Today's announcement of the 2005 Social Security COLA is good news and bad news. Social Security makes a vital contribution to the wellbeing of 47 million Americans and the COLA is critical to their ability to keep up with inflation. But, far too many Social Security beneficiaries will see the 2.7% Social Security COLA partially or completely eroded by the Medicare Part B premium increase this year. Still imagine if there were no Social Security COLA and today's 47 million Social Security beneficiaries had to keep up with current health care and energy inflation on their own. For eight out of ten retirees, Social Security is the primary source of income. For most it is the only protection against inflation. Without the Social Security COLA, inflation would have reduced beneficiaries' income by more than one-fourth in just the last ten years.
More should be done to prevent erosion of the Social Security COLA from sharply rising health care costs. But the largest COLA since 2000 is welcomed today by Americans receiving Social Security.