2012 SSA COLA Watch (March Report – Updated Monthly)

For the most current information on the latest Department of Labor CPI-W release and its potential effect on Social Security and SSI COLAs, please follow this link to see my most recent post on this topic. Thank you.

Social Security determines its succeeding year’s COLA in October each year by comparing the average CPI-W for July through September of that same year to the average CPI-W for July through September of the last year which produced a COLA. I call this the “baseline.”This year, the baseline we are working from is the period from July through September, 2008, which generated a 5.8% COLA in 2009. The average CPI-W for July 2009 through September 2009 and the average CPI-W for July 2010 through September 2010 did not exceed the baseline (the 2008 average.)

The Baseline CPI-W Amounts

July 2008 CPI-W: 216.304

August 2008 CPI-W: 215.247

September 2008 CPI-W: 214.935

2008 Average CPI-W: 215.495. This is shown as the bottom gray line on the graph.

Since then the CPI-W has been lower, until January, 2011. The months we are now concerned with are July through September, 2011. What happens before then shows a trend line and may be predictive.

Current CPI-W Amounts

July 2010 CPI-W: 213.898

August 2010 CPI-W: 214.205 (+ 0.14%)

September 2010 CPI-W: 214.306 (+ 0.05%)

(The average CPI-W 07/10 thru 09/10 Was 214.136)

October 2010 CPI-W: 214.623 (+ 0.15%)

November 2010 CPI-W: 214.750 (+ 0.06%)

December 2010 CPI-W: 215.262 (+ 0.24%)

January 2011 CPI-W: 216.400 (+ 0.53%)

February 2011 CPI-W: 217.535 (+ 0.52%)

Graph showing CPI-W For July, 2010 Through February, 2011

CPI-W For July, 2010 Through February, 2011

The bottom gray line crossing the chart horizontally at 215.495 reflects the baseline CPI-W which has to be exceeded by the average for July through September, 2011, for there to be any COLA at all in 2012.

The top gray line shows the average needed for July through September 2011 for a 1% COLA, 217.650. We’re almost there, in February. An increase of about 0.05% in the CPI-W will put us over the 1% line. This seems more than likely as food, energy, and commodity prices all increase, with no end in sight. Then we can hope for an average CPI-W of 219.800, which is what we would need for 2% COLA. This would take an increase of about 1.0% in the CPI-W from where we are now to achieve. Remember, though, it’s where we are in July through September that matters.

The April report from the Bureau of Labor Statistics, showing the March 2011 CPI-W, will be released April 15th. Check back.

I thought it would be interesting to take a look at what happened in the summer of 2008, when the price of oil rapidly inflated, which inflated gasoline and diesel fuel, which inflated nearly everything else. The following graph clearly shows this, as prices hit their highest point In July, 2008. Soon after that, in early September, 2008, with the demise of Lehman Brothers, the stock market collapse began, as did the great recession of 2008-2009. Prices fell like a stone, and not until December, 2008 (according to the Bureau of Labor Statistics), did they begin their slow (again according to the Bureau of Labor Statistics) climb which has continued to this day. (Note: The small, horizontal gray line at 215.495 represents the 2008 baseline amount. We just got back to this level in January, 2011.)

Graph Showing CPI-W For January, 2008 Through March, 2009

CPI-W For January, 2008 Through March, 2009

I bring this up just to show that a spike in inflation may be quite transitory, according to the Bureau of Labor Statistics, and that whatever they choose to report may have only a passing resemblance to the actual costs we pay. I know that my costs over the last 18 to 21 months have steadily increased by at least 10%. My grocery costs have increased more than this.

Editorial Comment

Repeated verbatim from last month’s report.

I do not trust Obama’s Department of Labor to figure the CPI-W honestly. For one thing, the numbers the Bureau of Labor Statistics are not “seasonally adjusted.” Once they are, they will probably be lower. We may feel the inflation, but the “official” numbers can easily be manipulated so that Social Security beneficiaries (and others whose COLAs are based on the increase in the CPI-W) can go one more year with no COLA. All in the name of deficit reduction. A 1% COLA would cost somewhere between $6 billion and $7 billion in 2012, and each year thereafter. A 2% COLA would cost twice as much.

Medicare

This information is also repeated verbatim from preceding reports.

If we get a Social Security COLA in 2012, Medicare Part B premiums will increase by a significant amount.

