The Social Security Administration’s announcement that it will not be providing Cost of Living Adjustment increases to its beneficiaries has caused quite a stir among seniors, nonprofits, and members of Congress. Here are some basic facts about the COLA itself, the implications of not having an increase, and the possibilities for other funding for Social Security beneficiaries.
Social Security benefits are adjusted each year to fit the cost of living increase measured by the Consumer Price Index. Because there has been inflation every year since 1975, there has also been an increase in social security benefits to help elders with the increased costs of living. This year, however, as a result of the economic crisis, the cost of living actually decreased. Thankfully, Social Security benefits are never smaller than they were the year before, but that means this year benefits will be the same as last year (no COLA/increase).
Even though the CPI measurement shows that the cost of living did not increase in the past year, elder advocates remind Congress that the economic crisis has hit seniors, as they pay high costs for healthcare and prescription drugs, and have few, if any, years of work to rebuild lost retirement savings. Because women live longer than men and have lower incomes due to time out of the workforce to provide caregiving and other duties, elder women are at a high risk of poverty.
President Obama is supporting a bill to provide $250 to seniors, veterans, and individuals with disabilities to make up for the lack of a COLA. The bill is called the Emergency Senior Citizens Relief Act of 2009 (H.R. 3597, S. 1685). President Obama’s proposed legislation would cost between $13 and 14 billion, but Social Security Commissioner Michael Astrue believes this payment is necessary to protect elders against medical costs that have increased “at a rate of inflation much higher than any other commodity.”
Opponents of the bill maintain that giving elders money even though the cost of living has not increased, will begin to transform the Social Security system into a welfare program. The COLA was designed precisely to increase only when inflation increased, and since that did not happen, seniors technically can purchase more with their benefits this year than last year. It is not Social Security’s responsibility to make up for the shortcomings of the overall economy, and beginning to compensate seniors in this way transforms the entire program from an earned benefit program to a welfare program. Finally, the country’s deficit is already large enough, without adding billions of dollars to the national debt. For these reasons, to opponents, Obama’s bill is unjustified and unnecessary.
Regardless of whether you support or oppose Obama’s bill to provide funding for seniors this year, those are the basic facts about the COLA in our Social Security program. Check back for updates on the bill!