As inflation climbs in 2021, the Social Security cost-of-living adjustment for 2022 is expected to rise as well. The latest forecast, based on the consumer price index for urban wage earners and clerical workers (CPI-W), from Social Security and Medicare policy analyst Mary Johnson of The Senior Citizens League came in at 6.1%.
Advocacy groups argue that Social Security COLAs should be based on the CPI for Elderly, or CPI-E, which better reflects senior expenses. Indeed, Congress is considering at least one bill to make the change. And though the CPI-E calculation typically has shown higher COLAs in the past 11 years, that is not always the case.
Rep. John Garamendi, D-Calif., introduced H.R. 4315, a bill to calculate COLAs for Social Security benefits based on CPI-E, rather than on the CPI-W, a month ago.
Over the past 11 years, the CPI-E measure has grown faster than the CPI-W. But in some years it doesn't. Using June inflation data, the COLA for 2022 would be only 4.8% if calculated using the CPI-E.
Some observers worry about the impact of enacting a COLA change too soon this year and shrinking the 2022 benefit increase. But the fate of Garamendi's bill is uncertain, and it is highly unlikely to pass in time to affect next year's payments.
"The window for action affecting the 2022 COLA is extremely narrow due to the COLA announcement being Oct. 13, 2021," Johnson told ThinkAdvisor in an email. "That would make getting this passed as a stand alone bill extremely difficult, especially in the divided Senate.
"What could potentially occur is that it could get wrapped into another bill such as The American Families Plan, so we can't rule anything out. … [But] this is not the first session of Congress to see the Garamendi CPI-E bill."
Nor will this be the only legislation on the topic, according to Dan Adcock, director of government relations and policy for the National Committee to Preserve Social Security and Medicare (NCPSSM).
"CPI-E is likely to be included in the larger Social Security bill that Congressman John Larson plans to introduce," he told ThinkAdvisor in an email, noting that Congress still has infrastructure legislation and a separate budget reconciliation bill to work on first.
But he's realistic about it. The bill's "chances in the Senate are a much heavier lift because 60 votes are needed to pass any bill that changes Social Security," he said.
"It is our hope that House approval of a Social Security bill will create momentum in the Senate for the legislation. And at least a recorded vote in the Senate would put additional pressure on senators to vote for improving Social Security benefits, like a more accurate COLA, and extending solvency, without cutting benefits."
CPI-W vs. CPI-E: What's the Difference?
The major difference, which is especially apparent this year, is how sectors are weighted. CPI-W is a consumer price index reflecting increases for urban wage earners and clerical workers that is based on a fixed market basket of goods and services. Energy prices are heavily weighted.
