, the UAW, the Alliance for Retired Americans, and National Nurses United, among other groups.

Sen. Brown Stands Up for Social Security

Following the second straight year of stagnant Social Security benefits, Brown strongly pushed for legislation to give a one-time, $250 check to Social Security recipients to help offset the rising cost of prescription drugs and other necessities—and last year, Brown was one of six senators to send a letter to Senate Minority Leader Mitch McConnell (R-KY) asking him to support legislation that would provide Social Security recipients with an emergency $250 payment in lieu of a COLA increase.

Brown strongly opposes raising the retirement age for Social Security due to the high number of Ohioans who are engaged in physically demanding work—on a shop floor, production line, or farmland. Brown has long been active in efforts to protect Social Security from privatization, and has worked to ensure that seniors can continue to afford necessities like prescription drugs despite the lack of cost-of-living-adjustments (COLA) that Social Security recipients have faced for the past two years. Earlier this year, Brown introduced new legislation that would require Members of Congress to “walk in the same shoes” as working Americans. His bill, the Shared Retirement Sacrifice Act of 2011, would amend the Federal Employees Retirement System (FERS) and Civil Service Retirement System (CSRS) to directly tie the Social Security retirement age to current and future Members of Congress’ access to their federal retirement benefits.

Brown, along with Sen. Bernie Sanders (I-VT), has also introduced legislation that would require a supermajority (two-thirds) vote in Congress to make any significant changes to Social Security. As of 2009, the median retiree Social Security benefit is $14,000.