Biggest Social Security Bump in 41 Years

Plus: inflation surprises again — and not in a good way ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ [The Fisc](   By Yuval Rosenberg and Michael Rainey Lots of news on this Thursday. The House committee investigating the January 6 attack on the Capitol held another hearing and voted unanimously to subpoena former President Donald Trump. “He is the one person at the center of the story of what happened on January 6th. So we want to hear from him,” Committee Chairman Bennie Thompson said, adding that it is a matter of “accountability to the American people.” The Supreme Court also denied a request by the former president that it intervene in a dispute over classified documents recovered from his Mar-a-Lago estate. We also got a somewhat disappointing new reading on inflation — and related announcement about Social Security’s cost-of-living adjustment for next year that most seniors will welcome. Here’s what you need to know. Inflation Worse Than Expected in September Another month, another alarming inflation report. The Consumer Price Index rose 0.4% on a monthly basis in September and 8.2% relative to a year ago, the Bureau of Labor Statistics announced Thursday, with both numbers coming in higher than expected. A measure of core prices, which leaves out volatile food and fuel components, also surprised analysts, rising 0.6% in September and 6.6% over 12 months — the highest reading in 40 years. The rise in prices was broad-based and occurred despite a fall in gas and used car prices. “Increases in the shelter, food, and medical care indexes were the largest of many contributors to the monthly seasonally adjusted all items increase,” the BLS report says. An increase in prices for services was particularly notable, suggesting that that segment of the economy is taking over from goods as the main driver of total inflation. The prices of services rose 7.4% over the last year, the highest reading since 1982. What the experts are saying: The report reveals that inflation is more entrenched than some analysts had thought and suggests that the Federal Reserve is now even more likely to continue taking a hard line as it considers two more interest rate hikes in 2022. “Inflation has kind of become like a cancer,” [said]( Christopher S. Rupkey, chief economist of FwdBonds. “It started in one area of the economy, and now it’s spread rapidly, infecting other areas of the economy. … and it’s spreading to services, where it’s going to be much more persistent, much more stubborn, much more difficult to bring those prices back down.” “The composition of the inflation reading is perhaps even more worrisome than the overall number,” said Seema Shah of Principal Asset Management. “Increases in shelter and medical care indices, the stickiest segments of the CPI basket, confirm that price pressures are extremely stubborn and will not go down without a Fed fight.” “For the Fed, this probably locks in a big November rate increase,” [wrote]( The New York Times’s Jeanna Smialek. “Central bankers have raised interest rates five times this year and are expected to make a fourth jumbo sized, three-quarter-point move at their meeting on November 2.” Still, not everyone was quite so pessimistic about the outlook for inflation. Ian Shepherdson, chief economist at Pantheon Economics, argued that there is evidence that inflation is starting to fall, including the most recent Producer Price Index that showed no gain in prices in September. That evidence hasn’t shown up in the monthly reports yet due to lags, Shepherdson said. Accordingly, he called on the Fed to consider slowing its tightening campaign, despite the big numbers for September. “Evidence of falling inflation is everywhere except in the inflation data,” Shepherdson [wrote](. “Fed choice: Wait, because the pipeline will work through. Or, keep hiking until inflation starts to fall, ignoring lags. No support in econ theory for the latter, as long as expectations anchored. They are.” Biden looks at the sunny side: The report is bad news for Democrats as they approach a difficult midterm election in November. The White House attempted to emphasize the positive, saying in a [statement]( that the “report shows some progress in the fight against higher prices, even as we have more work to do.” The administration claimed that inflation over the last three months averages 2% at an annualized rate, down from 11% in the three months before that, though critics charged that the White House was cherry-picking the numbers to obscure an obvious and persistent problem. Speaking to reporters in Los Angeles, Biden noted that gas prices have fallen substantially. “Nationwide, they came down about $1.35, and they’re still down over a dollar,” he said, adding that housing costs are a major problem that needs more attention. Brian Deese, the director of the National Economic Council, said the administration would be taking steps to combat high housing costs. “We have identified and been focused for some time now, on every measure we can take to try to increase the supply of housing, particularly affordable housing and multifamily housing,” he told the Times. “There are actions that we can take and will take administratively and there’s also something that we’ll be talking to Congress about.” Social Security Benefits to Jump by Most in 41 Years Social Security benefits for roughly 70 million Americans will rise by 8.7% in 2023, the largest annual cost-of-living adjustment since 1981. The increase, announced by the Social Security Administration, translates to a benefits bump of more than $140 per month on average — or a total of about $106 billion in extra income, some $9 billion a month, for beneficiaries (see the charts below). The annual cost-of-living adjustment to benefit payments is based on Consumer Price Index data — specifically, the average increase in the