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May 18, 2023 at 04:09 PM
Like many other federal law provisions, the amount of benefits received by Social Security beneficiaries is adjusted for inflation each year. Recent estimates have anticipated that the 2024 Social Security cost-of-living adjustment will be about 3%. By comparison, the adjustment amount for 2023 was 8.7%, which was the highest adjustment in 40 years. On average, Social Security benefits have increased by about 3.4% per year since 2000.
While these increases are tied to a set formula, lawmakers and policy wonks across the political spectrum have proposed changing the way Social Security COLAs are calculated.
Liberal lawmakers and senior advocates argue that COLAs do not accurately reflect price increases faced by older adults and have proposed tying them to the Consumer Price Index for the Elderly (CPI-E), instead of the CPI for Urban Wage Earners and Clerical Workers (CPI-W).
Conservatives have argued for using the “chained” CPI, which would produce smaller raises, arguing that this index more accurately reflects consumer behavior as prices rise.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the lower Social Security COLA for 2024.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Bloink
Byrnes
Their Reasons:
Byrnes: Inflation is coming down. We’ve all seen the research and statistics that have been published throughout late 2022 and early 2023. 2023 was a historic year for the Social Security COLA. There’s no reason to continue to inflate Social Security benefits when the program itself is in such serious jeopardy for insolvency.
A 3.1% cost-of-living adjustment is in line with what we have seen in most years for the past two decades, and there is no reason to think that a higher adjustment will be necessary at this point.