Part B premiums have been kept at the 2009 amount, $96.40, in 2010 and 2011, for about 75% of beneficiaries who were eligible for Part B prior to January 2010. According to law, the Social Security check amount cannot be decreased, so beneficiaries entitled before January 2010 could not have their Medicare Part B premiums increased. The Trustees project that the 2012 Part B premium amount will be $111.40, based on the assumption that there will be a COLA in 2012. This is an increase of $15.00.

The average Social Security beneficiary receives $1170.00 per month. Let’s say that we do get a 1% COLA in January, 2012. That would mean that the COLA to a beneficiary receiving the average amount would be an increase of $11.00. This is less than the projected increase in the Medicare Part B premium, so the COLA for a beneficiary receiving the average amount would be entirely absorbed by the Part B increase, with $4.00 left over to be applied to the 2013 COLA (if one is payable) along with the 2013 Part B premium increase.

If the COLA is 2%, the increase for an average beneficiary would be $23.00. After his Part B premium increase was deducted, he would see a net increase of $8.00.

Wow.

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23 Responses to 2012 SSA COLA Watch (March Report – Updated Monthly)

  1. OooSillyMe says:

    Wow indeed.

    • jerry warriner says:

      The people who compute the Social Security COLA are either living in a fantasy world or are deliberately manipulating statistics to reduce government spending.

      They ought to visit a supermarket and check the rising cost of groceries. During the last year the cost of filling my car’s gas tank has increased by more than $5. Prices for household items have also increased. Manufacturers of appliances — for example, fans — replace older models with more expensive, newer ones that are made of cheaper materials.

      I try to compensate by shopping at Walmart, Dollar Tree, 99 cent stores, Costco and “outlet” stores — where department stores sell pricey merchandise for one-tenth of what they charge in their retail stores.

      Every year gas, electric and cable providers increase the cost of their services. Although I’ve never received a traffic ticket, many states are gouging motorists by levying fines of up to $,1000! How is an SS recipient supposed to pay that? Does the CPI factor in rent increases?

      The CPI needs to take into account the high cost of living in various regions, but I guess that’s too much trouble.

      To put it simply, the whole system stinks!

  2. ssapotluck says:

    Don’t spend it all in one place!

  3. John says:

    This was a fine analysis, and I am very grateful for this page. It not only gives an astute description of the details, but a general upshot of the whole process and trend. Many thanks to the author for such a helpful page and really contributing an asset of information to the web. Again, I am very grateful, as I am sure many others are as well. I’ll definitely be keeping an eye on this page, as I only have $696 per month to live off of from SSI and State Supplemental combined; and these food price hikes are becoming quite worrisome.

    • ssapotluck says:

      Thank you for the very kind remarks. I do get a lot of people looking at this page so I believe I am providing a helpful resource here. The BLS is supposed to release the March CPI data on April 17 (assuming that a government shutdown, if it happens, doesn’t delay that) so within a day or so I will put up my report. I certainly understand your concern about coping with the rising cost of food on a fixed income. If Social Security gets a COLA, so will SSI, at the same percentage, though the state may or may not pass it along. States have been known to decrease their supplements by the same amount that the SSI Federal Benefit Rate was increased. Considering the anti-conservative politics which are now dominating so many state capitols, I don’t think this is too likely, but there is no way to know what any particular state will do.

      If you ever have any questions that you don’t want answered in public, feel free to email me at socialsecuritypotluck@gmail.com.

      Thank you again for your response.

  4. Donna says:

    If the colas are adjudicated using the CPI for the months of July-September, that means the cost of heating fuel is not calculated.

  5. ssapotluck says:

    Thank you for your response. Heating fuel doesn’t count for very much during the summer months, according to the Bureau of Labor Statistics. According to their August, 2010 report, Household Energy cost 4.5% of the total spent by the average household. Of this, 4.2% was spent on Gas (Piped) and Electricity, and 0.3% was spent on Fuel Oil and Other Fuels. The March, 2011 report (which used percentages determined in December, 2010) the percentages were essentially the same (4.3% and 0.3% respectively.)

    One thing that the current report shows is that heating fuel has increased in price at a greater rate than the overall CPI-W. In terms of 1982 dollars, heating fuel has increased 341.4%, compared to the overall CPI-W, which has increased 220.0%. Gasoline has increased 304.4%.

  6. Ray Adams says:

    Is it true that the cola computation has excluded the energy and food costs just so there will be no cola for 2011and 2012?

