Retirees could see biggest benefits bump since 1981

Transcript

NIALA: Good morning! Welcome to Axios Today!

It’s Thursday, October 13th.

I’m Niala Boodhoo.

Here’s what you need to know today: Detroit’s 7 million dollar investment in police surveillance. Plus, another sign of the pandemic’s effect on high school seniors.

But first, a big boost to Social Security benefits is today’s One Big Thing.

NIALA: September inflation numbers are out later this morning while everyone has been watching inflation closely today's consumer price index is especially important for millions of retirees and others who depend on social security benefits.That's because the annual cost of living adjustment for next year is based on today's monthly number and given that we've already seen inflation increase 8.2% over the past year, it's likely we'll see one of the biggest increases in Social Security checks in more than 40 years. Axios Chief Economic Correspondent Neil Irwin is here with how this affects all of us. Hey Neil!

NEIL IRWIN: Hi Niala. Thanks for having me.

NIALA: Let's start basic here. Who gets social security?

NEIL: The biggest categories are retirees, people who worked for a long time and now are not. And also people on disability, people who can't work cause of some disability and those people are in line for a significant bump next year.

NIALA: So how does a Social Security Administration figure out what the cost of living adjustment should be?

NEIL: So it's a little bit technical, but it's based on the third quarter average inflation over the previous year. So the third quarter is July, August, September, based on the consumer price index though not exactly the same CPI we use in headlines. But that doesn't matter, the key is once we get this number at 8:30 AM we'll know what that adjustment looks like for 2023. Starting in January those checks will be something like eight and a half, 9% higher.

NIALA: Neil, the money that's being paid to retirees comes from payroll taxes. It's that FICA line, the 6.2% of people's wages. Does that mean that current workers will have to pay more into Social Security next year to fund these increases?

NEIL: No, the money comes out of the Social Security Trust Fund, which as you say, is funded by payroll taxes that are taken out of everybody's paychecks. Over time, higher inflation will have an impact on the finances of social security, but in the near term the fund is solvent and this money's coming out of that trust fund, so nothing to worry about. There is one little quirk in the way inflation affects taxes and payroll taxes, which is, there is a cutoff over which you don't have to pay payroll tax. That's $147,000 this year. So that number will rise. So if you're making more than that, you might be looking at a higher total payroll tax next year. But in terms of day to day taxes, nothing really changes. This is just a higher social security payment that goes out to Social Security recipients.

NIALA: Neil, we've been talking about a cost of living adjustment for social security. Do other pension plans like other retiree plans have cost of living adjustments?

NEIL: It varies pretty widely, but frequently not. There's a reason that inflation is often hard on retirees. If you're on a fixed income, even if part of your income in retirement coming from social security, which isn't to inflation if the rest of it isn't, that's not great news. Also, if you're relying on investments to support yourself in retirement, this has been a really rough year for both stocks and bonds. Most portfolios are down quite a bit. So, no one's saying that retirees are living high on the hog here. The point is this key support of income for people in retirement and in disability situations is going up by quite a good bit in January.

NIALA: And Neil, since we're talking about cost of living adjustments, how common is it that people are getting cost of living adjustments for salary?

NEIL: It's often a matter of individual negotiations with your company. Maybe union negotiation depending on the structure of your company. And you know there it's all over the map and plenty of people are seeing raises, but not raises that are high enough to keep up with inflation. So that's a thing to watch. You know, a lot of Americans are seeing more money in their pockets, but costs are going up faster and so there's seeing negative real wages and that's been bad news for American workers over the last year.

NIALA: Axios’ Chief Economic Correspondent Neil Irwin. Thank you!

NEIL: Thanks Niala.

NIALA: Neil's reporting led me to a related story Emily Peck has been working on, so I asked her to give me a quick explanation of how inflation may actually mean people pay lower taxes next year.

EMILY PECK: Niala, just like what you were just talking about with Social Security, the IRS also adjusts for inflation to make sure that you are not facing a higher tax rate than you really should. So the easy way to understand this is to go back to 1980, I think. So say the IRS never adjusted for inflation, and we still we're facing the same tax brackets we were back then. That would mean that someone earning $34,000 a year now would face a 49% tax rate, which you just know instinctively is bananas and would be awful.

