For anyone on a fixed income, inflation is always an enemy. It can slowly erode your purchasing capacity, and over time can render your purchasing power greatly diminished. Eventually, it can leave you with a dollar that is only worth $0.75. For beneficiaries of programs like Social Security Disability, who may receive payments for years, such erosion could become critical, as a limited income shrinks over time.
To prevent the hardship this would cause, SSD benefits are eligible for a Cost of Living Adjustment (COLA), which is based on the inflation rate as measured by the Consumer Price Index (CPI).
The CPI is based on the prices of a variety of goods that are assembled to approximate the items that people buy every year. It includes the prices food, housings, transportation and other typical expenses.
This year, because of falling gas prices, the calculated inflation rate is not enough to trigger a COLA. This can be both a good and a bad thing. For the disabled, it may be bad because they may not use as much gasoline as the “average” American. In addition, they may have to spend more on items such as health care or drugs that are actually increasing faster than inflation.
The problem is that CPI is designed to measure the expenses of “for Urban Wage Earners and Clerical Workers,” and not for the elderly or disabled. Advocates for those groups argue that the CPI-E should be used for programs like SSD, as it better reflects the costs they actually experience.
This would provide a greater increase to SSD; it would help beneficiaries, but would cost more. With the funding issues that the program faces, it seems unlikely that Congress will agree to increase the expense of the program, as it would likely require a tax increase.
Source: washingtonpost.com, “Lack of inflation is bad news for Social Security recipients: No cost-of-living increase in 2016,” Lisa Rein, October 15, 2015