WASHINGTON — Millions of retirees on Social Security will get a 5.9% boost in benefits for 2022. The biggest cost-of-living adjustment in 39 years follows a burst in inflation as the economy struggles to shake off the drag of the coronavirus pandemic.
The COLA, as it’s commonly called, amounts to an added $92 a month for the average retired worker, according to estimates Wednesday from the Social Security Administration. It’s an abrupt break from a long lull in inflation that saw cost-of-living adjustments averaging just 1.65% a year over the past 10 years.
With the increase, the estimated average Social Security payment for a retired worker will be $1,657 a month next year. A typical couple’s benefits would rise by $154 to $2,753 per month.
But that’s just to help make up for rising costs that recipients are already paying for food, gasoline and other goods and services.
“It goes pretty quickly,” retiree Cliff Rumsey said of the cost-of-living increases. After a career in sales for a leading steel manufacturer, Rumsey lives near Hilton Head Island, S.C. He cares at home for his wife of nearly 60 years, Judy, who has advanced Alzheimer’s disease. Since the coronavirus pandemic, Rumsey said he has also noted price increases for wages paid to caregivers who occasionally relieve him and for personal care products for Judy.
The COLA affects household budgets for about 1 in 5 Americans. That includes Social Security recipients, disabled veterans and federal retirees, nearly 70 million people in all. For baby boomers who embarked on retirement within the past 15 years, it will be the biggest increase they’ve seen.
Among them is Kitty Ruderman of Queens in New York City, who retired from a career as an executive assistant and has been collecting Social Security for about 10 years.
“We wait to hear every year what the increase is going to be, and every year it’s been so insignificant,” she said. “This year, thank goodness, it will make a difference.”
Ruderman says she times her grocery shopping to take advantage of midweek senior citizen discounts, but even so price hikes have been “extreme.” She says she doesn’t think she can afford a medication that her doctor has recommended.
AARP CEO Jo Ann Jenkins called the government payout increase “crucial for Social Security beneficiaries and their families as they try to keep up with rising costs.”
Policymakers say the adjustment is a safeguard to protect Social Security benefits against the loss of purchasing power, and not a pay bump for retirees. About half of seniors live in households where Social Security provides at least 50% of their income, and one-quarter rely on their monthly payment for all or nearly all their income.
“You never want to minimize the importance of the COLA,” said retirement policy expert Charles Blahous, a former public trustee helping to oversee Social Security and Medicare finances. “What people are able to purchase is very profoundly affected by the number that comes out. We are talking the necessities of living in many cases.”
This year’s Social Security trustees report amplified warnings about the long-range financial stability of the program. But there’s little talk about fixes in Congress, with lawmakers’ consumed by President Joe Biden’s massive domestic legislation and partisan machinations over the national debt. Social Security cannot be addressed through the budget reconciliation process Democrats are attempting to use to deliver Biden’s promises.
Social Security’s turn will come, said Rep. John Larson, D-Conn., chairman of the House Social Security subcommittee and author of legislation to tackle shortfalls that would leave the program unable to pay full benefits in less than 15 years. His bill would raise payroll taxes while also changing the COLA formula to give more weight to health care expenses and other costs that weigh more heavily on the elderly. Larson said he intends to press ahead next year.
“This one-time shot of COLA is not the antidote,” he said.
Although Biden’s domestic package includes a major expansion of Medicare to cover dental, hearing and vision care, Larson said he hears from constituents that seniors are feeling neglected by the Democrats.
“In town halls and tele-town halls they’re saying, ‘We are really happy with what you did on the child tax credit, but what about us?’” Larson added. “In a midterm election, this is a very important constituency.”
The COLA is only one part of the annual financial equation for seniors. An announcement about Medicare’s Part B premium they pay for outpatient care is expected soon. It’s usually an increase, so at least some of any Social Security raise gets eaten up by health care. The Part B premium is now $148.50 a month, and the Medicare trustees report estimated a $10 increase for 2022.
Economist Marilyn Moon, who also served as public trustee for Social Security and Medicare, said she believes the current spurt of inflation will be temporary, due to highly unusual economic circumstances.
“I would think there is going to be an increase this year that you won’t see reproduced in the future,” Moon said.
But policymakers should not delay getting to work on retirement programs, she said.
