The Fizz And The Gas Of COLA

The big news today is COLA.

Not Coca-Cola. Not Pepsi-Cola.

We’re talking COLA as in Cost Of Living Adjustment for recipients of Social Security.

Clueless Joe Biden’s mishandling of domestic energy production, coupled with macroeconomic and microeconomic issues, some of which are beyond his control, have conspired to produce inflation running at rates not seen in the past 40 years.

That was confirmed by yet another uncomfortable inflation report issued today.

Social Security payments are indexed to inflation, and so for 2023 those payments will rise 8.7 percent, the largest increase in more than four decades.

The fact that the government admits 8.7 percent means the inflation you are witnessing likely is much higher.

Still, the increase, which means the average recipient will receive an extra $140 or so per month, will help ease the pain.

Also, there will be a modest decrease in the Part B Medicare premium, dropping $5.20 from $170.10 per month in 2022 to $164.90 in 2023.

Now, for the negative of it all.

Despite all of Al Gore’s ridiculous talk in the past about a Social Security lockbox, all there is to pay the obligations is a pile of federal IOUs.

These increased payouts only will shorten the time for which those imaginary assets will be able to fund fully Social Security payments, which had been calculated to end in 2037.

What happens then? The working plan is the federal government will just issue more debt and kick the proverbial can down the road.

A problem occurs when if by that time the U.S. government is perceived as not being creditworthy and so cannot borrow the sufficient funds to paper over the shortfall.

On an individual basis, there could be negative federal tax implications before that owing to this COLA. The complicated tax policy for Social Security benefits sets income cutoff points under which the benefits are not subject to tax. This COLA increase could be enough to push many recipients into the category of having some or all of there benefits in the taxable category.

Bottom line: Enjoy the fizz of the COLA while understanding that it could cause some gaseous discomfort down the line.