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Progressives Say 2.5% COLA Increase Is a Reminder That Social Security Is on the Ballot
"Older Americans should pay close attention and make sure they support candidates who will protect the benefits they have earned—and even increase them—in the fast approaching November elections," said one advocate.
Oct 10, 2024
The cost-of-living adjustment announced Thursday by the U.S. Social Security Administration for more than 72 million senior citizens should serve as a reminder, said economic justice advocates, that the monthly Social Security payments—the "bedrock" of financial security for 58% of recipients—are on election ballots this year.
The administration announced a 2.5% cost-of-living adjustment, commonly known as COLA, for 2025. People who get retirement benefits through the broadly popular New Deal-era program will see their payments adjusted starting in January 2025, and people with disabilities who rely on Supplemental Security Income (SSI) will receive increased benefits starting in December.
To Nancy Altman, president of Social Security Works (SSW), which advocates to protect and expand the program, the COLA announcement underscored the vast differences in how Democratic Vice President Kamala Harris and former President Donald Trump are likely to approach the Social Security program should they win the presidency in November.
Harris and her running mate, Minnesota Gov. Tim Walz, both co-sponsored legislation to update the COLA formula to better reflect the cost of living for seniors and people with disabilities, noted Altman.
"Republicans have a different perspective," she said. "The Republican Study Committee (which comprises over 80% of House Republicans) proposes annual budgets that include Social Security cuts. Page 104 of the Fiscal Year 2025 Republican Study Committee Budget calls the automatic nature of COLAs a 'problem' and implies that they should be subjected to annual Congressional approval. It also claims that the current COLA formula is too generous. Social Security beneficiaries likely disagree!"
The authors of Project 2025, the right-wing policy agenda co-written by dozens of people who worked in the Trump White House from 2017-21, have also endorsed increasing the full retirement age from 67 to 69, which would cut benefits for nearly three-quarters of Americans.
The current formula for the COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), but advocates have called for the Social Security Administration (SSA) to instead take into consideration the CPI-E, which measures the spending of Americans 62 years of age and older.
"The formula currently used to calculate annual COLAs under-measures the expenses that Social Security beneficiaries face," said Altman. "Seniors spend a greater proportion of their income on medical expenses―and the Social Security COLA should reflect that."
For beneficiaries who last year received $1,870 per month, the 2.5% increase will give them an additional $46.80 each month, Social Security and Medicare policy analyst Mary Johnson toldNewsweek.
"That's only going to buy about 14 gallons of gasoline per month at today's prices, or maybe enough groceries for one to last two or three days," she added.
Richard Fiesta, executive director of the Alliance for Retired Americans, said the group welcomes the COLA, but warned that "many older Americans struggle to make ends meet and afford even the most basic necessities like housing, food, and prescription drugs."
"We need a COLA that better reflects how seniors spend their money," said Fiesta. "Strengthening Social Security and increasing benefits must be a national priority. If billionaires and the top 1% pay their fair share into the system, we can afford to increase benefits across the board and ensure Social Security is there for our children and grandchildren."
"Raising the retirement age, slashing benefits and privatizing the program are among retirees' top concerns," he added. "Older Americans should pay close attention and make sure they support candidates who will protect the benefits they have earned—and even increase them—in the fast approaching November elections."
Rep. John Larson (D-Conn.) pointed to the Social Security 2100 Act, legislation that would apply federal payroll taxes to earnings above $400,000 to ensure millionaires and billionaires pay their fair share toward funding and expanding Social Security.
"There is an urgent need to act to not only protect Social Security from the cuts that my Republican colleagues have proposed [but to] enhance benefits," said Larson.
Ahead of the elections, said Altman, "the bottom line is that Democrats want to make annual COLAs more accurate and generous, while Republicans want to make them stingier."
"Democrats also support other policies that would lower costs for Social Security beneficiaries, including Harris' recently released plan to expand Medicare to include home care, hearing, and vision benefits," she said. "Older voters should bear that in mind this November."
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Instead of Blaming Policymakers for High Prices, Thank Them for High Wages
The inflation of recent years was—sadly—inevitable; the fast wage growth over the past four years was made possible entirely by proactive policy decisions.
