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Social Security makes it official: No COLA

Social Security makes it official: No COLA

Bradley C Bower / AP 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 Associated Press via YellowBrix

October 16, 2009

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.


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