50 Million People Will Not Get IncreasesWashington DC- The government announced today that there will be no cost-of-living increases for Social Security recipients next year. It's the first year without a raise since automatic adjustments were adopted in 1975.
Social Security payments will not go down. But cost-of-living adjustments, or COLA, are pegged to inflation. Inflation is negative this year because of lower energy costs.
Social Security payments increased by 5.8 percent in January, the largest increse since 1982. The big increase was largely because of a spike in energy coasts in 2008.
Blame Falling Consumer Prices
The Labor Department reported today that consumer prices had declined 2.1 percent since the third quarter of 2008. The 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 an increase next year because their purchaasing power has already increased with falling consumer prices, said the Center on Budget and Policy Priorities.
"Sice the purpose of COLA's is to preserve beneficiaries' purchasing power, the decline in overall prices means that beneficiaries do not need a COLA in 2010," Kathy Ruffing, a senior policy analyst at the center, wrote in a report this week.
Ruffing noted that government forecasters don't expect consumer prices to return to 2008 levels until 2011.
Advocates for Seniors Concerned
Advocates argue that older Americans spend a disproportionate amount of their incomes on health care costs, which rise faster than consumer prices.
President Obama called on Congress on Wednesday to approve the second round of stimulus payments.
"This additional assistance will be essentially important in the coming month, as countless seniors and others have seen their retirement accounts and home values decline as a result of the economic crisis," Obama said on Wednesday.
The $250 payments would go to Social Security recipients as well as those receiving veterans and disability benefits, railroad retirees, and retired public employees who don't receive Social Security.