index for urban wage earners between from third quarter of last year to the same months this year. Beneficiaries saw a 5.9% increase in 2022. The higher Social Security payments will be paired with a drop of about 3% in Medicare Part B premiums, which means seniors will be able to keep more of their monthly benefits as they try to cope with inflation that has also been running near a four-decade high. “Medicare premiums are going down and Social Security benefits are going up in 2023, which will give seniors more peace of mind and breathing room,” Kilolo Kijakazi, the acting commissioner of the Social Security Administration, said in a statement. That would be a welcome change for seniors after years in which benefits have failed to keep pace with the cost of living. “As of March, inflation has caused Social Security payments to lose 40% of their buying power since 2000,” CNN’s Tami Luhby reports, citing a study released earlier this year by The Senior Citizens League. “Monthly benefits would have to increase by $540 to maintain the same level of buying power as in 2000.” A boost for the economy? Economist Daniel Silver of J.P. Morgan said in a note to clients that Social Security benefits account for about 7% of disposable income in the economy, meaning that they are just one of many factors affecting American’s income. Still, he said, the sizable cost-of-living adjustment could result in a noticeable increase in disposable income that could support consumer spending or saving. More trouble for Social Security’s finances? Social Security’s combined trust funds are projected to be depleted by 2035, and the program then would only be able to pay about 80% of promised benefits. The large cost-of-living adjustment for 2023 could speed up that depletion date. “This very large COLA increase is likely to bring the year of insolvency forward by a full year,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told [The New York Times](. “It is just another reminder that procrastinating on addressing these imbalances leaves the people who depend on Social Security particularly vulnerable to a further deterioration in its finances.” The higher benefit payments will be offset to some extent by greater payroll tax collections resulting from higher wages. For 2023, the maximum amount of earnings subject to the Social Security tax will increase from $147,000 to $160,200. Number of the Day: $2.2 Billion Starting Friday, the Agriculture Department will accept public comments on how it should implement a program that will pay out $2.2 billion to farmers who have historically faced discrimination by the agency. Congress provided funding for the program in the Inflation Reduction Act that passed in August. The program will replace an earlier $4 billion effort to help minority farmers. That program got bogged down in lawsuits charging unfair racial bias. (h/t [NPR]( Most PPP Loans Forgiven With Little Scrutiny: Report The roughly $800 billion Paycheck Protection Program provided loans to small businesses during the early days of the Covid-19 pandemic to enable them to keep employees on the payroll. According to a new analysis by NPR, about 91% of those loans have been turned into grants — essentially forgiven — and the Small Business Administration says that it expects nearly 100% of them to be forgiven after all is said and done. The SBA says it uses a computer program to review loans, but only about 215,000 — or 2% — have received a close look from auditors. An analysis by researchers at the University of Texas, however, suggests that 1.4 million loans show signs of possible fraud. Although the program was designed to allow for loan forgiveness for small businesses who followed the rules, there is evidence that there was considerable fraud among borrowers in the program, raising the question of how nearly all borrowers will see their debts erased. For more details, [see the analysis at NPR](. News - [U.S. Inflation Pressures Further Intensified in September]( – Politico - [Biden Says Prices 'Too High' as Inflation Rises Before Midterms]( – Reuters - [Here’s Where Inflation Is Biting American Consumers the Most]( – Bloomberg - [Social Security Announces Biggest Benefit Hike Since 1981. Here's When You'll Get It]( – CBS News - [Social Security Cost-of-Living Increase Could Strain the Program’s Solvency]( – New York Times - [Virtually All PPP Loans Have Been Forgiven With Limited Scrutiny]( – NPR - [Americans Have Largely Avoided Health Care Inflation So Far – But That’s About to Change]( – CNN - [America Is Unleashing Its Economic Arsenal]( – Bloomberg Businessweek - [World Faces New Threats From Fast-Mutating Omicron Variants]( – Bloomberg Views and Analysis - [With Rising Rates and Rising Debt, the Taxpayer Bill Is Finally Coming Due]( – Allan Sloan, Washington Post - [Enjoy the Social Security Bump Now. You'll Pay Later]( – Allison Schrager, Bloomberg - [Another Dovish Inflation Narrative Bites the Dust]( – Jonathan Levin, Bloomberg - [Nothing Is Working Against Inflation]( – Kevin T. Dugan, New York - [Voters May Care More About the Cost of French Fries Than January 6 Panel’s Compelling Evidence]( – Stephen Collinson, CNN - [What the Fed Isn't Saying About Inflation]( – Kate Davidson and Sam Sutton, Politico - [Fiscal Policy in a Time of High Inflation]( – Committee for a Responsible Federal Budget - [Forget Overkill. Central Banks Are Still Way Behind]( – Richard Cookson, Bloomberg - [As Markets Fret, Fed Officials Reject Idea of Rising Financial Stability Risks]( – Michael S. Derby, Reuters - [How to Foot the Bill on Urgent Climate Action]( – Antonio Guterres, Bloomberg Copyright © 2022 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website or through Facebook. The Fiscal Times, 399 Park Avenue, 14th Floor, New York, NY 10022, United States Want to change how you receive these emails? [Update your preferences]( or [unsubscribe](