Each year at this time, the government tries to ensure that seniors and disabled veterans have adequate buying power to be able to purchase their everyday needs. It does this by lifting Social Security payments and veterans' benefits enough to compensate for the rise in the cost of living.
It's a great idea - but more often than not the government gets things wrong. For you see, Washington tends to under-compensate seniors and vets for the actual rise in their cost of living - year after year, decade after decade.
Is this deliberate, a way of saving money? Or could it be an honest mistake, perpetuated for years by the bureaucrats who crunch these numbers?
Let's find out by defining terms.
An individual's cost of living is determined by what happens to prices. Not all prices, mind you, just the prices of the goods and services that one actually buys.
As you might imagine, not everyone's cost of living is the same. This is because everyone's market basket of goods and services is different. It depends on one's age, health, savings and so on.
As you might also figure, it is impossible for Washington to measure each individual's cost of living. That's why it uses an index that it thinks is a good proxy for prices that people in all demographic groups pay.