Social Security makes it official: No COLA in 2010
WASHINGTON — There will be no cost-of-living increase for more than 50 million Social Security recipients next year, the first year without a raise since automatic adjustments were adopted in 1975.
Blame falling consumer prices. By law, cost-of-living adjustments are pegged to inflation, which is negative this year because of lower energy costs. Social Security payments, however, do not go down even when prices drop.
The Obama administration, meanwhile, is pursuing a different way to boost recipients’ income. On Wednesday, President Barack Obama called for a second round of $250 stimulus payments for seniors, veterans, retired railroad workers and people with disabilities.
The payments would match the ones issued to seniors earlier this year as part of the government’s economic recovery package. The payments would be equal to about a 2 percent increase for the average Social Security recipient.
The White House put the cost of the payments at $13 billion. Obama didn’t say how the payments should be financed, leaving that up to Congress. The president is open to borrowing the money, which would increase the federal budget deficit, just like Congress did with the first round of stimulus payments.
Social Security payments increased by 5.8 percent in January, the largest bump up since 1982. The big increase was largely because of a spike in energy costs in 2008.
“Social Security is doing its job helping Americans maintain their standard of living,” said Social Security Commissioner Michael J. Astrue.
But, he added, “In light of the human need, we need to support President Obama’s call for us to make another $250 recovery payment for 57 million Americans.”
The Labor Department reported Thursday that consumer prices had declined 2.1 percent since the third quarter of 2008. The cost-of-living adjustment for Social Security, or COLA, is based on the change in consumer prices from the third quarter of one year to the next.
Social Security recipients shouldn’t get a raise next year because their purchasing power has already increased with falling consumer prices, said the Center on Budget and Policy Priorities, a liberal-leaning think tank.
“Since the purpose of COLAs is to preserve beneficiaries’ purchasing power, the decline in overall prices means that beneficiaries do not need a COLA in January 2010,” Kathy Ruffing, a senior policy analyst at the center, wrote in a report this week.
Over the past 12 months, gasoline prices have fallen 29.7 percent and overall energy costs have decreased 21.6 percent, the Labor Department said Thursday.
Ruffing noted that government forecasters don’t expect consumer prices to return to 2008 levels until 2011.
Sen. Judd Gregg, R-N.H, called the $250 payments “inappropriate.”
“The reason we set up this process was to have the Social Security reimbursement reflect the cost of living,” Gregg said.
Some advocates for seniors, however, argue that older Americans spend a disproportionate amount of their incomes on health care costs, which rise faster than consumer prices.
The lack of a cost-of-living increase triggers several provisions in the law. Among them, the amount of wages subject to Social Security payroll taxes will remain unchanged. The first $106,800 of a worker’s earned income is currently subject to the tax.
Also, Medicare Part B premiums for the vast majority of Social Security recipients will remain frozen at 2009 levels. However, premiums for the Medicare prescription drug program, known as Part D, will increase.
Obama’s proposal calls for sending $250 payments to Social Security recipients as well as those receiving veterans or disability benefits, railroad retirees, and retired public employees who don’t receive Social Security. Recipients would be limited to one payment, even if they qualified for more.
Obama’s proposal has picked up support from key members of Congress, including Senate Majority Leader Harry Reid, D-Nev., and House Speaker Nancy Pelosi, D-Calif.
Republican leaders said they, too, favor the proposal, but without increasing the deficit.
Rep. John Boehner, R-Ohio, said he wanted to use unspent funds from last year’s stimulus legislation to offset the cost.
Senate Republican Leader Mitch McConnell of Kentucky said he expected members of his rank and file would also want to offset the estimated $13 billion cost, but did not state a personal preference.
Several groups that advocate for seniors have also endorsed the $250 payments, including the AARP and the National Committee to Preserve Social Security and Medicare.
One group, The Senior Citizens League, said Social Security recipients would be better off with a 3 percent increase in their monthly payments.
“Although President Obama’s call for a one-time payment of $250 will help seniors, it is a distraction since the zero COLA will cost retirees thousands in lost compounding throughout their retirement,” said Shannon Benton, executive director of The Senior Citizens League.
The average monthly Social Security payment for all Social Security recipients is $1,094.
Related News
Social Security to announce no COLA as Obama calls for 2nd round of $250 payments for seniorsOctober 15th, 2009 Social Security to make it official: No COLAWASHINGTON — The Social Security Administration makes it official Thursday: There will be no cost of living increase for Social Security recipients next year, the first year without one since automatic adjustments were adopted in 1975. The announcement comes as President Barack Obama and key members of Congress call for a second round of $250 payments to more than 50 million seniors, veterans, retired railroad workers and people with disabilities.
Obama says Social Security recipients need protection from rising health costsOctober 15th, 2009 Obama says lower costs aren't seen in health careNEW ORLEANS — Even though consumer prices have fallen in the past year, President Barack Obama says that's not the case for health care costs. Obama says that's one reason he wants people on Social Security to get a $250 payment to make up for the lack of an increase in their benefits next year.
