The federal government will not adjust federal income earnings for inflation in 2011, the second consecutive year with a Cost of Living Adjustment (COLA) of zero. Those affected in military retirees, disabled veterans and social security recipients.
Subsequent years’ COLA depends on the Consumer Price Index (CPI) of the preceding year. The result is the actual rate of inflation. A major problem is that the rate of inflation has not been positive since 2008, making 2008 the base year for computing the rate of inflation in 2010.
Therefore, the 2010 rate of inflation is -0.1 percent after getting compared to 2008. Without a positive rate of inflation, there will be no 2011 COLA. Usually, COLA changes earnings for certain recipients. Such earnings include military retirement, VA pensions and payments, and Social Security benefits. In this case, an absence of COLA will freeze the federal payments received by recipients.
COLA is based on a formula, making it an apolitical tool. However, Sen. Harry Reid (D-Nev.) said he wants to give Social Security recipients an extra $250 in 2011. Other Democrats got behind the idea. President Obama supports giving a one-time $250-payment to not just Social Security recipients, but also to military-connected recipients.
Photo thanks to American Progress Action under creative common license on Flickr.