Democrat Lawmakers Eye Social Security COLA

Would CPI-E vs. CPI-W result in larger yearly increases?

Jan 3, 2025

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Arkansans are eagerly looking for major changes in our government promised by President Donald Trump as he takes office on January 20. Of course, border security and bringing down inflation are the most fiery topics, but where are Congressional Democrats when it comes to so-called mandatory spending? For several years Democrats (and some Republicans) have been flirting with changing the way Social Security benefits are calculated.

In April, 2023, Democrat Rep. Ruben Gallego (who defeated Kari Lake for an Arizona Senate seat in November) sponsored the Boosting Benefits & COLAs for Seniors Act, and Democrat Senator Bob Casey of Pennsylvania filed a companion bill in the Senate. Of course these bills are now dead going into the 119th Congress, but Democrats have filed similar legislation over the last several terms.

Democrats propose to use the Consumer Price Index for Elderly Consumers (CPI-E) to calculate the yearly cost-of-living adjustment (COLA) instead of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W); each year the COLA would depend on which calculation results in a larger raise for seniors on Social Security. President Joe Biden unsuccessfully proposed similar changes in 2020 but CPI-E is getting more attention, even from a few Republicans. Supporters of CPI-E say that standard would likely result in larger Social Security COLA hikes than using CPI-W.

How is COLA Calculated?

Newsweek explains:

The annual COLA is currently based on the percentage increase in the CPI-W between the third quarter of the previous year and the third quarter of the current year. If there’s no increase, there’s no COLA. The idea is to adjust Social Security benefits so that they can keep pace with inflation: in 2024, the COLA was 3.2 percent, a much smaller boost than the previous year, when the adjustment had been 8.7 percent.

For 2025, the adjustment is set at 2.5%. CPI-E supporters say the CPI-W just isn’t a realistic measurement of the various costs retirees face (such as healthcare and housing), compared to what younger people still in the workforce pay to live.

CPI-W, the Consumer Price Index for Urban Wage Earners and Clerical Workers, measures spending patterns for households where more than half the income is from clerical or wage jobs.

CPI-E, Consumer Price Index for the Elderly, focuses on the cost of living for those aged 62 and above where healthcare costs are a larger piece of household budgets.

Wanna know more about pros and cons? Take a look at this 2023 piece that digs into all that.