Posted: 3:17 am
July 17, 2008
IT'S not exactly like hitting the lottery or even getting a surprise visit from Publishers Clearing House. But Social Security recipients and other retirees are likely to get a huge increase in their cost of living adjustments next year.
Paydirt! Go out and buy yourself a couple tanks of gas.
That's good news for them, of course; not so good for the taxpayers who will be footing the bill for the runaway inflation that will be coming in the months ahead.
Yesterday the government announced what readers of this column should have been expecting - that consumer inflation soared during June.
The 1 percent rise was the biggest monthly increase since 2005, and well above the 0.7 percent jump that the "experts" on Wall Street had been expecting.
Prices had been up an improbably small 0.6 percent from April to May.
But as I explained in several recent columns the rise in consumer prices during the spring had been muted by odd seasonal adjustments, especially in the price of energy.
And those optimistic adjustments - as is supposed to happen - will be reversed in the coming months.
That means the government's statistics will exaggerate the rise in inflation for the rest of the year, unless the price of oil suddenly collapses.
"We are going to show huge increases," Pat Jackman, the senior economist for the CPI, was quoted as saying exclusively in this column back in May.
Ironically, the 68-year old Jackman has since retired from the government's Bureau of Labor Statistics.
Could it be that the upcoming cost of living adjustment, commonly known as COLA, is going to be just too good for a guy of Jackman's age to pass up? The number that matters to retirees is the year-to-year increase in inflation.
The government yesterday announced that inflation has been up 5 percent since June 2007.
That was a big jump over the 4.2 percent inflation rate reported between May, 2007 and May of this year.
Social Security recipients got a 2.3 percent COLA this year. So, if inflation continued to rise at 5 percent, retirees will be more than doubling that increase.
But the news is even better for retirees.
The Social Security Administration won't use the 5 percent inflation number, which comes from the most often-quoted CPI figure put out by the government.
Instead, Social Security uses something called the CPI-W, a subset of the consumer price calculations.
And the CPI-W (The "W" is for wage earners) was 5.6 percent higher this June when compared to the same month of 2007.