“We’re at a point in time where people don’t react to policy needs until there is a sense of desperation, and both Social Security and Medicare are programs that benefit from long-range planning rather short-range machinations,” she said.
Social Security is financed by payroll taxes collected from workers and their employers. Each pays 6.2% on wages up to a cap, which is adjusted each year for inflation. Next year the maximum amount of earnings subject to Social Security payroll taxes will increase to $147,000.
The financing scheme dates to the 1930s, the brainchild of President Franklin D. Roosevelt, who believed a payroll tax would foster among average Americans a sense of ownership that would protect the program from political interference.
That argument still resonates. “Social Security is my lifeline,” said Ruderman, the New York retiree. “It’s what we’ve worked for.”
Attorney General Mark Herring and Republican challenger Jason Miyares debated in Loudoun County on Wednesday, defending their opposing political views and attacking each other in front of a group of business leaders.
Without any broadcast or livestream, the public had no way to watch or listen.
Herring, debating on his home turf in Loudoun, is seeking a third term in the job after deciding to forgo a run for governor. Miyares, a state delegate from Virginia Beach, often cites his family’s immigrant roots. His mother fled Cuba in 1965.
The two sparred over Herring’s liberal record and Miyares’ conservative positions. The challenger largely focused on crime and attacked Herring over an ongoing scandal involving the Virginia Parole Board.
“Our murder rate is the highest it’s been in Virginia in decades. We have a criminal first, victim last mindset,” Miyares said. “We need a check and balance in Richmond. As attorney general, I’ll be that check, and I’ll be that balance.”
Herring’s theme was that Miyares’ opposition to abortion rights, gun control and gay marriage put him out of touch with mainstream Virginians.
“Voters will choose between my proven record of protecting Virginians and expanding our rights, and Jason Miyares, whose record shows he is a right-wing, Cuccinelli-style conservative who would abuse the office and undermine both our safety and our rights.”
Ken Cuccinelli, a Republican, was Virginia’s attorney general from 2010 to 2014.
As he has done in the campaign and in TV ads, Miyares repeatedly referenced the Parole Board, which consists of gubernatorial appointees who consider whether to release from prison people who were convicted before Virginia abolished parole in 1995. A state watchdog agency found last year that the board violated laws and policies in the process under which people were released from prison. That included not adequately notifying victims and prosecutors of the releases.
Senior officials in Gov. Ralph Northam’s administration admonished and questioned the investigators, and the state inspector general told them his office wouldn’t look into any more complaints. The lead investigator was later fired.
Herring does not have a say in Parole Board decisions, but his office represents the board and all state agencies.
“He stood by, he did nothing, he said nothing,” said Miyares, who also slammed the Parole Board for releasing people who had been convicted of murder.
Herring said Miyares had been checked by the press more than once for misrepresenting Herring’s role.
“Jason is trying to blame me for decisions I didn’t make,” Herring said.
Herring promoted his record: refusing in 2014 to defend Virginia’s gay marriage ban; fighting opioid trafficking and supporting a settlement that will bring millions of dollars to Virginia to fight opioid addiction; reducing a backlog in rape kit testing; defending the federal Affordable Care Act health care law; and supporting gun control measures like limiting purchases of handguns to one per month and strengthening background checks for purchases.
Herring told business leaders that he fought to remove public monuments honoring Confederates, in contrast to Miyares’ record in favor of them. Miyares was among Republican lawmakers who voted against giving localities the authority to remove such monuments.
Herring attacked Miyares for opposing Virginia’s new law that legalizes small amounts of marijuana for personal use by adults.
“Virginia was needlessly criminalizing tens of thousands of Virginians, and the weight of that system was falling disproportionately on people of color,” Herring said.
Miyares said he voted against it because the law is flawed, in that it makes possession legal while the sale of marijuana remains illegal. But as attorney general, he said, he would defend the law and not supersede the will of the General Assembly and governor.
Herring also criticized Miyares for sending people to jail for small amounts of marijuana as a “junior prosecutor.” Miyares was an assistant commonwealth’s attorney in Virginia Beach before working as a political consultant.
Miyares said that if elected, he would support a bill that would allow the attorney general to prosecute certain cases if a local commonwealth’s attorney fails to.
Miyares cited a case in Fairfax County handled by Commonwealth’s Attorney Steve Descano, in which prosecutors reached a deal with a man who sexually abused a girl for years that would cap the man’s sentence at 17 years.
