Are We Headed For a COLA War?
This COLA War won't be Coke versus Pepsi. It'll be the Trump administration versus reality.
In the era of Trump, we’re all living day to day — whether we choose to or not. The orange menace has mastered the art of sucking up all the oxygen in the room by doing more and more outrageous things every day. He has kept the nation entirely off balance.
One day, it’s crazy on-again/off-again tariffs. The next day it’s threatening the independence of our most prestigious universities. Then, it’s flouting the emoluments clause in more extreme ways than ever before. (“A $400 million jet? Sure. Why not? They owe me.”) Next, it’s his latest cryptocurrency money-laundering scam.
It becomes almost impossible not to devote most of one’s attention to the latest outrage. But it’s a good idea to step back from the day-to-day insanity to look at some longer term items — things that will affect U.S. citizens’ lives but that aren’t necessarily front page headlines.
One such somewhat nerdy back burner issue is the annual Cost of Living Adjustment (or “COLA”) for Social Security recipients. Each year since 1975, the Social Security Administration has provided an increase in benefits to Social Security recipients. The increase is calculated based on the Consumer Price Index (“CPI”), which is set by the Bureau of Labor Statistics (“BLS”). The CPI enables to Social Security Administration to gauge the rate of inflation.
For the COLA, timing is everything, more so this year than perhaps at any other time since its inception. Stick with me.
The COLA is based on the difference between the CPI for the third quarter of the previous calendar year and the CPI for the third quarter of the current calendar year. Put more directly, it attempts to quantify how much more things cost this year than they did last year.
What do we know about how much things cost this year? For starters, costs of consumer goods have risen rapidly. Trump’s absurd and uninformed approach to tariffs have already driven prices higher, and we haven’t yet seen the full impact of his tariffs. Most recently, he’s been threatening the EU — our second largest trading partner — with a 50% tariff and then delaying it a few days later with no explanation. Who knows if the EU tariff will ever even go into effect? But even if it doesn’t, we already have across the board tariffs (yes, taxes) on all imports of at least 10% and as high as 30% for Chinese goods.
These fluctuations and the resulting economic uncertainty have already had an effect on prices, and — not that I’m suspicious of huge corporations BUT — companies have also been hiding behind the talk of inflation and the specter of increased tariffs as cover for raising prices. Consumers are confronted with this reality every time they set foot in a supermarket or big box store.
Over the next several months, prices will continue to rise. Many economists are predicting that the worst is yet to come, with regards to Trump’s asinine tariff policy and its effect on inflation. And remember how I said that timing is everything? Well, October is when the Social Security Administration sets the new rate for the following calendar year. So in October 2025, the SSA sets the rate for calendar year 2026.
But in November 2025, off-year elections happen, and those are sometimes seen as indicators of the popularity of the president’s political party. So far, special elections have heavily favored Democrats.
The COLA paints Trump and the Republicans into a corner:
On one hand, if Trump manages to pressure the Bureau of Labor Statistics into keeping the COLA artificially low, he reduces the purchasing power of Social Security recipients, and older Americans are among the most reliable voters — voters that he needs to hold in his grip.
On the other hand, if the COLA actually keeps pace with inflation, Trump will have to admit that he’s failed to keep a major campaign promise — lowering inflation.
Trump’s ego will not allow him to appear to be losing power. But he won’t have many options:
Will Trump attempt to manipulate the CPI to make it appear that the inflation rate isn’t as high as it truly is? If he does this, the purchasing power of Social Security recipients will decline. The contrast between what Trump is saying and what Americans see and experience first hand will become even more stark.
We’ve already witnessed Trump putting pressure on federal agencies to bend to his will. The Trump administration has already made budget cuts to BLS to the tune of 13% of its overall budget. There have been staffing cuts as well, potentially bringing the integrity of their data into question. Will he disparage or be dismissive of any factual information the BLS provides?
Will his newly-appointed head of the Social Security Administration — you know, that guy who had to Google what his job was going to be — bend to Trump’s will and fudge the inflation numbers to make Trump look better?
And what about 2026, when the next COLA adjustment will be announced immediately prior to midterm elections? The consequence of those midterms might be that Congress could finally flip back to the Democrats, and a Democratic Congress could put the brakes on Trump’s extremism, potentially impeaching and, at last, convicting him.
(I’m getting way ahead of myself, of course. But a guy can dream, right?)
Here’s another twist. The Social Security Administration set the COLA for 2022 at 8.7%, an amount that was higher than it had been in decades, but by no means the highest. At the time, there were Republicans who whined that it would destroy Social Security. Of course, they blamed the higher rate on President Biden, conveniently ignoring the fact that the inflation the nation was dealing with then was almost entirely attributable to the economic effects of the pandemic.
We also know that actual inflation in 2025 is likely to exceed the inflation rate that the 2022 COLA was based on. If Trump doesn’t manipulate the rate via either the BLS or the SSA, with Republicans be singing the same tune they did for 2022, knowing that the majority of the public — both Democrats and Republicans — are already holding Trump responsible for our high inflation rate, no matter how much he tries to deflect the blame onto Biden or China or corporations or whoever his scapegoat du jour might be.
Are Republicans going to be willing to accept the responsibility for inflation, when their own jobs might be at stake?
Like most things in the United States these days, the entire situation could change drastically. But this is one issue that will have a direct impact on a huge swath of the U.S. population, and it will have an effect on the economy as a whole. Consequently, it will certainly have political ramification.
I’ll be paying attention in October, and beyond.