    • ssapotluck says:

      Thank you for your comment.

      BLS does track inflation both with and without food and energy costs. Their thinking is that the latter provides a better measure of the true degree of inflation. I disagree. Everyone buys food, and increased fuel costs are reflected everywhere in the economy. But it doesn’t matter. How COLAs are calculated is specified in the law and implementing regulations.

      Section 215(i)(1) of the Social Security Act provides the legal basis for COLAs. It refers to the “Consumer Price Index for that quarter (as prepared by the Department of Labor)” but doesn’t specify which one — the BLS prepares several indices.

      However, the implementing regulations (20 CFR (Code of Federal Regulations) §404.272) provide that the COLA will be based on “(t)he revised Consumer Price Index (CPI) for urban wage earners and clerical workers as published by the Department of Labor” (the CPI-W) for the foreseeable future. There is a provision that would base the COLA on a different metric, but that only will take effect when the combined OASI and DI trust funds are virtually exhausted, in around 2037 if the law is not changed.

      I apologize for the length of time it took to get your comment up. I have had a small personal emergency which has diverted my attention from the blog. It will be resolved in a couple of days, and things will return to normal.

  7. guard says:

    Well, this is quite interesting indeed. Would love to read a little more of this. Great post. Thanks for the heads-up.

    • ssapotluck says:

      Thank you for your comment.

      I will be posting a new “2012 COLA Watch” next Saturday, after the BLS releases its April data. I am anticipating a slight slowing in the rate of increase, which may show up as early as April. The price of oil is dropping now, as is the price of gasoline.

  8. roger coffey says:

    More and more retired people on ssn, will be forced to do as I and many others have done. Leave their country, retire in a foreign country in order to survive. Thanks to those creeps they call politicians, I now, like many others, after 50 years of work and paying taxes have received the real American dream, for me that has become a nightmare. Their representatives in government showing their real feeling towards the retired people. I am not anti-American, I love my country. I am a vet and proud of it. To all my representatives in the USA government, thanks for nothing, may you receive equal to what you gave people like me.

    • ssapotluck says:

      Thank you for your service to the country. I, too, am a veteran, in addition to being a long-time Federal employee. I couldn’t agree more with your comments.

      Benito Mussolini, who coined the word “Fascism” is quoted as saying, “Fascism should rightly be called Corporatism, as it is the merger of corporate and government power.” That is what we have going here. This has been happening since the conservative wing of the Republican party became more and more enmeshed with corporations, beginning in the 1960s and accelerating beginning in the 1980s. It has gotten to the point where corporate power and influence are all that most of our elected officials respect or represent. The rest of us can go to hell. Mussolini always felt that the US would eventually abandon democracy and embrace fascism. We are close now.

      This is why I urge people to speak up, to protest. I believe that the pendulum will swing back. I also believe that 2012 will be a very bad year for conservative Republicans. I can certainly understand why you would feel the way you do. I hope that you stay here and join in the protest. They may have the money, but we have the numbers, and, to (partially) quote Abraham Lincoln, “…you can’t fool all of the people all of the time.”

      Again, thank you for reading my blog and for your heartfelt comment.

  9. kelly says:

    Wow! The government is no longer for and by the people. It’s capitalism going socialism! Politicians are a group of people who have no effect by themselves, only as a group, and they spend a majority of their time wasting it! They are not there to help the people, they are setting up what is beneficial to them, regardless of the outcome. I live in IL, and 2 governors in a row have been convicted of felonies for pay to play and selling the senate seat! Outrageous! The poor get poorer! Sad but true!

    • ssapotluck says:

      The poor may get poorer, but they get louder too. Look at what is going on in the states right next to yours. Recalling state senators in Wisconsin. Putting SB5 on the November ballot in Ohio. Protests and demonstrations all over the place.

      By the way, it isn’t “capitalism going socialism.” The countries in the world which have the best and fairest economies are what are called “Social Democracies.” They provide, or make sure that private industry provides, decent universal health care, education through either college or post high school vocational school, attendant care for the elderly, disabled, and others who need it (in France, for example, physical assistance at home is provided to new mothers.) Money is spent to keep the country’s infrastructure in good shape. Unemployment is a problem all across the world, but many social democracies have much better systems of unemployment compensation than that which exists here. Here is a chart you may find interesting. It is the CIA Factbook’s ‘Country Comparison::Unemployment Rate.

