Washington, DC -- Congressman Eliot Engel (D-NY-17) welcomed the announcement that seniors will get their first cost-of-living increase in Social Security benefits since 2009.  The 3.6 percent raise will help about 55 million beneficiaries during these difficult financial days.  Rep. Engel is the author of the Guaranteed 3% Cost Of Living for Seniors Act which would guarantee a minimum three percent increase annually in COLA for Social Security recipients. 

“It is good news for seniors around the country to be able to see an uptick in their Social Security benefits.  Seniors need to keep up with the growing cost-of-living, especially in New York, and not having a COLA increase can be devastating.  Our challenging economic times make it doubly important to put more money in the pockets of seniors, who are reliant upon Social Security as a major part of their finances and have counted on the COLA increases for decades.  We must change the way it is calculated to avoid the mistaken policy of assuming seniors’ expenses haven't risen,” said Rep. Engel.

Due to the way the COLA is calculated, seniors did not receive a COLA increase in their monthly benefits during 2010 or 2011.  There previously had never been a year without an increase, since automatic adjustments for inflation was installed in 1975 and responsibility for the COLA was taken away from the Congress.  The Social Security Act of 1973 specifies the formula to determine the COLA.  (http://www.ssa.gov/oact/cola/latestCOLA.html)

The COLA formula is currently based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which reflects the purchasing patterns of people who earn at least half of their income from wages.  Rep. Engel’s legislation would mandate using another index of the Bureau of Labor Statistics, the Consumer Price Index for the Elderly (CPI-E).  This is geared towards capturing inflation among those over 62, and is a better indication of seniors’ spending habits.   The CPI-E would have provided seniors a COLA in both 2010 and 2011. 

“Social Security has been a vital lifeline to America’s seniors for generations, and the COLA has worked quite well over time to help people manage their budgets.  However, a small tweak would make it even better.  We must protect Social Security for future generations – keep it from privatization, maintain the current retirement age, and avoid cuts to benefits.  By improving the COLA formula, we bolster the short and long term health of this incredibly important program,” added Rep. Engel.

The Senior Citizens League supports legislation that would base the Social Security COLA on a consumer price index that uses the CPI-E. The Bureau of Labor Statistics has tracked the CPI-E since the early 1980’s. For example, a senior who retired with an average monthly benefit of $460 in 1984 would have received almost $12,856 more over the past 27 years with the CPI-E.

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