The Stanly News and Press (Albemarle, NC)

Opinion & Letters to the Editor

February 25, 2013

What’s the best ‘COLA’?


Monday, February 25, 2013 — The CPI tracks prices in a “market basket” of products and services typically bought by households. The prices are weighted by their relative importance to households’ overall spending – meaning, for example, gasoline gets a larger weight than a can of peas – and then the weighted prices are averaged and converted to an index for ease of comparison. So, for example, a CPI of 200 compared to a CPI of 100 indicates weighted average prices have doubled. CPI values can be found at

So the CPI sounds reasonable, right? Not everyone agrees. One criticism has been that changes in the CPI won’t reflect how prices change for every household, because people differ in what they buy in their market basket.

Of course, this is correct, but we shouldn’t expect the government to have a customized CPI for every household. However, while conceding this point, retired households have long complained that their spending patterns do markedly differ due to the larger proportion spent on medical care. This has led to calls for a special “senior citizen CPI” to adjust Social Security pensions.

But the new COLA conflict is over a different issue. It has to do with how frequently the market basket is updated. The current CPI assumes that what we buy changes infrequently, approximately every two years.

Of course, this is unrealistic. Therefore, a revised CPI – the “chained CPI” – has been developed. It is designed to reflect changes in household buying over time due to two factors: as new products are introduced or buying preferences change and as we shift out of products and services where prices have risen to products and services where prices have fallen or remained stable.

It’s the last factor that has created the controversy. Say the price of gasoline jumps. The traditional CPI would assume we would continue buying the same gallons of gasoline, so the full impact of the gas price increase would be reflected in the CPI.

Yet under the new chained CPI, there would be an assumption we would purchase slightly fewer gallons, so the “weight” in the gasoline component of the CPI wouldn’t be as large as with the traditional method.

This means inflation with the chained CPI will be more modest, and programs like Social Security will save money because pensions to retirees will rise at a slower pace. Indeed, calculations suggest Social Security could save more than $100 billion over the next decade if the chained CPI is used to adjust future payments.

This has led some to claim that using the chained CPI for the Social Security COLA would mean a cut in payments for retirees. Other say no, it’s merely a more realistic COLA that will extend the life of Social Security.

Since I’m now eligible to receive Social Security, I’ll be watching this COLA war if it is renewed. So, what’s the right COLA for you? You decide.


Text Only
Opinion & Letters to the Editor
  • Council asks veterans to seek office

    The terms of office for the leaders of the Stanly County Veterans Council ended June 30. A call is being sent to veterans council members requesting candidates for the four elective offices of the council. A meeting has been set for 6:30 p.m. Aug. 12 at the DAV building. All council members are urged to attend.

    July 28, 2014

  • Mike Walden The gains and gaps in our economy

    Twice a year, I pull out my cloudy crystal ball and attempt to make some predictions about the direction and pace of the North Carolina economy. I just finished my latest effort and, as usual, the results are a combination of pluses and minuses.

    July 28, 2014 1 Photo

  • Jason O. Boyd Yellow journalism takes on new form, people are dumber for it

    Time to get on the soapbox for a few minutes.
    Let me clear my throat. Eh ... hem!
    People are dumb.

    July 28, 2014 1 Photo

  • Brent Laurenz Special election adds to the mix

    RALEIGH – A busy slate of judicial elections this November got even busier recently when Judge John Martin of the N.C. Court of Appeals announced his retirement.
    A special statewide election to fill Martin’s seat will be added to the general election ballot, joining the four N.C. Supreme Court seats and three N.C. Court of Appeals races already slated for this fall.

    July 25, 2014 1 Photo

  • Patrick Gannon Fake news or sign of some more trouble?

    RALEIGH – Of the three situations I can recall where agencies receiving large sums of taxpayer dollars wouldn’t divulge employees’ salaries, two of them ended badly. The third – involving a group of charter schools in Southeastern North Carolina – is playing out right now.

    July 25, 2014 1 Photo

  • Almost half of America's obese youth don't know they're obese

    WASHINGTON - The good news is that after decades of furious growth, obesity rates finally seem to be leveling off in the U.S.. The bad news is that America's youth still appear to be dangerously unaware of the problem.

    July 23, 2014

  • Darth Vader is polling higher than all potential 2016 presidential candidates

    On the other hand, with a net favorability of -8, Jar Jar is considerably more popular than the U.S. Congress, which currently enjoys a net favorability rating of -65.

    July 23, 2014

  • D.G. Martin Where did all these new voters in North Carolina come from?

    “Voters born elsewhere make up nearly half of N.C. electorate.”
    So begins the latest DataNet report from the UNC Program on Public Life, directed by former journalist Ferrel Guillory.

    July 23, 2014 1 Photo

  • Patrick Gannon Some light for Dems in their time of darkness

    RALEIGH – Earlier this year, state Sen. Ben Clark, a Hoke County Democrat, became a hero for a day among his party and environmentalists when his amendment to require more well water testing near future fracking sites passed the Senate. It even gained the support of a number of GOP senators, against the wishes of the Republican bill sponsor.

    July 23, 2014 1 Photo

  • mama.jpg What we get wrong about millennials living at home

    If the media is to be believed, America is facing a major crisis. "Kids," some age 25, 26, or even 30 years old, are living out of their childhood bedrooms and basements at alarmingly high numbers. The hand-wringing overlooks one problem: It's all overblown.

    July 22, 2014 1 Photo

House Ads
Seasonal Content