MW Social Security's COLA is now at risk after Trump's shock firing at the Labor Department

By Brett Arends

Erika McEntarfer was in charge of more than just the monthly jobs figures

President Donald Trump's firing of the commissioner of labor statistics, Erika McEntarfer, on Friday raises serious risks for retirees living on Social Security, and for those with money in U.S. bonds and bank savings accounts.

Read: Trump sacks BLS chief after poor jobs report, as credibility of U.S. economic data comes under fire

That's because the woman who got fired wasn't just in charge of the monthly jobs figure, although that was the notional cause of her firing.

She was also in charge of official U.S. inflation figures, including the monthly consumer-price index.

And that's the number that determines Social Security's annual cost-of-living adjustment, or COLA.

Read: Here's what Americans are willing to sacrifice to save Social Security

Those inflation figures also underpin the entire U.S. bond market - which in turn underpins the entire global financial system.

So, nothing to see here, folks. Move along.

Nancy Altman, the head of the nonprofit Social Security Works, tells MarketWatch she is "extremely concerned" by the latest developments.

"It is unprecedented that we have to worry that government data, generated with all of our tax dollars, may be intentionally inaccurate," she says. "The seriousness of that concern cannot be overstated."

Read: Trump's firing of BLS commissioner decried as 'groundless' and 'giving way to authoritarianism'

The backstory to Friday's shock firing is crucial.

Under McEntarfer, the Bureau of Labor Statistics reported that there was inflation in the U.S. economy and that it was speeding up.

Most economists agree. You've probably seen it yourself on store shelves.

The bureau's last report showed that consumer prices across the U.S. economy had risen 2.7% in the past year. And, the bureau added, last month prices rose at an annualized rate of 3.7%. That's nearly twice as high as the Federal Reserve's official target. McEntarfer and the BLS were due to report new inflation data next week.

But those numbers were a problem for Trump. He wants the inflation figure to be lower. And he says that the BLS is wrong and that inflation in the U.S. economy is nonexistent.

"Right now there is no inflation," the president said on Wednesday. People ("everyone") predicted that his tariffs would cause inflation, he said, but they hadn't. "We have no inflation," he added.

Not just low inflation. No inflation at all.

As Chico Marx famously asked, "Who are you gonna believe, me or your own eyes?"

And: Here's why Trump's excuses for firing BLS chief Erika McEntarfer don't add up

Two days after making those remarks, Trump fired the person in charge of producing these inconvenient official inflation figures.

His economic adviser Kevin Hassett says the president "wants his own people" at the BLS. The president says he will appoint a new commissioner within days.

That would be before the bureau's next inflation report, scheduled to be published on Aug. 12.

Trump has very good reasons for wanting the official inflation figures to be slashed, no matter what is actually happening on store shelves.

Read: Medicare Part B premium hike could wipe out some recipients' Social Security increases

A lower consumer-price index will make him look better. A high CPI makes him look bad.

And a lower CPI will save the government money. Potentially a lot of money.

If the official CPI were miraculously lowered, it would give Trump extra ammunition against Fed Chair Jerome Powell. Trump has been publicly hounding Powell for months to slash the overnight interest rate from the current level of 4.25% to 4.5% down to 1% or even less. This, the president says, would cut the interest bill of the massively overindebted U.S. federal government. The president says each 1-point cut would trim the federal interest bill by $360 billion a year.

Read: Older adults on 'edge of poverty' lose jobs and funding as new Medicaid and SNAP work requirements loom

It was surely no coincidence that Trump launched yet another personal attack on Powell when he fired McEntarfer.

And lowering what the federal government pays in interest costs isn't the only way a low CPI would help Trump. It would also help federal finances across the board - by cheating the public.

That's because if you have high actual inflation in the economy and an artificially lowered CPI, wages and taxes will rise with inflation, while many government expenses will only rise in line with CPI.

Among them: those annual Social Security COLAs. They are based entirely on the official CPI numbers.

Could this happen? Could the president, after installing "his own people" at the statistics bureau, get them to artificially manipulate the official figures downwards?

Read: Opinion: All the reasons privatizing Social Security would be a terrible idea

Sure. Actually, it would be easy. That's because inflation numbers are easy to manipulate. Much easier, as it happens, than the jobs data.

The reason is that inflation data depend on so many value judgements and assumptions. Are you familiar with the concept of "owner's equivalent rent"? Most people probably aren't, but it's the single most important input into the official inflation figures. This one figure alone accounts for 27% of the monthly CPI numbers. And it's easy to manipulate.

What about hedonic adjustments? If this year's iPhone $(AAPL)$ is the same price as last year's model but has a faster processor and a better camera, has the "real" price fallen or stayed the same?

What about substitution? If the price of butter goes up while the price of olive oil goes down, and some consumers switch, is that inflation or not inflation? What number would you use?

Whole books have been written about this stuff.

Someone who wants to take a 3.7% inflation rate and "magic" it down to 2.7%, 1.7% or 0.7% would find it reasonably easy to do so.

Would Trump's people do that? Maybe the better question is: Why wouldn't they? But we will have to wait and see. Nervous times.

-Brett Arends

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August 05, 2025 09:35 ET (13:35 GMT)

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