Social Security COLA
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 (COLA) will be substantially lower than 2023, at about 3.1%. 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.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the lower Social Security cost of living adjustment for 2024.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Byrnes
Bloink
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.
Bloink: Yes, recently published data does suggest that inflation in the U.S. has begun to ease. That doesn't mean that Americans have seen prices decline. Many are still struggling with the cost of basic necessities, including sky-high prices at the grocery store and gas pumps. Utility costs have also increased dramatically for many senior citizens. Until the costs of these and other basic necessities are brought under control, we have to give Social Security benefits a cost-of-living increase that is proportionate to these costs.
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Byrnes: Members of Congress are struggling to find viable ways to save the Social Security benefit system without reducing benefits for beneficiaries who are already in pay status. Unnecessary benefit hikes would instead further drain the system by offering an artificially high COLA when inflation is showing significant signs of easing. With Congress fully focused on enacting meaningful legislation designed to control inflation, we should at this point at least take a “wait and see” approach as to whether another sky-high Social Security COLA is called for in 2024.
Bloink: The loss of buying power recorded among Social Security recipients in 2023 is one of the steepest losses that has ever been recorded. While we do need to focus on the solvency of the Social Security system, we also have to take steps to ensure that Americans who rely on those benefits are receiving a fair deal.
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Byrnes: The bottom line is that we should be encouraging Social Security recipients to rely less on the entitlement program, not more. The 2023 COLA should be viewed as a one-off necessity that was approved to give beneficiaries the assistance they needed during unprecedented times—not the “new normal” of the Social Security system.
Bloink: According to some studies, Social Security recipients have lost 40% of their buying power since the year 2000. Many senior citizens can barely afford to buy a dozen eggs in today’s market. Lower income and elderly taxpayers are those who are struggling the most under the burden of today’s inflationary marketplace. We should take steps to ensure their financial security to spur economic growth in this country generally. We have certainly not reached a point in the fight against inflation where an “average” 3% COLA adjustment is going to cut it for these Americans.