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Consumer Prices Rise Sharply

Washington Post | October 14, 2005

Hurricane Katrina helped push inflation up sharply last month, guaranteeing that millions of Americans receiving Social Security and other federal benefits will see their payments rise in January by the largest amount since 1991, the government reported today.

The Labor Department also reported that the widely followed consumer price index for all urban consumers, rose 1.2 percent last month and 4.7 percent in the 12 months that ended in September. That was the biggest monthly rise since March, 1980, and the biggest 12-month increase since May, 1991.

Social Security payments to more than 50 million retired and disabled workers will rise 4.1 percent in January to help those recipients keep up with inflation, which was driven higher over the last year by rising energy costs. Those costs surged after the deadly storm shut down and damaged oil rigs, refineries and pipelines when it hit Aug. 29. The average retired couple, both receiving Social Security benefits, will see their monthly check go from $1,538 to $1,648.

For senior citizens enrolled in Medicare, part of that increase will be consumed by rising health insurance premiums, which are deducted from Social Security checks.

Millions of recipients of other federal benefits -- including military, Foreign Service and civilian federal retirees -- also will get a cost-of-living adjustment in their monthly checks based on changes in the Labor Department's consumer price index during the past year.

The benefits adjustment, or COLA, provided government retirees is one of the foundations of the Washington-area economy. More than 327,000 civil service retirees and spouses of deceased retirees live in the District, Maryland and Virginia, and more than 174,400 military retirees live in the District and two states.

Nationwide, there are about 2.4 million civil service retirees and about 1.9 million military retirees, officials said.

Payments will go up 4.1 percent for retirees covered by the Civil Service Retirement System and those who receive military annuities. People who retired under the newer Federal Employees Retirement System and who are 62 or older will receive a 3.1 percent increase under the rules for that program.

Benefits will rise by 4.1 percent as wellfor recipients of Supplemental Security Income, which is paid to low-income people.

The size of the annual COLA is based on the change in the consumer price index for urban wage earners and clerical workers over the federal fiscal year, which ended Sept. 30.

The Labor Department also reported another measure of inflation, the more widely followed consumer price index for all urban consumers, rose 1.2 percent last month and 4.7 percent in the 12 months that ended in September. That was the biggest monthly rise since March, 1980, and the biggest 12-month increase since May, 1991.

The CPI increase primarily reflected soaring energy costs, which rose 12 percent last month, the largest monthly increase since the department started collecting data in 1957. Energy costs rose 35 percent in the 12 months that ended in September.

After excluding food and energy prices, so-called core prices rose 0.1 percent for the month and 2 percent over the past year.

Workers used to be able to retire and collect full Social Security benefits when they turned 65 years old. But the retirement age is being raised to encourage workers to retire later, which should reduce financial pressure on the system over time.

This year, people born in 1940 have to wait until they are 65 years and six months to collect full benefits.


Last modified October 14, 2005





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