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In that context, legislators might not feel as much pressure to provide special relief for what many will see as a less severe Part B premium problem than last year’s. MOAA will support the relief effort.


High or Low COLA: CPI Is


Your Friend Low COLAs make some consider an alternative.


T


he 2017 COLA will increase military retired pay and sur- vivor annuities, Social Security


benefits, VA disability compensation, and more by 0.3 percent. Last year, the zero COLA prompted


several legislators to introduce a bill that would have bypassed the Consumer Price Index (CPI) standard and substi- tuted a one-time 3.9-percent COLA. According to legislators, 3.9 percent was


the average increase in compensation for CEOs of the top 350 U.S. corporations. We’ve already seen some talk of intro- ducing a similar bill in the post-election lame-duck session. If so, we expect the ef- fort won’t go far, as it didn’t last year. At a time when Congress is worried about deficits, legislators are looking for ways to cut the budget rather than ponying up many, many more billions. The special COLA effort isn’t just pan-


dering. For years, organizations represent- ing seniors have argued the CPI used for COLA doesn’t reflect older Americans’ spending because it’s overly influenced by fuel prices and doesn’t account for seniors’ disproportional health care spending. The Bureau of Labor Statistics tested a modified CPI for the elderly (CPI-E) and found it would show a somewhat higher


34 MILITARY OFFICER DECEMBER 2016


inflation rate than the standard CPI. However, it hasn’t been pursued serious- ly, mainly because it would cost more. MOAA used to argue for CPI-E. But once TRICARE For Life was enacted in 2001, it was sufficient protection for older military beneficiaries from health care inflation, other than Part B premium growth. It’s difficult for military advocates to


make the main case for CPI-E — that it better reflects seniors’ disproportional health care costs. Regardless, MOAA believes it would be unwise to set a prec- edent of breaking the COLA tie with CPI. The purpose of the COLA law is to


ensure retired pay, Survivor Benefit Plan annuity, VA disability compensation, and Social Security checks have their purchas- ing power protected as long as you live. When double-digit inflation hit in the


1970s, that COLA protection was retirees’ lifeline. Many think those days never will come again, but history says they’re wrong. Few people today can envision inflation


ever going above 4 percent. But back in the 1970s, nobody thought it ever would fall as low as 6 percent. We’ve had low inflation now for 30 years, and we’re overdue for a change. If we support breaking the CPI- COLA tie when inflation is low, it will give ammunition to budget hawks to break the tie when inflation is high, because it would save so much money. We can complain about low or no


COLAs, but it’s a fact that gas prices are down significantly from a couple of years ago. There have been some exceptions, but, overall, prices for food and other items also are down, in part because of lower transportation costs. So low COLAs generally mean your


costs haven’t risen much. High COLAs mean the purchasing power of your re- tired pay is rising with prices. Whether it’s high COLAs or low/no COLAs, CPI is your friend.


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