      This country is headed the other way. The conservatives have been yelling “Socialism” at every social program designed to make the lives of ordinary people more secure. Where we are headed is toward a form of government called “corporatism,” a term coined by Benito Mussolini. To him, corporatism meant the merger of corporate power and government power. He despised democracy, and predicted that the US would one day move away from democracy toward corporatism, which is what has been happening since 1980 or so. Now we will need to fight back on election day to keep our few social programs intact by turning out every conservative from government. The right has had its way for too long now, and too many people have been hurt by it. They are the true anti-Americans.

    • ooosillyme says:

      I agree with everything you say except for the socialism….we could use more of that for the people instead the politicians give to the rich and corporations and say the social spending is runaway…..they aren’t fooling us any more.

  10. I am not a political person ( or at least I dont consider myself one )
    Before I even graduated high school I was already working in the consumer/retail market. After graduating I needed a better job. (yep walmart was a temp job in 1999) I started working for a Plastic Injection molding facility. I only worked for a few months. At the age of only 21 I fell on my back from 13 feet and permenantly injured my spine. To this day I get to live with that injury day in and out still with no permanent relief. I know nobody likes to divulge how much money they make a month but I have a good one for you! I recieve LESS than $700 a month for disability and I only get $27 a month for food stamps. Yep you read right…. I have a roof over my head and healthy food to eat and can even afford a few luxeries once in a while like maybe going to a movie once or twice a year. PINCH THOSE PENNIES! I belive that were in such a dire economic crisis because everyone feels like they deserve more. Yes I wished I had a little more. But really…. Why do I keep hearing about people getting these huge SSI and or SSDI payments of over $1200 a month? HOLEY CRAP! I have Medicare/Medicaid. Yes I pay my own co-pays. Yes money is extremely tight. But I am not in debt to anyone! I just personally feel that if people just watched their spending more we would not be in sure a dire situation like we are in now. People should just simply learn that if you dont have the money DONT BUY IT…. Credit cards are just simply a disaster waiting to happen. Why should our country have such a HUGE debt crysis? If only our government leaders could learn about spending from a measly person such as me maybe we wouldnt be in such a freakin disaster!

    PS: My SSDI comes in on the 3rd of the month…. Yep I am completely freaked out even though I know how to budget my life. Thanks government for messing up out country.

    And to prevent others who would love to slam me for being on SSDI at such a young age… Think of this: What if you were in my shoes? I still buy my groceries here in the US therefore I still technically pay taxes. So not all my income is mine to keep. Every time I pay my utility bill, there goes more to taxes. I live in a messed up city where the city tax is 8.9 percent. Then figure in State tax on top of that every time I go to the grocery store…. NICE. Oh whell. At least sunshine is still free for the moment.

    • ssapotluck says:

      Gabriel,

      Thank you for your comment.

      First of all, I want to tell you that there are a lot of young people who became disabled early in their working lives, either through a catastrophic accident, as in your case, or through illness. Chronic and/or fatal illnesses strike the young too. There is no shame in receiving SSDI or Food Stamps or Medicare or Medicaid. All societies owe all their citizens food, shelter, and medical care. I mean the word “owe” very strongly. If a society cannot provide these basics to all its citizens, it cannot claim to be civilized.

      I agree that your SSDI of $700 is lower than the average, but the amount you get is based on the earnings you had prior to the quarter in which your disability began. I congratulate you on your ability to live within your income. My wife and I are both disabled, though we are quite a bit older than you, and we struggle to keep our expenses under our income. I know from personal experience what you are up against.

      The budget deficit, which has increased sharply since the early 1980s, and even more sharply since 2001, is a deliberate political strategy of the Republican party. The idea is to put the country so deeply in debt that the government must be cut down in size. As anti-tax activist and billionaire Grover Norquist so memorably put it, “I don’t want to destroy the government, I just want to shrink it enough to drown it in the bathtub.” According to the conservatives, the only things government should pay for are war and making rich individuals and corporations richer. This squeezes out the ability to pay for necessary social spending, or education, or infrastructure maintenance, or anything else.