The girl’s parents opposed a plea deal and told The Washington Post they were disappointed in Fairfax County prosecutors.
“You have some commonwealth’s attorneys up here that have forgotten their victims,” Miyares said.
“If you’re not willing to do your own job, let me do it for you. Let me hold these scumbags accountable. Let me go after these rapists and these sick child molesters, because if you’re not willing to do your job, I’m going to do your job.”
The debate included an unusual moment when the candidates were asked to praise something about the other.
“I think Attorney General Herring is very sincere … I’m not going to question his motives,” Miyares said. “I think we just view the world very differently. In many ways, we want to achieve the same thing. We want to get there in a different manner. … I admire his service, I know he’s given up a lot.”
Herring thanked Miyares for voting in support of an opioid program Herring backed.
“You could have said, ‘Well, this is Mark Herring’s initiative, we’re running against each other, I’m not going to vote for that,’” Herring said. “But he didn’t. He voted for it.”
Miyares responded, “I appreciate that, and I have tried to reach across the aisle.”
The two candidates previously met in a virtual debate in June. The Miyares campaign said he has accepted a debate invitation from WRIC-TV in Richmond, but Herring has not.
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More than 18 months after the COVID-19 pandemic hit the United States, roughly 5 million Americans are still sitting out of the labor force.
It’s a development that can hold back economic growth and cause price increases, and a trend that worries Tom Barkin, president of the Federal Reserve Bank of Richmond.
“The thing I am really interested in is this question of what is really going on in the labor market,” Barkin said this week during a question-and-answer session at the University of Richmond’s Robins School of Business.
“I really did think we would see stronger job growth in the last two or three months than we have seen,” said Barkin, who is a voting member this year of the Federal Reserve Bank’s Federal Open Market Committee, or FOMC.
The FOMC is primarily responsible for setting policy that heavily influences U.S. interest rates, or the cost of borrowing money, which has a major impact on overall economic growth. In September, the Fed held benchmark interest rates near zero, while indicating that rate increases could be coming.
On Tuesday, Barkin spoke more about underlying issues in the economy such as labor and supply shortages. Many employers have complained about difficulties finding workers as the U.S. economy has clawed its way back from the widespread shutdowns caused by COVID-19 in 2020.
Barkin said he thought more people who dropped out of the workforce last year would re-enter the labor market this summer and fall after enhanced unemployment benefits ended and students returned to schools.
“We have not seen it,” he said. “So why not?”
A key question is whether that remains a temporary issue — for instance, because people are still concerned about the risks of catching COVID-19. “Or, Is it something that is actually much more fundamental?” Barkin asked.
“That is what I am doing my research on right now,” he said. “It’s these 5 million people. What will it take to get these 5 million people back in the labor market? What do we need to do?”
Barkin spoke at the Robins School in a taping of the radio and podcast show “Full Disclosure” hosted by Roben Farzad, journalist-in-residence at the University of Richmond. About 300 people listened to the interview either live or remotely through livestreaming. Around 100 attended in-person.
In an interview that covered a wide range of economic topics, Barkin also said he thinks the commercial real estate market will face some disruptions as a result of COVID-19, as businesses and other organizations re-assess their office needs with more people working remotely or in a hybrid work model.
However, Barkin said he thinks the economy will adjust to that, and banks are well-capitalized against a downturn in commercial real estate.
“I think the office space will be occupied — the question is at what price,” Barkin said after noting that the market for industrial and warehouse space is “booming.”
“You are going to have organizations using less space” in the office market, Barkin said. “I do think downtown commercial real estate space is going to be challenged from a rent and price perspective.”
Yet, “the economy is going to adjust,” he said. “That is creative destruction.”
“As best as I can tell — and we have certainly done the stress tests — the banks are well capitalized against that,” he said.
Barkin said he think the housing market will remain strong.
“I think this generation of millennials wants a house,” he said. “I do think that more and more people working remotely are going to want a house or a little more house.”
“On the supply side, it is really, really hard to find construction workers right now,” he said. “There are houses going up, but I don’t see the building that we saw back in 2004 or 2006.”
Labor shortages and the potential long-term consequences of that are a troubling issue, he said.
Barkin said a large number of the workers staying out of the labor force are working-class families with children under the age of 10.