But because the IRS adjusts, that's not what's gonna happen. If your salary hasn't changed from last year, you might be in a lower tax bracket. But Niala, it's not like anyone's getting a great tax break. It's really running to stand still. The price of everything has gone up. If you haven't gotten a cost of living adjustment in your actual pay or salary, you've gotten a pay decrease. You really just need this tax quote on quote break to keep up.

NIALA: That’s Axios Markets’ Emily Peck.

In a moment, a controversial audio surveillance tech program gets approved by the City of Detroit.

Detroit’s $7 million investment in audio surveillance technology for police

NIALA: Welcome back to Axios Today! I’m Niala Boodhoo.

Audio surveillance technology used by police departments around the country to detect gunshots just got a huge boost in Detroit, despite community opposition. The City Council approved a $7 million contract earlier this week with ShotSpotter, to expand its technology which the company says is already in at least 135 American cities. Here to help us dig deeper is Axios Detroit's, Sam Robinson. Hi, Sam.

SAM ROBINSON: Hi Niala.

NIALA: Sam, first of all, can you explain a little bit more about what this ShotSpotter technology is and does?

SAM: Yeah, so ShotSpotter is a, uh, gunshot surveillance detection technology. It places live microphones across neighborhoods and those microphones, they don't pick up conversation, they don't pick up the honking of horns, but what they do pick up is, gunshots. Here in Detroit, police are extremely confident that ShotSpotter is a really useful tool. And the advocates and residents opposing it do not. The approval that happened on Tuesday came after weeks that debate on council whether to use American Rescue plan money for the contract.

President Biden has actually encouraged states to do just that, spend it on police tools. Residents here say we should be spending pandemic money on mental health services to address the city's housing crisis. People say when folks have the things they need, crime goes down and they're really putting scrutiny on the claim that ShotSpotter prevents crime.

NIALA: And what has the company said about its product?

SAM: So the company has said that, Defund the Police groups are presenting misinformation that we're reporting on their misinformation that they're presenting to the public. ShotSpotter says that there are areas in Detroit where this technology is already deployed, where they can say, we've seen a reduction of crime since this tool has been deployed here. There is a national advocacy group, opposing ShotSpotters across the country called Campaign Zero. It's led by DeRay McKesson. Campaign Zero says they found areas with a similar drop in crime that don't use ShotSpotter.

NIALA: So you mentioned Defund the Police. How does this fit into the continued struggle between police and communities, especially as we're thinking about the George Floyd protests and the racial justice movement that we saw in 2020.

SAM: So you have one group of folks who says, you know, “we need to listen to the police and we need to give them the tools and resources they need to reduce our crime.” And then you have another group of folks who say, “no, we have given enough resources to the police. They should have the tools to be able to solve crime. We do not need surveillance, in our neighborhoods.” These, microphones are going up in the highest crime areas. What do we know that means? Those are the folks at, at the margins. So yeah, it's certainly an extension of the conversation that we were having in 2020 over whether to trust that police can reform themselves or to disinvest money from departments and spread it elsewhere. So this conversation is, is coming to municipalities across the country. It's already played out in here in Michigan, in Grand Rapids and Saginaw across the last decade. And, and don't be surprised if you know, pretty soon your city council is talking about whether to do business with ShotSpotter.

NIALA: Sam Robinson is an Axios local reporter based in Detroit. Thanks, Sam.

SAM: Thank you.

Another sign of the pandemic’s effect on high school seniors

NIALA: One final headline for you: ACT data out yesterday shows that the class of 2022 had the lowest average scores for the standardized tests since 1991. Experts tell Axios that ACT scores have been on the decline in recent years - so this is another sign that the pandemic exacerbated problems that already existed with student learning.

NIALA: That’s it for us today! I’m Niala Boodhoo - thanks for listening - stay safe and we’ll see you back here tomorrow morning.