No increase in Social Security likely in '11

10/11/2010

WASHINGTON - As if voters don't have enough to be angry about this election year, the government is expected to announce this week that more than 58 million Social Security recipients will go through another year without an increase in their monthly benefits.

It would be only the second year without an increase since automatic adjustments for inflation were adopted in 1975.

The first year was 2010.

"If you're the ruling party, this is not the sort of thing you want to have happening two weeks before an election," said Andrew Biggs, a former deputy commissioner at the Social Security Administration who is a scholar at the American Enterprise Institute.

"It's not the congressional Democrats' fault, but that's the way politics works," Mr. Biggs said. "A lot of people will feel hostile about it."

The cost-of-living adjustments, or COLAs, are automatically set each year by an inflation measure that was adopted by Congress in the 1970s. Based on inflation so far this year, the trustees who oversee Social Security project there will be no cost-of-living adjustment for 2011.

The projection will be made official Friday, when the Bureau of Labor Statistics releases inflation estimates for September.

The timing couldn't be worse for Democrats as they approach an election in which they are in danger of losing their House majority and possibly their Senate majority as well.

Democrats have been working hard to make Social Security an election-year issue, running political ads and holding press conferences to accuse Republicans of plotting to privatize the retirement program.

Social security has become an issue in the Ohio race for governor, with incumbent Democrat Ted Strickland accusing his Republican opponent, John Kasich, of both trying to raise taxes on seniors and supporting the idea of privatizing Social Security.

Mr. Kasich, in a debate in Toledo on Thursday, said he would not raise taxes.

Mr. Kasich, while in Congress, backed a plan to allow Americans to create personal retirement saving accounts. He and other Republicans maintained it would not replace Social Security and would help balance the national budget.

The Social Security issue also came up during both debates in the race for Ohio's open U.S. Senate seat between Democratic Lt. Gov. Lee Fisher and former Republican congressman Rob Portman.

This week's announcement about Social Security benefits raises more immediate concerns for older Americans whose savings and home values still haven't recovered from the financial collapse: Many haven't had a raise since January, 2009, and now it looks like they won't be getting one until at least January, 2012.

"While people aren't getting COLAs they certainly feel like they're falling further and further behind, particularly in this economy," said David Certner, AARP's legislative policy director. "People are very reliant on Social Security as a major portion of their income and, quite frankly, they have counted on the COLA over the years."

Social Security was the primary source of income for 64 percent of retirees who got benefits in 2008, according to the Social Security Administration. One-third relied on Social Security for at least 90 percent of their income.

A little more than 58.7 million people receive Social Security or Supplemental Security Income. The average Social Security benefit is about $1,072 a month.

Social Security recipients did get a one-time bonus payment of $250 in the spring of 2009 as part of the government's economic recovery package. President Obama lobbied for another one last fall when it became clear seniors wouldn't get an increase in monthly benefit payments in 2010.

Congress took up the issue, but a proposal by Sen. Bernie Sanders died when 12 Democrats and independent Sen. Joe Lieberman of Connecticut joined Senate Republicans to block it. Sen. Olympia Snowe of Maine was the only Republican to back the second payment.

Mr. Sanders (I., Vt.) said he expects older voters to be angry when they learn there will be no increase for the second straight year.

"I do think there's going to be political fallout," Mr. Sanders said. "Many seniors who are spending a lot of money on health care and prescription drugs really are going to find it hard to believe that there has been no inflationary costs to their purchasing needs."

Federal law requires the Social Security Administration to base annual payment increases on the Consumer Price Index for Urban Wage Earners and Clerical Workers, which measures inflation. Officials compare inflation in the third quarter of each year - the months of July, August, and September - with the same months in the previous year.

Social Security payments increased by 5.8 percent in 2009, the largest increase in 27 years, after energy prices spiked in 2008.

But energy prices quickly dropped. For example, average gasoline prices topped $4 a gallon in the summer of 2008. But by January, 2009, they had fallen below $2. Today, the national average is roughly $2.70 a gallon.

As a result, Social Security recipients got an increase in 2009 that was far larger than inflation. And they won't get another increase until inflation exceeds the level measured in 2008. The Social Security trustees project that will happen next year, resulting in a small increase in benefits for 2012.

Rep. Earl Pomeroy (D., N.D.), chairman of the Ways and Means subcommittee on Social Security, has introduced a new bill to provide $250 payments to seniors, if there is no increase in Social Security. Maybe, he said, there will be more of an appetite in Congress to pass it after lawmakers hear from voters in November.

"Costs of living are inevitably going up, regardless of what that formula says," he said. "Seniors in particular have items such as uncovered drug costs, medical costs, utility increases, and they're on fixed incomes."