Most Workers (And Seniors) Not Keeping Up With Inflation

Republicans are whinging about inflation - hoping inflation worries will help them win the midterm election. But that's more than a bit disingenuous. Inflation is hitting the poor, the working class, and seniors the hardest -- and those are not the groups Republicans are interested in helping. In fact, the Republicans want to cut government spending (especially spending to help the poor), cut Social Security and Medicare, and keep the minimum wage at a poverty level.

Here's how former Labor Secretary Robert Reich describes the situation:

Most of us don’t have paychecks that automatically increase to cover the rapidly-increasing costs of just about everything. As a result, inflation is making most of us poorer. 

But recipients of Social Security just got the largest inflation adjustment in four decades — 8.7 percent — effective December 2022. 

The media talk about this as a “boost” in Social Security benefits but it’s not. The adjustment simply enables people living on Social Security (more than 70 million of us) to maintain the purchasing power they had a year ago.

And it doesn’t even accomplish this, because medical and drug costs take a higher percentage of older Americans’ budgets than other Americans and have been rising even faster than inflation.

On the other hand, the people working at the federal minimum wage haven’t got an inflation adjustment. They’ve been getting poorer at a faster pace and for a longer time than most of the rest of us. 

The federal minimum wage is still $7.25 — just where it was in 2009, the last time the minimum wage was adjusted. (It’s the longest period of time without a minimum-wage adjustment since the federal minimum wage was put into place in 1938.) 

The chart below shows (in black) the real (inflation-adjusted, actual purchasing power) value of the minimum wage since its passage in 1938. (The blue line shows the nominal — non-inflation-adjusted — value.)

Workers paid the federal minimum of $7.25 today earn 23 percent less than what they (or their counterparts) earned 13 years ago, after adjusting for inflation, and 36 percent less than in 1968. 

This is bizarre, to say the least. As a nation, we’re far richer than we were in 1968. Per capita GDP then was just over $24,000. Today, it’s almost $60,000.

Because of Congressional inaction on the federal minimum, over two dozen states and several cities have raised their own state minimum wages. But in the rest of the country, states have punished low-wage workers by refusing to raise minimum pay. 26 states have gone so far as to pass laws prohibiting local governments from raising their minimum wage.

Why doesn’t the minimum wage rise with inflation, like Social Security? 

A big part of the reason is that big corporations and their trade associations — especially big retailers and restaurant chains — have lobbied intensely against any minimum wage increase. Their political power continues to grow even as the real value of the minimum wage continues to shrink. 

Remember: Corporations pay for the minimum wage. Taxpayers pay for Social Security.

Another reason Social Security keeps up with inflation while the minimum wage doesn’t is that Americans who receive Social Security — elderly and politically active — are far more likely to vote and demand cost-of-living increases than are people living at or near the minimum wage. 

But don’t grow too complacent about Social Security. Republicans and much of corporate America would like to do away with it. As Wisconsin Republican Senator Ron Johnson put it: “Social Security and Medicare, if you qualify, you just get it no matter what the cost… We ought to turn everything into discretionary spending so it’s all evaluated.”

So is it ever going to be possible to raise the minimum wage? Yes. 

I led the fight to raise it in 1996. Republicans controlled both houses of Congress at the time. Everyone told me it was impossible. But I sensed that raising the minimum wage was a popular issue. 

I asked Bill Clinton’s pollster to find out. He came back to me wildly enthusiastic. “85 percent of Americans believe the minimum wage should be raised!” he said. 

Armed with that poll, I convinced Clinton it was worth the fight. Then I took the poll to Democratic leaders in Congress, who became equally enthusiastic. 

It was a presidential election year, and Democrats immediately saw it as an issue they could bang over the head of Republicans. Fearing they would — and concerned about a voter backlash if they didn’t raise it — enough Republicans joined on to pass it. 

But is it possible to include an automatic inflation adjustment in the minimum wage? 

When I suggested it, Republicans balked. This didn’t surprise me. 

What surprised me was that Democrats also balked. Why?

"If it’s automatic, then we can’t fight about it,” a senior Democratic senator explained. “And in presidential election years, it’s a fight we like to have.”

Bottom line: Even if Republicans control one or both houses of Congress in 2024, that would be a good year to try to raise the minimum wage again. As to including an automatic adjustment for inflation, though, I’m less optimistic.

