Be wary of political leaders looking at COLAs at all, given entitlement program spending that already is broadly reviewed as unsustainable. Image: Rosie Apples/Shutterstock.com
By: FEDweek StaffThe thought behind the phrase “be careful what you ask for because you might get it” and its variants has been traced to both ancient Greece and ancient China. It underlies some of Aesop’s fables, myths such as King Midas, books such as The Monkey’s Paw, and tales of rubbing a genie’s lamp.
The message is that granted wishes can backfire, resulting either in too much of a good thing or negative, unexpected consequences.
That’s worth considering amid the ongoing push to change the basis for calculating inflation adjustments in programs such as federal retirement benefits, by using an inflation measure specifically designed to reflect spending by older persons.
Bills are again pending in Congress to use the “CPI-E” rather than the general CPI-W—the CPI for Urban Wage Earners and Clerical Workers—now used in federal retirement, Social Security and many other programs. The “E” stands for elderly, in this case defined as those age 62 and over (note: ask a 62-year-old what it feels like to be elderly and see what kind of reaction you get).
That usually would result in COLA adjustments larger than those produced by the index currently used, says a report from the Congressional Research Service—but that would not necessarily be the case.
The report referred to the measure as the R-CPI-E—the R standing for research, since the measure is considered experimental even though the Labor Department has been calculating it since the 1980s. “Historically, the R-CPI-E has grown faster than the CPI-W has because a larger portion of spending by the elderly goes toward health care expenditures and other items that are weighted more heavily in the R-CPI-E and whose prices tended to rise more rapidly,” it said.
For example, it said that using the CPI-E would have resulted in a 4 percent increase in January of this year in the retirement and other programs linked to the inflation index rather than the 3.2 percent that was paid. (Federal employees retired under the CSRS system get the full adjustment while those retired under FERS who are eligible for COLAs get an adjustment of 1 percentage point less if the figure is above 3 percent). Collectively over 1986-2023, it added, the CPI-E has increased 211 percent compared with the 188 percent in the index currently used.
However, it also noted that there were six years since 1986 in which the CPI-E figure was smaller than the CPI-W number. Further, all six of those happened since 2005, three of them in just the last six years. That looks like a trend.
The report also cautioned that the CPI-E “is experimental and has methodological limitations that may impact its accuracy in reflecting the experiences of the elderly and that any conclusion from analyses should be treated as tentative.” For example:
* The CPI-E “uses the same geographic areas, retail outlets, items selected for pricing, and prices” as the general CPI and “assumes that Americans 62 or older live and shop in the same places, buy the same things, and pay the same prices” as other consumers, just in different quantities.
* “The underlying population used to calculate the R-CPI-E differs from the population of Social Security beneficiaries. Many Social Security beneficiaries are under the age of 62, such as surviving children and most disabled workers. Additionally, not all people over 62 are Social Security beneficiaries, including the substantial portion of persons age 62 or older who have not yet claimed benefits.”
Political leaders would want to look closely at those issues before changing a formula that affects tens of millions of people and hundreds of billions of dollars.
But perhaps more concerning is the idea of political leaders looking at COLAs at all, given entitlement program spending that already is broadly reviewed as unsustainable. Opening retirement programs for review could provide the opportunity for congressional Republicans to enact into law all those proposals they always have handy to reduce the value of not only that feature of federal retirement but others, as well.
As mentioned above, wishes that are granted can result either in getting too much of a good thing or negative, unexpected results. If you had to choose which of those two would be the more likely from opening federal retirement for review, which would you pick?
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See also,
Legal: How to Challenge a Federal Reduction in Force (RIF) in 2025
How to Handle Taxes Owed on TSP Roth Conversions? Use a Ladder
The Best Ages for Federal Employees to Retire
Best States to Retire for Federal Retirees: 2025
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