Seniors Get The UnCOLA

Because of the low growth in consumer prices, senior citizens will see no Cost of Living Adjustment in their checks this January.

Social Security and Supplemental Security Income (SSI) benefits are adjusted annually to reflect the increase, if any, in the cost of living as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) prepared by the Bureau of Labor Statistics. The purpose of the annual cost-of-living adjustment
(COLA) is to ensure that the purchasing power of Social Security and SSI benefits is not eroded by inflation.

But now the recession has claimed another victim: Social Security recipients.

In response, on October 14th, President Barack Obama asked Congress to legislate a second round of $250 economic recovery payments to Social Security recipients in 2010. This year’s stimulus bill (the American Recovery and Reinvestment Act, or ARRA) included those payments, which went out to all Social Security beneficiaries in the summer. The President
is now urging Congress to authorize a repeat of that program for the coming year, citing continued economic hardship among the Social Security population.

The $250 figure is equivalent to approximately 2% of the average annual Social Security retirement benefit. It is estimated that the cost of this proposal is $13 billion. This is the White House’s first ARRA extension request. The announcement came on the heels of the news that there will be no cost-of-living adjustment (COLA) in 2010, given the country’s negative inflation rate.

“Older adults struggling to make ends meet in this recession will be directly aided by this relief, and we hope the expenditure of these payments will have a stimulative effect on the economy, as well," said Paul J. Lanzikos, President of Mass Home Care. "Given the lack of a cost-of-living adjustment in 2010 for Social Security recipients, this one-time payment will be especially
helpful to those living on a fixed income," Lanzikos said.

According to the Social Security Administration, under present law there is a COLA for Social Security and SSI benefits provided only when there is an increase in the average of the Consumer Price Index-W from the third calendar quarter of the prior year to the third calendar quarter of the current year of at least one-tenth of one percent (0.1 percent). If the CPI-W increases by less than 0.05 percent, or if the CPI-W decreases, there is no COLA. If there is no COLA, Social Security and SSI benefits remain the same. That means for every year after 2010, the Social Security will be lower than it would have been if there had been a COLA in 2010. Since there is no COLA in 2010, the starting point for the measuring period for the 2011 COLA will remain the third calendar quarter of 2008.

There has been an on-going debate in Congress about whether or not the CPI-W accurately measures the impact of inflation on seniors, since their expenditures on consumer goods is much more weighted on medical services and drugs than younger workers.  Congress has yet to agree on creating a special CPI for elders, and as a result the CPI-W is not seen as a fair indicator of the rising costs for drugs and health care out of pocket expenses that seniors face.