Oct 10, 2024
Last week, the Bureau of Labor Statistics reported that 254,000 jobs were created in September and that job growth in both July and August was stronger than initially reported. This report was just the latest confirmation of the extraordinary strength of the U.S. labor market in recent years. This strength is what led to real (inflation-adjusted) incomes recovering far faster after the Covid-19 recession than they have following previous recessions. Even better, real wage growth has been by far the fastest at the low end of the wage scale, which has reduced inequality.
This labor market strength was also 100% a policy choice. Unlike previous business cycles, policymakers passed fiscal relief and recovery measures at the scale of the shock, and it proved that low unemployment could be restored very quickly after recessions so long as this policy lever was pulled with enough force.
Public appreciation of this accomplishment has been blunted by the outbreak of inflation in 2021 and 2022. While inflation has been steadily reined in since early 2023, the public’s perception of the economy remains soured by it. In a strict economic sense, the public mood seems odd: If real wages are higher and more equal now than at equivalent points in previous recoveries, why isn’t the public mood much better?
Policymakers who chose not to target significantly higher unemployment rates to tamp down inflation made the correct judgement that inflation was mostly driven by shocks that would fade even with labor markets remaining strong.
One reason put forward as to why the public dislikes inflation even if real wages and incomes are rising is pretty persuasive: Workers see wage growth as something they individually achieved while inflation was a policy mistake inflicted on them. This outlook is understandable, but it’s totally wrong.
Policy choices influence wage growth every bit as much as inflation—and sometimes more. When wage growth is slow, policymakers deserve blame—not workers. When wage growth is strong, however, it is because policy has done something right, not because workers spontaneously decided to become more productive or harder-working.
It is deeply damaging to U.S. policy debates that this is not more broadly appreciated.
For decades when wage growth for the vast majority of workers was anemic, these workers were often told it was because they weren’t skilled enough to keep pace with the demands of technological changes and globalization. This was false. It was intentional policy decisions that suppressed wage growth in those decades, policy choices meant to redistribute income upwards toward capital-owners and corporate managers.
In the past four years, workers have seen fast wage growth not because they are working more productively or harder—U.S. workers have always been the most productive in the world and have always worked hard. What changed was that policymakers decided to target a rapid return to sustained low unemployment, keeping unemployment below 4.5% for the longest stretch of time since the Vietnam War. In 2021, these tight labor markets were also accompanied by unprecedently large and expansive unemployment insurance benefits and cash transfers to households. These public supports gave workers more breathing room than ever before to be choosy about which jobs they took. These policy choices are why wages grew so fast so early in the pandemic recovery.
In fact, over the pandemic recovery, the policy fingerprints on fast wage growth are far clearer than those on too-high inflation. Inflation after 2019 was driven by two global shocks—the pandemic and the Russian invasion of Ukraine. Inflation accelerated everywhere in the advanced world, and the precise amount by country was wholly unrelated to policy choices they made.
The most common critique of policymakers is that the Federal Reserve should have engineered softer labor markets and tolerated higher unemployment to break inflation’s momentum. This thinking is wrong. There is a long and extremely well-developed literature nearly unanimously showing that higher unemployment has larger and more reliable effects in reducing wage growth than it does in reducing inflation.
Policymakers who chose not to target significantly higher unemployment rates to tamp down inflation made the correct judgement that inflation was mostly driven by shocks that would fade even with labor markets remaining strong. That is, they chose to not sacrifice wage growth (and the jobs of millions of workers) to pull down inflation.
In short, the inflation of recent years was—sadly—inevitable. The fast wage growth over the past four years was made possible entirely by proactive policy decisions. Getting this straight is crucial for getting better policy going forward. And it should make the public much more appreciative about the macroeconomic choices made since 2020.
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'Wowza': Economy Added 254,000 Jobs Under Biden-Harris in September
"This labor market," said one economist, "is the result of policy choices that prioritized full employment—as it turns out putting people first, works."
Oct 04, 2024
Friday's job report from the Bureau of Labor Statistics offered a "better than expected" picture of job growth as federal unemployment hit 4.1% and more than a quarter-million people were added to the payroll last month alone.