The Good And Bad News For Social Security Recipients

The good news for Social Security recipients is that the government has announced the cost-of-living-adjustment for next year. It will be 5.9%. That's the largest increase in nearly four decades (since 1982).

That means a person getting $1000 a month, will get $1059 in 2022. 

Now the bad news. The two biggest expenses for most Social Security recipients are food and medical expenses. The food inflation alone will eat up most of the increase, and medical expenses rose by a whopping 7%. Together, just these two expenses will put seniors further behind in spite of the significant increase.

And the amount taken out of a Social Security check for Medicare hasn't been announced yet. It is possible that it will increase -- further cutting into the increase that was badly needed by millions who depend on their Social Security checks to survive.

American seniors can't win for losing! 

70% Of Social Security Recipients Will Get No Raise In 2018

The chart above shows the cost-of-living increase in Social Security over the last decade. The adjustment for 2018 will be 2%. That's not enough to keep up with inflation (on items seniors spend the most on), but it's the largest increase since 2012.

But don't celebrate that tiny increase yet. That's because about 70% of all Social Security recipients will not see any raise at all on their monthly check. That's because the increase in the Medicare deduction taken out of their check will eat up all of the increase.

Here's how CNBC explains it:

Here's why: A so-called "hold harmless" legal provision has protected the majority of retirees from increased Medicare Part B premiums if it would reduce their Social Security benefits. It affects people whose premiums are deducted from their monthly Social Security check. (Note: New Medicare enrollees are not protected by the provision.)

Premiums for Part B, which primarily covers doctors' visits and other outpatient care, can change annually, as it is expected to fund about 25 percent of the the program's annual expected per-beneficiary spending. For 2017 the premium was $134, with higher earners paying more.

Yet because of the hold harmless provision, the actual amount paid by most Medicare recipients is about $109 monthly, research from the The Senior Citizens League shows.

So even if Part B premiums don't rise in 2018, the average retiree will see that extra $25 go toward paying the difference between their monthly Social Security check ($109) and the Part B cost ($134).

This means that 70% of Social Security recipients will fall further behind in 2018 (just like they have for the last five years -- as medicine, health care, rent, groceries, gas, clothing, and other costs rise while their check does not.

And it won't get any better for them in 2019. That's because the $500 billion cuts to Medicare (included in the GOP Tax cuts for the rich bill) will happen in that year. They can expect the Medicare deduction in their checks to again go up to help pay for the tax cuts for the rich.

The Republicans have once again shown they don't care about seniors (or anyone but the rich and corporations).

The Social Security COLA For 2017 is A Shameful 0.3%

This chart was made using figures from the Social Security Administration (SSA). The green line shows the cost-of-living-adjustment (COLA) for each year from 2000 to 2017. The red line shows the trend in COLA from 2000 to 2017 -- note that it's been decreasing since 2000.

After 2016, when no raise was given at all to Social Security recipients (COLA=0), the COLA raise for 2017 is only a pathetic 0.3%. That's less than half of one percent, and means someone getting a $1,000 monthly benefit in 2016, will get a $1,003 monthly benefit in 2017.

The SSA says it bases the COLA on the difference between the Consumer Price Index (CPI) in the third quarter of last year and the third quarter of this year (September 2015 to September 2016). That can't be right though. The CPI in September of 2015 was 237.945, and the CPI in September of 2016 was 241.428. That's an increase of 1.46% -- significantly larger than the 0.3% COLA for 2017.

That means the COLA for 2017 should be about 1.5% (or a $15 raise for someone drawing a benefit of $1000 a month). That may not sound like much of a difference to someone making a lot of money, but to someone having to exist on their Social Security benefit it makes a big difference.

And it gets even worse. The inflation rate for the first nine months of 2016 (January through September) was even higher (2.07%).  This means seniors relying on a Social Security check for their income will fall further behind next year, whether you use the CPI for the last 12 months (1.46%) or for the nine months of 2016 (2.07%). It seems obvious to me that Social Security benefits need to be raised -- especially for those making less than the median Social Security benefit.

The Republicans will not do that. They want to reduce current benefits and raise the retirement age -- something that would hurt most seniors, and throw many of them into poverty. Anyone receiving Social Security benefits, or getting close to applying for those benefits, would be either stupid or crazy to vote Republican in November.

