It’s 1982 Again

Last week, the Social Security Administration announced it will increase payments to beneficiaries by 5.9% next year.  That is the largest increase since 1982.  For those of you in denial of getting old (like me), that was 40 years ago.  I almost cried when I read that.  I remember 1982.    

The same day the SSA announced its increase, the consumer price index (CPI) was announced at a 5.4% annual rate.  I (and many others) have argued for years that the CPI calculation grossly understates real inflation.  A safer car is a good thing but it still costs more in dollars than a car did years ago.  The government adjusts for product improvements in ways that I find questionable.  If I concede that CPI is accurate, the social security cost of living adjustment is essentially canceled out by the rise in prices.  Likewise, firms are starting to announce raises for 2022.  My gut tells me raises will be in line with inflation.

Unless inflation starts to moderate soon, I expect people to start to notice that they have less spending money than before.  Energy (up 25% over last year) and food (up 4.6% YOY) costs are a big part of most people‚Äôs spending.  If those costs continue going up, expect discontent from the general public.  That will not be good. 

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