In what ABC Newsnoted was "one of the last major pieces of economic data before the presidential election," the jobs report offered an indication of economic strength—a possible boon to outgoing President Joe Biden's legacy and a political advantage to Democratic presidential nominee Vice President Kamala Harris ahead of November 5.
"U.S. hiring surged in September," the news outlet reported, "blowing past economist expectations and rebuking concern about weakness in the labor market."
Former Labor Secretary Robert Reich responded to the new data Friday morning by pointing out that "more jobs have been created during the Biden-Harris presidency than during any single presidential term in history."
Donald Trump "doesn't often tell the truth, but he was right about this," added Reich, who quoted the GOP presidential candidate in 2004 admitting that "the economy does better under the Democrats than the Republicans."
More jobs have been created during the Biden-Harris presidency than during any single presidential term in history.
Trump doesn't often tell the truth, but he was right about this:
"The economy does better under the Democrats than the Republicans." — Donald Trump in 2004 pic.twitter.com/32XQnqbbb1
— Robert Reich (@RBReich) October 4, 2024
"Wowza," said economist Justin Wolfers, a professor at the University of Michigan and a senior fellow at the Brookings Institute, in response to Friday's report.
Mentioning how payrolls grew by over 254,000 in September—"well above expectations"—and that large upward revisions were made to the August and July payroll numbers, Wolfers said the overall picture shows an "economic expansion that is motoring along."
September jobs report: US economy adds 254,000 jobs vs. 150,000 expected pic.twitter.com/fUZvzx8tuK
— Yahoo Finance (@YahooFinance) October 4, 2024
"It was 'wow' across the board, much stronger than expected," Kathy Jones, chief fixed income strategist at Charles Schwab, toldCNBC. "The bottom line is it was a very good report. You get upward revisions and it tells you the job market continues to be healthy, and that means the economy is healthy."
Pointing to a recent analysis by her colleague Josh Bevins, Economic Policy Institute (EPI) economist Hilary Wething on Friday credited the strong performance represented by the new jobs numbers as the result of specific policies by the administration.
"You might think we just magically stumbled upon a consistently strong labor market—but no, this labor market is the result of policy choices that prioritized full employment—as it turns out putting people first, works," said Wething.
Elise Gould, a senior economist at EPI, also championed the "strong" figures:
In a blog post on Thursday, ahead of Friday's report—Gould detailed the strength of the labor market, despite the real pain that many workers and families still feel in their day to day lives:
It is indisputable that the U.S. labor market is strong. The share of the population ages 25–54 with a job is at a 23-year high, median household incomes rose 4.0% last year, and real wage growth over the last four years has been broad-based and strong. The economy has not only regained the nearly 22 million jobs lost in the pandemic recession, but also added another 6.5 million.
Are some folks still having a hard time? Absolutely. Even when the unemployment rate is low, there are still sidelined workers, and it remains difficult for many families to make ends meet on wages that are still too low. Unfortunately, that's a long-term phenomenon stemming from a too-stingy U.S. welfare state, rising inequality, and the legacy of anemic wage growth during past economic recoveries. But when comparing the labor market with four years ago (during the pandemic recession) or even before the pandemic began, the answer is clear: More workers have jobs and wages are beating inflation by solid margins.
With the Federal Reserve easing interest rates, in part based based on the strength of the hiring trends alongside lower inflation, Friday's jobs report was welcomed as a show of strength for progressives who have argued since the Covid-19 pandemic that pro-worker policies—as opposed to endless fealty to the demands of corporate powers and Wall Street—alongside public investments can work together to create strong economic foundations for the nation.
"Today's strong jobs report confirms once again that we never had to throw millions of people out of work to tame inflation," said Kitty Richards, a senior fellow with the left-leaning Groundwork Collaborative.
"Thanks to big investments in [pandemic] relief, manufacturing, and green energy, inflation is low, and the economy is still delivering for workers," Richards said. "The pundits who said we couldn't have low unemployment, growing wages, and stable prices at the same time have been proven wrong."
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