A look back at Social Security’s most dramatic COLA jumps - Including the biggest one ever recorded

Americans have been dealing with another surge of inflation since Israel and the U.S. attacked Iran prompting Tehran to close the Strait of Hormuz, choking off 20% of the world’s supply of oil. Consumers will be eagerly looking forward to possible relief now that President Donald Trump and the Islamic Republic say that they’ve reached a deal to stop the fighting and reopen the vital waterway to maritime traffic.

While the price of oil has already come down, it is still nearly $20 above where it was before the conflict. Furthermore, the disruptions throughout the global supply chains will be felt for a long time as was seen during the covid-19 pandemic.

This will likely keep the pace of inflation higher than policymakers would like, which could mean the biggest cost-of-living-adjustment (COLA) increase for Social Security benefits since 2023. Current forecasts put the annual boost anywhere from 3.9% to 4.7% reports CNBC if inflation continues on its current trajectory. However, that is nothing compared to some of the monster COLAs in the past.

Social Security whopper COLAs

A president’s fortunes at the ballot box are usually tied to how the economy is doing. They get the credit when things are going well, and much of the blame when it sours. In reality they have very little control over the economy, which swings depending on global forces.

The biggest COLA on record came while Jimmy Carter was president, but the boost to Social Security benefits couldn’t help his electoral chances, with a myriad of problems beyond his control. When the COLA was announced that was to take effect for payments in July 1980, Social Security benefits got a whopping 14.3 percent boost. The average retired worker was estimated to get $338.12 per month, an extra $42.36 added to their monthly payment.

However, the high inflation that necessitated the massive increase, coupled with high unemployment, saw Reagan swept to power when Americans voted in 1980. The year after was the second biggest COLA ever, followed by the 1979 adjustment.

Finally, dramatic interest rate increases implemented under Federal Reserve Chairman Paul Volcker helped bring an end to the ‘Great Inflation’ period. However, there were some bouts of higher inflation in the late 80s, again in the noughts, and in the wake of the covid-19 pandemic resulting in larger COLA increases.

While the U.S. is experiencing stubbornly high inflation, at 4.2% in May it’s the highest level in three years, the economy has been surprisingly resilient so far. The May jobs report blew past expectations with American employers adding 172,000 new jobs. However, there are concerns that inequality could begin to take a serious toll.

At a glance - ten largest COLAs:

What caused the record COLA in 1980

Oil shocks have been pretty effective at throwing a wrench in the works of the economy time and again. In 1973, the Arab oil embargo quadrupled the price of crude, which remained high until the 1979 energy crisis brought on by the Iranian revolution.

The second shock tripled the price of crude oil. Other factors and a misguided policy by the Federal Reserve helped to accelerate rising prices at the tail end of the Great Inflation period, which ran from 1965 to 1982. Of the ten biggest COLA increases, seven of them occurred in the final years of the Great Inflation period. Besides the one for 2023, the only ones outside that period are 2022 and 2009, which come in at ninth and tenth place.

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