Lawmakers Push for 3% COLA in 2021

October 22, 2020 12:28 PM
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Some lawmakers are unhappy about the current process that automatically calculates the cost of living adjustment (COLA) each year for federal retirees and Social Security recipients.

In response to news about the 2021 COLA being set at 1.3% for Social Security recipients and federal retirees, Congressman Peter DeFazio (D-OR) has introduced legislation (H.R. 8598) that would set next year’s COLA at 3%.

The legislation would also change the COLA calculation formula to be based on the consumer price index for the elderly (CPI-E) rather than the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) that is currently used.

DeFazio cited the COVID-19 pandemic as the key reason behind introducing the legislation. “Due to the COVID-19 pandemic, seniors are facing additional financial burdens in order to stay safe,” said DeFazio. “This absolutely anemic COLA won’t even come close to helping them afford even their everyday expenses, let alone those exacerbated by COVID-19. Raising the COLA to 3% for 2021 will provide seniors with an immediate, crucial lifeline during the ongoing coronavirus crisis.”

He elaborated on the reasons for wanting to switch the COLA calculation to be based on the CPI-E, stating, “It’s also critically important that Congress provide a permanent fix to the COLA formula that actually reflects the real costs that seniors face. That’s why I’m urging Congress to pass my comprehensive legislation, the Social Security Expansion Act, to increase benefits and use a new COLA index (CPI-E) to factor in seniors’ actual, everyday expenses.”

This is not the first time Congress has introduced lediglation to change the consumer price index behind the annual COLA for retirees. Last year for example, legislation was introduced to switch to the CPI-E, citing an issue of “fairness” for seniors. That bill’s sponsor, Congressman John Garamendi (D-CA), cited data which showed the CPI-E rose at a faster rate than the CPI-W which would result in higher overall COLAs each year.

As enticing as this may sound on the surface, there are potential downsides as I noted in that article. Among them would be that the fluid nature of inflation means that different groups are impacted differently by the two COLA calculation formulas along with the potential for increased costs on a government program that is already struggling financially.

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Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce.

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