Social Security freeze: no COLA, but maybe $250
Social Security freeze means recipients won't get a cost-of-living adjustment for the second year in a row. But House Speaker Pelosi is pushing for a $250 payment.
More than 58 million retirees and disabled Americans will get no increase in Social Security benefits next year. That's the second Social Security freeze in a row.
The Social Security Administration said Friday inflation has been too low since the last increase in 2009 to warrant an increase for 2011. The announcement marks only the second year without an increase since automatic adjustments for inflation were adopted in 1975. The first year was this year.
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.
To make up for the lack of a COLA, the House will vote in November — after congressional elections — on a bill to provide $250 payments to Social Security recipients, House Speaker Nancy Pelosi said. But even if Pelosi can get the House to pass the proposal, it faces opposition in the Senate.
The absence of inflation will be of small comfort to many older Americans whose savings and home values still haven't recovered from the recession. Many haven't had a raise since January 2009, and they won't be getting one until at least January 2012. And 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.
Dizik, 83, said her only source of income is a $1,200 monthly payment from Social Security.
"I'm like a lot of other people in my predicament who live on Social Security," Dizik said. "It's hard. We cannot make ends meet."
Claire Edelman of Monroe Township, N.J., said she was so hard up that at the age of 83 she applied for a temporary job as a census taker for the 2010 Census. She didn't get the job, so she gets by on a small pension from her job with the state and her monthly Social Security payment of $1,060.
"I just hope there is some way to reconsider that decision (on the COLA) because it is going to affect so many people," Edelman said. "I can't understand why the Congress hasn't seen that there's been an increase in everything."
A little more than 58.7 million retirees and disabled Americans receive Social Security or Supplemental Security Income. Social Security was the primary source of income for 64 percent of retirees who got benefits in 2008.
The average Social Security benefit: $1,072 a month.
Social Security is supported by a 6.2 percent payroll tax — paid by both workers and employers — on wages up to $106,800. Because there is no COLA, that amount will remain unchanged for 2011.
The last increase in benefits came in 2009, when payments went up by 5.8 percent, the largest increase in 27 years. The big increase was caused by a sharp but short-lived spike in energy prices in 2008.
Gasoline prices topped $4 a gallon in the summer of 2008, jolting the inflation rate and resulting in the high COLA for 2009. When the price of gasoline subsequently fell below $2 a gallon, so did the overall inflation rate. Seniors, however, kept the high COLA for 2009.
"They received a nearly 6 percent COLA for inflation that no longer really existed," said Andrew Biggs, a former deputy commissioner at the Social Security Administration and now a resident scholar at the American Enterprise Institute.
"Seniors aren't being treated unfairly, here," Biggs said. "It looks bad, but they're actually not being treated unfairly."
By law, the next increase won't come until consumer prices rise above the level measured in 2008. The trustees who oversee Social Security project that will happen next year, resulting in an estimated 1.2 percent COLA for 2012.
Advocates for older Americans are pushing for some kind of payment to make up for the lack of a COLA.
"I know everybody's been hurting. I see it everyday. But they are really hurting," said Barbara Kennelly, a former Democratic member of Congress from Connecticut who is now president and CEO of the National Committee to Preserve Social Security and Medicare.
"It's one more thing to be disappointed in," she said.