What If Chained CPI Had Been Used To Calculate COLAs SINCE 2002?
Doug Short | Apr 18, 2013 03:01AM ET
Each year the Social Security cost-of-living adjustment COLA is calculated based on the change from the Q3 average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the Q3 average of the previous year, rounded to one decimal place. If the average for the most recent year is below the previous high, there is no adjustment, as was the case in 2010 and 2011. Note that for 2011, the Q3 average was indeed higher than the 2010 average, but it was still below the 2009 average, hence no COLA.
The President's 2014 Chained CPI Versus the Standard CPI: Breaking Down the Numbers Note
: The BLS explains that "The C-CPI-U is issued first in preliminary form, and subject to two subsequent revisions. These revisions have been relatively small, and are expected to be small in the future. Revisions to 12-month changes in the All Items index, for example, generally have been 0.2 index points or less."
The latest Chained CPI spreadsheet from the BLS shows the monthly data points for 2013 as Initial. All data points for 2012 are labeled as Interim. It's unclear at this point how a future use of Chained CPI for Social Security COLAs would handle adjustments in the index calculations.
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