The Social Security Cost-of-Living Adjustment (COLA) for 2026 faces potential risks due to President Donald Trump’s federal hiring freeze and the controversial firing of Bureau of Labor Statistics (BLS) Commissioner Erika McEntarfer, which have raised concerns about the accuracy of inflation data used to calculate the COLA. Here’s a detailed breakdown based on available information:
Background on Social Security COLA
The COLA is an annual adjustment to Social Security benefits designed to protect retirees’ purchasing power against inflation. It is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), based on third-quarter (July–September) data from the BLS. The 2025 COLA was set at 2.5%, and current projections for 2026 range from 2.5% to 2.7%, potentially boosted by Trump’s tariff policies.
Impact of Trump’s Actions
- Federal Hiring Freeze:
- Details: On January 20, 2025, Trump instituted a federal hiring freeze across all executive agencies, extended twice and set to last until October 15, 2025. This freeze has reduced the number of BLS enumerators who collect price data for the CPI-W, forcing the agency to rely on less accurate estimation methods.
- Consequences: The Wall Street Journal reports that staffing shortages have led to fewer surveyed businesses, increasing the use of “guesswork” in inflation calculations. If third-quarter 2025 CPI-W data underestimates inflation, the 2026 COLA could be too low, eroding retirees’ purchasing power. Conversely, overestimation could inflate benefits but undermine trust in the data.
- Senior Concerns: The Senior Citizens League (TSCL) warns that inaccurate CPI-W data “dramatically increases the likelihood that seniors receive a COLA that’s lower than actual inflation,” potentially costing retirees thousands over their retirement. A TSCL survey found 80% of seniors felt 2024 inflation exceeded the 2025 COLA of 2.5%.
- Firing of BLS Commissioner Erika McEntarfer:
- Details: Trump fired McEntarfer, reportedly due to dissatisfaction with employment data, raising fears of politicization of the BLS, an independent agency. This move has sparked concerns about the integrity of inflation data, as the BLS also oversees CPI-W calculations.
- Impact on Trust: The firing threatens public confidence in BLS data, including the CPI-W. If beneficiaries question the 2026 COLA’s accuracy, it could fuel perceptions of unfairness, especially since retirees already feel shortchanged by COLAs failing to match rising costs for shelter (3.9% annually) and medical care (3%).
- Critical View: Critics argue that targeting an independent agency’s leadership for unfavorable data undermines objective economic reporting. The lack of transparency around McEntarfer’s dismissal amplifies distrust, though no direct evidence suggests deliberate manipulation of CPI-W data.
Additional Context: Tariff Policy and COLA
Trump’s tariff policies, including a 10% global tariff and higher rates on countries like China (145%), are expected to increase inflation, potentially boosting the 2026 COLA. Estimates from The Budget Lab (2.3% price increase) and Ernst & Young (1% increase) suggest tariffs could push CPI-W higher, with TSCL and analyst Mary Johnson forecasting a 2.6%–2.7% COLA, up from earlier 2.1%–2.2% projections. However, higher COLAs may not fully offset rising costs for retirees, as shelter and medical expenses consistently outpace CPI-W-based adjustments.
Risks to Retirees
- Inaccurate COLA: If BLS data underestimates inflation due to staffing issues, the 2026 COLA could fall short, reducing retirees’ ability to cover essentials. A 2.5% COLA would increase the average retired-worker benefit by $50/month (from ~$2,000), but this may not keep up with real-world costs.
- Eroding Trust: The firing of McEntarfer raises questions about data integrity, potentially leading to public and political backlash if the COLA is perceived as manipulated or inadequate.
- Long-Term Impact: Even a higher COLA driven by tariffs could accelerate the depletion of Social Security trust funds, projected to face challenges by 2035 without reforms.
Critical Perspective
While Trump’s policies don’t directly cut Social Security benefits, the hiring freeze and McEntarfer’s firing introduce uncertainty into the COLA process. The reliance on CPI-W, which tracks spending by working-age urban workers rather than seniors, already skews COLA calculations, as retirees face higher costs for healthcare and housing. The BLS staffing issues exacerbate this flaw, and the politicization of an independent agency risks further eroding trust in a system that 80%–90% of retirees depend on, per Gallup surveys. Moreover, tariff-driven inflation may provide a short-term COLA “bump” but could harm retirees if it triggers a recession or higher living costs without adequate benefit increases.
What to Watch
- Third-Quarter CPI-W Data: The accuracy of July–September 2025 inflation data will determine the 2026 COLA, announced in October 2025.
- Hiring Freeze End: If the freeze lifts by October 15, 2025, BLS data collection could improve, but third-quarter data may already be compromised.
- Tariff Developments: Changes to Trump’s tariff policies (e.g., pauses or legal challenges) could moderate inflation, affecting COLA estimates.
If you’d like a chart visualizing COLA trends or comparing CPI-W to retiree-specific costs, or if you want more details on specific impacts, let me know! For now, retirees should stay informed and monitor updates from the SSA and advocacy groups like TSCL.