Hillary Clinton and the Democrats want to raise benefits (at least for those making the smallest amount). They would lift more seniors out of poverty. And they would pay for it by making the wealthy share more of the cost -- as should have been done long ago.

Social Security benefits need to be raised, and the wealthy need to pay their fair share. Only the Democrats will do that. Remember that when you go to the polls this year.

Seniors To Be Tossed Under The Bus - No COLA in 2016

(Chart made from figures provided at ssa.gov.)

It's already tough enough for retired Americans to live -- especially those who rely entirely on Social Security monthly payments. The average Social Security benefit is about $1300 a month (or about $15,600 a year) -- and half of the recipients get less than that.

Recipients are supposed to be given a cost-of-living adjustment (COLA) to their benefit payment each year. But the government has announced that their will be no COLA for 2016. This marks the third time in the last eight years that no COLA will be provided for retired seniors.

The COLA is supposed to be based on the rise in inflation. So, it's fair to have no COLA since inflation didn't rise overall -- right? NO. The only reason inflation didn't rise was because of the huge drop in oil prices (which drove gas prices down). The problem is that doesn't help seniors nearly as much as many other Americans.

Seniors no longer have to drive to work every day. And they no longer have to drive their kids to school, extracurricular practices, and many other places. Seniors do very little driving. But their other expenses are going up -- things they must continue to pay for (rent, food, clothing, medicine and medical care, etc). While gas prices went down, those other expenses are still going up.

This means the buying power of the small Social Security payment received by many seniors will continue to go down -- as prices for what they really need rise without a corresponding rise in the benefit they get. It's just not right!

And now we hear the congressional Republicans want to make it even worse. To avoid a government default or shutdown, they are going to demand a change in the way the COLA is figured. They want it to be figured in a way that will insure a lower COLA is given each year. That won't affect them (since most of them are rich anyway), but it could be disastrous for those living on a Social Security benefit. It means they will lose buying power even faster than they currently lose it.

This is ridiculous. Instead of cutting the COLA, we should be raising the monthly Social Security benefit -- especially for those making less than the average benefit. But that won't be done as long as the Republicans control Congress. That makes it important to vote them out of office next November.

Social Security COLA Raise Will Be 1.7% In January

There is both good news and bad news for Social Security recipients this year. The good news is that there will be a cost-of-living-adjustment (COLA) in January of 2015 (unlike 2009 and 2010, when there was no COLA raise at all). The bad news is that it is only a tiny 1.7% increase -- one of the smallest increases in the last 15 years.

That means that a person receiving a check for $1000 a month right now will start getting $1017 a month in January. The average benefit is $1306 a month, which would result in a $22 raise per month.

But don't think most people get that average benefit. The median benefit (the amount where half of all recipients get less and half get more) is about $1192 a month. That means more than half of all recipients get less than the average benefit. Adding the 1.7% raise to the median benefit will put it at $1212 for 2015.

There is another small bit of good news. The Part B Medicare deduction will stay the same as it was in 2014 ($104.90 a month). That means Social Security recipients will get to keep all of the tiny raise they get in January.

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And while I'm discussing Social Security, let me remind you that the Republicans are telling two big lies about that program.

They say Social Security is going bankrupt. It is not! Social Security can continue to pay full benefits for another 22 years (until 2036). And after that, even if nothing is done, the program can continue to pay 80% of benefits far into the future. The program needs to be adjusted to make that 80% a full 100% -- but the program is not going broke, and it will be around when today's young people need it years from now.

They say that to save Social Security, benefits must be cut and the retirement age must be raised to 70 years of age. These are not only unnecessary, but hard-hearted. Many people in tough physical labor jobs cannot delay retirement until age 70 -- and with the median benefit being only around $1200 a month, cutting benefits would sink millions of recipients into poverty.

The Social Security program can easily be fixed without either cutting benefits or raising the retirement age. All that needs to be done is to raise the cap on FICA payroll tax to $250,000 (or eliminate it altogether). Raising the cap would extend the full benefit pay-out at least another 47 years (and eliminating the cap would push that far into the future) -- and it would do it without requiring a single penny more from those who can't afford it (those making less than $160,000 a year). It would just require the rich to pay the same percentage as working-class and middle-class earners already pay.