ECONOMY
Blank Social Security checks are run through a printer at the U.S. Treasury printing facility in
Philadelphia, Pennsylvania, on Feb. 11, 2005. (William Thomas Cain/Getty Images)
By Jack Phillips
May 15, 2023
Updated: May 16, 2023
   Print
A nonpartisan seniors group warned that next year’s cost-of-living adjustment
(COLA) for recipients will likely be smaller in 2024 than in 2023, meaning
retirees will lose purchasing power.
In a news release, The Senior Citizens League said that the COLA for 2024
could be approximately 3.1 percent for 2024, or down more than 5 percentage
points from 2023’s COLA, which was 8.7. percent. The increase was the largest
in more than 40 years due to high inflation amidst the winding down of
COVID-19-related pandemic rules and lockdowns.
The group said that because of a likely decrease in inflation, there will be a
smaller COLA adjustment. Inflation has been decreasing as the Federal
Reserve has sharply raised interest rates over the past year or so, although
Labor Department data shows that last month’s Consumer Price Index—a
measure of inflation—stood at 4.9 percent year-over-year.
“Inflation is moderating, but a lower inflation rate has not necessarily meant
that prices have decreased,” the Senior Citizens League wrote in a new study,
adding that some “key items” have “stubbornly high” prices.
The COLA is determined annually during the month of October by the Social
Security Administration, basing the adjustment on the percentage increase in
the Consumer Price Index in the third quarter of that year. If there is no
change, then no adjustment will be made.
“Based on February inflation data, the [FY 2024] COLA looks like it will be
below 3 percent and could fall into the 2 percent or even lower range by the
third quarter if that 12-month average continues to decline,” Mary Johnson,
the Social Security and Medicare policy analyst at the Senior Citizens League,
told CBS News in a recent statement.
The group noted that Social Security beneficiaries’ purchasing power has
diminished greatly—or about 40 percent—since the year 2000. “That was the
deepest loss in buying power since the start of this study in 2010. This year the
study found that the loss of buying power slightly improved—by four
percentage points—to 36 percent. However, that is still one of the deepest
losses recorded by this study, exceeded only by the loss in 2022,” it said.
Johnson also noted that seniors have different spending habits than other
groups and are more likely to purchase prescription drugs, dental services,
and other medical expenses—some of which are not covered by Medicare. She
told The Hill that the Consumer Price Index does not necessarily reflect the
rising cost of those items and services.
Seniors “are spending a bigger percentage of their household budgets [on
these expenses]. These costs are not showing up, necessarily, in the COLA.
There’s a weakness in the COLA,” Johnson told the outlet, while noting the
diminished change in purchasing power over the past two decades or so.
U.S. Senate Minority Leader Mitch McConnell (R-Ky.), House Speaker Kevin McCarthy (R-Calif.), and President
Joe Biden meet with other lawmakers in the Oval Office of the White House in Washington on May 9, 2023.
(Anna Moneymaker/Getty Images)
But regarding the COLA increase or decrease, “It’s not like we have a target
number we were hoping for,” Johnson told The Hill. Instead, her group wants
“to see an approach that’s more comprehensive than that,” she said,
adding: “People are also living longer lives in retirement, so it’s hard for
anyone to save for that.”
The seniors group also weighed in on the recent congressional battle over the
debt ceiling as Treasury Secretary Janet Yellen has repeatedly warned that the
United States may default on its obligations in the coming weeks. Certain
spending cuts have already been implemented to offset a possible default, she
has said.
“Beneficiaries are legally entitled to full scheduled benefits under the Social
Security Act,” the organization said in its release. “But according to a recent
issue brief from the Congressional Research Service, another law, the
Antideficiency Act, prohibits government spending in excess of the available
funds.”
According to data from the Social Security Administration, the agency makes
about $1 trillion in benefits payments during the year to approximately 67
million people—the majority being retirees. Some 48.6 million recipients are
retired, while 7.6 million are disabled workers, and another 9.8 million
recipients are survivors and dependents.
It noted that the Social Security Administration “would not have the legal
authority to pay Social Security benefits in full or on time should the trust
funds fall short due to a delay in an agreement over the debt limit,” according
to the release. “No law provides the specific actions the SSA must take to
ensure that Social Security benefits are paid in full and on time.”
It came as Yellen recently warned that Social Security and Medicare may
suffer as a result during a recent interview.
“Treasury [could find] itself in the position where we’re unable to pay all of
the bills that come due that day. And this would be really the first time in the
history of America that we would fail to make payments that are due,” Yellen
told ABC News earlier in May. “And, you know, whether it’s defaulting on
interest payments that are due on the debt or payments due for Social Security
recipients or to Medicare providers, we would simply not have enough cash to
meet all of our obligations.”
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