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Social Security: Lower COLAs on the Table

New inflation measure could shrink checks

Critics of the measure also say that the chained CPI doesn't accurately reflect rises in living costs for older adults and people with disabilities, because health care is a disproportionate expense for this group and can't be substituted with less costly alternatives. In this view, seniors already don't get enough of a Social Security COLA to offset increases in health care costs, which rise faster than inflation.

Effect on long-term funding

Marc Goldwein, policy director for the nonprofit Committee for a Responsible Federal Budget, says that switching to the chained CPI would help reduce the long-term funding shortfall facing Social Security.

"Getting the funding gap under control is pretty important, and this is one of those policies that can really start to move us in that direction," he says.

Some experts say the Social Security COLA should be calculated using the experimental consumer price index for the elderly (CPI-E). This measures the spending of people 62 and older, taking medical care and housing costs more into consideration.

The CPI-E has grown at a faster rate than the CPI-W, increasing 126.5 percent between 1983 and 2007, compared with 110 percent for the CPI-W.

However, Goldwein argues there are flaws with the CPI-E, such as "how it fails to account for things like senior discounts."

Eric Kingson, co-chair of the Strengthen Social Security Campaign and a professor at Syracuse University, says the key to the debate is choosing which measure most accurately measures the impact of inflation on seniors.

"What the COLA is supposed to do is ensure that if you live into the 80s and 90s — as many people now do — at least one piece of income is core protected," he says.

You may also like: Social Security Benefits Calculator. >>

Tamara E. Holmes is a Maryland-based journalist who writes about health, wealth and careers.

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