“A lot of them are dual career couples, and scraping to get by,” he said. “It costs some amount of money to go to work. If you think your kids are going to be sent home and you don’t know, you might make a choice to just go on with low income, or make a little money on the side, or just forestall some spending.”
“Whether this lasts or not is the big question we have in front of us,” he said. “We are still 5 million workers down from where we were 18 months ago.”
Barkin said women’s participation in the U.S. workforce peaked in 2000, and right now is now about 4 percentage points below 2000. “It is almost all working class,” he said.
However, women’s participation in the workforce in the nation’s northern neighbor, Canada, is up 5 percentage points from 2000, and that is “almost all working class,” he said.
“I would like to know, what is Canada doing to get women in the workforce, that we are not doing,” Barkin said, adding that it might be related to child care policies or education policies.
Virginia tax revenues soared by 18.4% in September, showing further signs of economic recovery from the COVID-19 pandemic as Gov. Ralph Northam met with economists on Wednesday to revise the financial outlook for the next two-year state budget.
The state collected about $406 million more during September than the same month a year ago — months before distribution of vaccines began to bring the public health emergency under control — and ended the first quarter of the fiscal year about $569 million up from the same period last year.
Income tax collections, both those withheld from paychecks and estimated payments by self-employed professionals and investors, rose by $234 million over the same month last year. Corporate income tax revenues increased by almost $104 million, and sales taxes went up $64 million.
“Our economy continues to show signs of a strong recovery,” Northam said in an announcement Wednesday afternoon.
Earlier in the day, the governor met privately with the Joint Advisory Board of Economists to prepare a new revenue forecast for the 2022-2024 budget he will propose in December, a month before ending his term. The Governor’s Advisory Council on Revenue Estimates, composed of business and legislative leaders, will meet on Nov. 22 to consider the revised economic outlook.
They know the budget will reflect a $2.6 billion revenue surplus in the fiscal year that ended June 30, as well as mandatory commitments for depositing most of that money in financial reserve and water quality improvement funds. The constitution requires a $1.1 billion deposit in the state rainy day fund, as well as a possible super deposit of $564 million.
But they don’t know what will come next, especially if the COVID-19 delta variant prolongs the pandemic and slows the reopening of Virginia’s economy.
“Overall, this quarter’s revenue performance was strong,” said Secretary of Finance Joe Flores, who will review the revenue outlook with General Assembly budget committees next week. “It is important to remember that we are comparing this quarter’s performance to the heart of the pandemic closures last year when there was still not a vaccine on the horizon.”
As a result, the revenue performance in September and the first three months far exceeded expectations in the current budget, which assumed declines or modest increases in growth. Total revenues increased by 10.6% in the first quarter, compared to the same period a year ago and an expected annual decline of 8%.
The gains came in every major source of revenue for the general fund budget, now about $24 billion a year, which comes from state taxes to pay for core government services such as education, health care and public safety.
Income taxes withheld from paychecks account for 62% of state revenue. Those collections increased by almost $110 million in September, compared to the same month a year earlier, and almost $307 million for the first three months of the fiscal year that began on July 1. Those gains represented a 9.9% increase for the month and 9.7% for the quarter, well ahead of the annual estimated growth rate of 1.7%.
Estimated payments of income taxes not withheld from paychecks, typically paid by self-employed professionals and investors, increased by about $125 million in September, compared to the same month the previous year. For the first quarter, those collections are $120 million below the same period a year earlier, or 12.2% less than the same period a year ago, but the budget assumes an annual decline of 25.4%.
Corporate income taxes finished the first quarter $123 million ahead of the same period a year ago, an increase of 36.5%, compared to an expected annual decline of 16.1%.
Sales and use taxes, including those collected on internet sales, rose by $138.4 million in the first three months of the fiscal year, a growth rate of 16.7%, compared to an expected annual decline of 4.2%.
Recordation taxes, levied on deeds and other court filings, rose by $3.5 million in September over the same month last year. They increased by $15 million during the first three months of the fiscal year compared to a year ago, a growth rate of 9%, even though the current budget assumes a 31.3% decline for the entire fiscal year that will end on June 30, 2022.
“In this strong economy Virginia will continue making critical investments in our communities, our public schools, and statewide infrastructure to bolster our growth economy,” Northam said in a written statement. “Our fiscal responsibility is paying off for Virginians.”