Obama calls for $250 payments to older Americans to make up for no increase in Social SecurityOctober 14th, 2009 Obama calls for $250 payments to seniorsWASHINGTON — President Barack Obama called on Congress Wednesday to approve $250 payments to more than 50 million seniors to make up for no increase in Social Security next year. The Social Security Administration is scheduled to announce Thursday that there will be no cost of living increase next year.
By any other name: Bills to create jobs add up to a second economic stimulus packageOctober 8th, 2009 Proposals to create jobs add up to second stimulusWASHINGTON — Confronted with big job losses and no sign the U.S. economy is ready to stand on its own, Democrats are working on a growing list of relief efforts, leaving for later how to pay for them, or whether even to bother.
AP answers your news questions, from status of 'Sully's' jet to what's up with Somali piratesOctober 2nd, 2009 Ask AP: Capt. 'Sully's' jetliner, Somali piratesCapt.
House passes bill to eliminate premium hikes for Medicare Part B patients; bill goes to SenateSeptember 24th, 2009 House passes bill stopping Medicare premium hikesWASHINGTON — The House voted overwhelmingly Thursday to eliminate monthly premium increases for millions of Medicare patients next year. It voted 406 to 18 to send the bill to the Senate, which is expected to act soon.
House passes bill to eliminate premium increases for Medicare Part B patientsSeptember 24th, 2009 House passes bill stopping Medicare premium hikesWASHINGTON — Millions of Medicare patients would be spared monthly premium increases next year under a bill passed by the House Thursday. The House voted 406 to 18 to eliminate all premium increases for Medicare Part B, which provides coverage for doctor's visits.
House to vote to eliminate Medicare Part B premium hikes next year for the few who face themSeptember 23rd, 2009 House to vote to eliminate Medicare premium hikesWASHINGTON — With no Social Security cost-of-living increase expected in January, House Democrats want to cancel all of next year's premium increases for Medicare Part B recipients. Most seniors won't face a premium increase anyway, but Democrats want to shield the few who would.
Obama cites unemployment, economy in order reducing federal pay hike to 2 percentAugust 31st, 2009 Obama reduces 2010 pay increases to 2 percentWASHINGTON — President Barack Obama notified Congress on Monday he is reducing pay increases for federal workers from 2.4 percent to 2 percent. Using powers employed by his two most recent predecessors, the president cited the national unemployment rate and the budget busting federal payroll.
Government sent 3,900 economic stimulus checks to prison inmates _ 2,200 got to keep themAugust 26th, 2009 3,900 stimulus checks went to prison inmatesWASHINGTON — The federal government sent about 3,900 economic stimulus payments of $250 each this spring to people who were in no position to use the money to help stimulate the economy: prison inmates. The checks were part of the massive economic recovery package approved by Congress and President Barack Obama in February.
Millions face smaller Social Security checks next year as rising drug costs diminish paymentsAugust 23rd, 2009 Millions face shrinking Social Security paymentsWASHINGTON — Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise. The trustees who oversee Social Security are projecting there won't be a cost of living adjustment (COLA) for the next two years.
Feds to pay $500 million in back Social Security payments to recipients wrongly barredAugust 12th, 2009 Feds to pay $500 million in Social Security suitOAKLAND — A federal judge has tentatively approved a settlement requiring the government to pay more than $500 million to tens of thousands of people wrongly barred from receiving Social Security payments. The Social Security Administration over the past several years withheld benefit checks from recipients found to have outstanding arrest warrants
Agency officials say they were complying with a 1996 law requiring them to stop payments to recipients "fleeing to avoid prosecution" of a felony.
Obama says Social Security disability part of broad review of entitlement programsMay 14th, 2009 Obama: Entitlement changes key to budget healthRIO RANCHO, N.M. — President Barack Obama says he likes the idea of increasing income limits for those receiving Social Security disability payments, but also says it costs money.
$250 Social Security checks going out this month only a loan for manyMay 9th, 2009 $250 stimulus checks only a loan for manyWASHINGTON — About 52 million Social Security recipients started receiving $250 economic recovery checks Thursday, including many who will have to repay the money at tax time next year — either through a smaller refund or a larger tax bill. The payments were meant to provide a boost to people who don't qualify for President Barack Obama's "Making Work Pay" tax credit, which pays individuals up to $400 and couples up to $800.
$250 government stimulus checks going to 50 million retirees in MayApril 29th, 2009 50 million retirees to get $250 checks in MayWASHINGTON — More than 50 million retirees can expect to receive $250 payments from the government in the next few weeks as their share of the economic stimulus package enacted in February. Economists say the payments will be a timely boost just as the recession is showing signs of easing a little.
Loading ...