The government is expected to announce this week that there will be no increase this year in monthly benefits for more than 58 million Social Security recipients.
As reported by NPR, your tax dollars at work
The cost-of-living adjustments, or COLAs, are automatically set each year by an inflation measure that was adopted by Congress back in the 1970s. Based on inflation so far this year, the trustees who oversee Social Security project say there will be no COLA for 2011.
It would mark only the second year without an increase since automatic adjustments for inflation were adopted in 1975. The first year was this year.
"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 and now a resident scholar at the American Enterprise Institute.
"It's not the congressional Democrats' fault, but that's the way politics works,'' Biggs said. "A lot of people will feel hostile about it.''
The projection will be made official on 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.
This past Friday, the same bureau delivered another painful blow to Democrats: The U.S. lost 95,000 jobs in September, and unemployment remained stubbornly stuck at 9.6 percent.
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 national retirement program.
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 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. A 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 got a one-time bonus payment of $250 in the spring of 2009 as part of the government's massive economic recovery package. President Barack 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 support the second bonus payment.
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,'' 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.
If inflation increases from year to year, Social Security recipients automatically get higher payments, starting in January. If inflation is negative, the payments stay unchanged.
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 actual inflation. However, 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.
Social Security spokesman Mark Lassiter said the agency has no leeway to increase payments if the inflation measurement doesn't call for it.
Rep. Earl Pomeroy (D-ND), 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,'' Pomeroy said. "Seniors in particular have items such as uncovered drug costs, medical costs, utility increases, and they're on fixed incomes.''
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