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The federal government released an inflation measure that’s closely watched — for no good reason.
At issue is CPI-W, the Consumer Price Index for Urban Wage Earners and Clerical Workers. In July, it stood at 246.155. August’s level, which was released on Thursday, was 246.336. July and August’s levels are two of the three months used to calculate the annual cost-of-living increase for Social Security retirement benefits. The CPI-W for September will be the final factor in determining 2019’s benefits increase.
The average for those three months will be compared with the same three-month stretch in 2017, when CPI-W averaged 239.668. The cost-of-living increase will be based on the difference between those two averages. If September’s CPI-W matches the average of 246.246 for July and August 2018, the cost-of-living increase for Social Security in 2019 will be 2.7%. Got that?
Why am I bothering you with this arcane nonsense? There are two reasons.
First, it makes clear that increases in Social Security are determined by a formula spelled out by the law, and not by a decision made every year by politicians in Washington. In the past, retirees have blamed modest increases on the current president or Congress. That’s simply not true.
Second, the purpose of the cost-of-living increase is to keep pace with inflation, not to get ahead. If the increase in benefits is modest, it means price increases have also been modest, so retirees are no worse off.
All this highlights a major problem: Misinformation about Social Security abounds. On my own site, I devote a lot of time to correcting this misinformation. Let’s face it: We can’t have an honest discussion about the program’s future unless we stick to the facts.
Richard Quinn blogs at QuinnsCommentary.com. Before retiring in 2010, he was a compensation and benefits executive. His previous blogs include Tortoises Needed, That’s Rich and Sharing the Load. Follow Quinn on Twitter.
This column previously appeared on Humble Dollar. It was published with permission.