IT'S A DEFLATIONARY EPOCH, KILL THE COLA:

Adjusting to Reality (ALICIA H. MUNNELL and ANDREW G. BIGGS, 3/08/10, NY Times)

The Social Security adjustment is intended to maintain the purchasing power of benefits once recipients retire. Social Security cost-of-living adjustments are calculated every October by comparing the third-quarter Consumer Price Index for Urban Workers with the previous year’s numbers; if an adjustment is needed, it’s made the following January.

But in 2008, this time lag led to an unnecessary adjustment: rising energy prices in the fall of 2008 called for a 5.8 percent increase in benefits to be paid starting in January 2009; however, before the adjustment went into effect, prices plummeted by nearly 5 percent. As a result, Social Security recipients got a benefit increase to compensate for a price increase that no longer existed.