Social Security Income Adjustments Outpaced by Real Inflation

by Vins
Published: Last Updated on

In January 2015 the federal government increased the amount paid to Social Security recipients by 1.7%. This cost of living adjustment (COLA) lags behind the rapidly increasing cost of everyday necessities, such as food and energy. The disparity is due to the formulae government officials utilize to calculate inflation, which in turn determines payouts.

The US Department of Agriculture estimates the price of food in grocery stores has increased by 3.2% between September 2013 and September 2014. Along these lines the National Energy Assistance Directors Association foresees heating fuel costs to go up by over ten percent in 2014-2015. Independent economist John Williams argues that the actual rate of inflation in 2014 would be 9.4% if it was calculated using traditional measures instead of “government gimmicks for understating inflation,” some of which are motivated by political expediency of public office holders.

According to Williams, every presidential administration since at least John Kennedy has introduced oblique techniques for the government to massage and thus misstate economic figures, such as those intended to represent unemployment and inflation rates. Beginning with the George H. W. Bush administration federal officials have devised an entirely different (and ostensibly less inflationary) set of criteria for determining the consumer price index (CPI).

Now the Obama administration may further modify the CPI to depress COLA disbursements even further.

“With the geometrical loss of purchasing power,” author Susan Boskey notes, “the government formula for your later year’s financial well-being leaves you begging. The only way most Americans will be able to thrive throughout their retirement plan is if they plan for and develop additional streams of revenue.”

Source: Susan Boskey, “Bonanza! The 2015 1.7% Social Security COLA,” The Quality Life Plan, December 12, 2014,

Student Researcher: Kelsey White (Florida Atlantic University)

Faculty Evaluator: James F. Tracy (Florida Atlantic University)