      The last three years of Bill Clinton’s presidency were years of budget surpluses, not deficits. Clinton handed over to Bush a budget which was actually shrinking the national debt, and Bush blew it up. On January 20, 2001, the national debt was about $5 trillion (largely from Reagan’s two terms.) On January 20, 2009, when Obama became president, the national debt was just under $10 trillion. Bush and the Republican Congress he had for the first six years of his presidency rammed through two wars, which included huge amounts paid to private contractors or outright stolen and the lifetime medical costs of tens of thousands of maimed or mentally disabled veterans, two tax cuts which mainly benefited the rich, and Medicare Part D, which helped seniors a little bit but helped big Pharma with nearly $100 billion each year. None of this was in any way paid for, and added $500 billion to $700 billion to the national debt each year. These things are still adding to the national debt each year.

      When the economy crashed in the fall of 2008, Bush pushed through the Wall Street bailout. Another trillion dollars. The big banks are now richer than ever. In 2009 Obama pushed through the stimulus bill to try and end the recession. The Republicans saw to it that about half went to tax cuts, which aren’t very stimulating. Yet another trillion added to the national debt, but this one was necessary. When people have no money to spend, and corporations sit on their trillions refusing to spend a nickle of it, then it’s up to the government to try and get the economy going. The only good way to do this is government spending, focused on things which create jobs. FDR did the same thing in his first term, and the great depression lightened up. During his second term, under fierce pressure from Republicans, he pulled back from government spending and instead tried to reduce the deficit created during his first term. The depression got worse, and stayed that way until WWII, when government spending ballooned.

      But now we have a national debt of $14.2 trillion. It is too big to fix through budget cuts. There have to be tax increases too, and they need to be focused on the millionaires and billionaires. No one will ever get this through the 112th Congress’s House of Representatives, who view letting a tax cut expire as a deliberate tax increase. As long as the Teabagger insanity rules the Republican party, nothing meaningful will be done to reduce the deficit. The only things the Teabaggers will consider are things that directly hurt the middle class, such as cutting Social Security or Medicare.

      You say you are not political. Whatever your political beliefs are, it is time for you to start contacting the President and your Congressman and Senators and telling them what you expect from them as a condition for receiving your vote next year. It does matter. They do keep track of these contacts.

      By the way, I think you will get your Social Security check on the 3rd. The federal government’s income in August is projected to be about $200 billion. Treasury will have this amount to spend regardless of what happens to the debt ceiling. I think it will go to fund the wars, Social Security and a few other programs which directly benefit citizens (because Obama wants to be reelected), and interest on the national debt, to prevent default on loans to the government.

  11. Courtney says:

    FYI the current Medicade Part B Premium is $115.40 per month. In 2010 it was 110.50 per month So your prediction for 2012 is off. Those are pretty simple #s to find so I kind of question your other #’s on here.

    • ssapotluck says:

      Courtney,

      These are the full amounts for 2011 and 2012. We will all see the 2012 amount together in January. Roughly 3/4 of Part B beneficiaries are only being charged $96.40 in 2011 due to the “Hold Harmless” provision of the Social Security Act. This provision makes it illegal for Social Security check amounts to be decreased when there is no COLA and Part B premiums if allowed to increase would reduce the Social Security check amount. If you need any further clarification please write back or email and I will give you a specific reference. I worked with this material for 22 years, so I think it is safe to trust me. 😉

  12. Dave Elmore says:

    Why give retires a cola when the gov’t is going to take away for medicare. This hurts a lot of people. I am paying $110.00 amonth for medicare and at my work they take out $14.00 a month.I look at it as I am paying $124.00 amonth. How much more does the gov’t. want? This really hurts people on a fixed income.

    • ssapotluck says:

      Hello, Dave

      Thanks for writing and for your comment.

      The Medicare Part B premium will be reduced to $99.90 in 2012. I do not know how the Health Care Financing Administration (HCFA) determines the Part B premium each year. They aren’t part of SSA. I do know that one reason the Part P premium decreased is due to the increasing effect of the Affordable Care Act (what the Republicans derisively call Obamacare) on the overall costs of health care.

      Our government has little control over what private health care insurers charge, but effective December 1st, 2011, just a couple of days ago, a provision of the Affordable Care Act took effect. Beginning that date, private health care insurers are required to spend 80% of premiums on paying for medical care. They are limited to 20% for other expenses, such as CEO salaries, better buildings and new office furniture, seminars for management at resorts, lobbying, and profits. Before December 1st, there was no limit on how much insurers could spend on these items, or on how little they had to spend on actual health care. Some insurers had spent as little as 65% on actual health care. The insurers hate this provision, and it remains to be seen how our government will enforce it.

      Things will get better. Good luck.

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