Abstract
In 1973 Congress passed legislation requiring that Social Security benefits be adjusted annually according to changes in the Consumer Price Index (CPI). The intent of this provision was to insure that adjustments in benefits would be made on a regular basis and that Social Security recipients, most of whom were elderly and retired, would not suffer a decrease in real benefits during inflationary periods. Since 1973 the combination of rapid inflation, slow growth in real wages, unemployment and an increased elderly population has strained the Social Security system’s financial resources to the point where the solvency of the Social Security system has been threatened. Recent reforms have included a one-time six-month postponement of the cost-of-living adjustment.
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