Social Security benefits will remain flat for 2nd straight year, government says

By Amy Goldstein
Washington Post Staff Writer
Saturday, October 16, 2010; 12:42 AM

For the second year in a row, the nearly 54 million retirees and other Americans who receive Social Security benefits will not get any cost-of-living increase in 2011 in their monthly checks, government officials announced Friday, renewing debate over whether the system offers enough help in a weak economy.

The absence of any growth in Social Security checks for consecutive years is unprecedented in the 31/2 decades that payments have been adjusted automatically based on the nation's inflation rate.

The news that retirement benefits will remain static was part of a trio of developments on Friday that drew attention to lingering effects of the recession. Taken together, the new reminders of the country's economic fragility carry large political stakes, coming 21/2 weeks before a midterm election in which the deficit and jobs are paramount concerns among voters.

In the White House and on Capitol Hill, Democrats immediately responded with fresh calls to give extra money to older Americans, a potent voting bloc, and other people who depend on Social Security. Republicans disparaged the idea, contending that it would deepen the deficit and skirt a more fundamental need to put the retirement system on solid financial footing for the long term.

While the parties argued in Washington, Federal Reserve Chairman Ben S. Bernanke signaled during a speech in Boston that the Fed was prepared to undertake a new round of unconventional efforts to spur economic growth, with inflation persistently low and unemployment high.

Separately, the Obama administration reported that the federal budget deficit for the fiscal year that ended in September hit $1.29 trillion, in part because of lagging tax collections. The budget gap was lower than the record of $1.4 trillion for 2009 but, as a percentage of the overall economy, was the second-highest since World War II.

The static Social Security payments are a side effect of the nation's low inflation. The Social Security Administration made its announcement moments after the Labor Department released the latest figures for the consumer price index. They show that prices for the third quarter of this year rose by 1.5 percent compared with a year earlier, but fell by 0.6 percent compared with the same period in 2008.

Last year marked the first time consumer prices fell since the automatic adjustment formula has existed, and Social Security recipients did not get an increase in their checks.

This year, the picture is more complicated. Consumer prices have risen slightly from a year ago. But under the government rules, consumer prices must have risen past their level when the last Social Security increase was awarded - in this case, 2008 - for another boost in benefits to take effect. The Labor figures show they did not increase that much.

About 73,000 District residents receive Social Security benefits, while Maryland and Virginia have about 826,000 and 1.2 million beneficiaries, respectively.

Leaders of the AARP, the influential lobby of Americans age 50 and older, said the organization has been deluged lately with complaints from members who depend on Social Security.

"It's like being stuck in neutral," said John Walker, 62, of South Arlington, who was laid off in 2008 from his trucking job and now lives on veterans' benefits and the early Social Security payments he began to collect this year. "I have the same income, but . . . seems like the basic necessities we have from day-to-day living go up. I don't think it's fair."

In early 2009, as part of its efforts to stimulate the economy, Congress approved a one-time $250 payment for each person on Social Security, even though the size of monthly checks had gone up that January by nearly 6 percent.

In his 2011 budget, President Obama proposed another such payment, and many congressional Democrats, courting older voters before the elections, have called for the same thing. So far, Congress has not acted.

On Friday, the White House renewed its call for another payment. "Many seniors are struggling in the face of the economic downturn, having seen their savings fall," White House Press Secretary Robert Gibbs said in a statement. "Today's news that the Social Security Administration will for a second year not provide a cost of living adjustment for social security benefits highlights these struggles."

In July, Rep. Earl Pomeroy (D-N.D.), chairman of the Ways and Means Committee's Social Security subcommittee, introduced legislation to provide a $250 payment to the program's recipients, at a cost of about $14 billion. House Speaker Nancy Pelosi (D-Calif.) said Thursday that she will schedule a vote on the measure when lawmakers return for a lame-duck session after the election. The legislation has 127 Democratic co-sponsors and none who are Republican.

In the Senate, which defeated a similar proposal in March, Majority Leader Harry Reid (D-Nev.) said that chamber would consider a $250 payment in its lame-duck session, as well.

GOP leaders oppose the idea. Don Stewart, spokesman for Senate Minority Leader Mitch McConnell (R-Ky.), said, "He has a real deficit concern about this," noting that the $14 billion price tag is greater than the entire Kentucky state budget.

House Republican leaders on Friday avoided direct comments on the $250 payments. Instead, they attacked Democrats for not passing a measure earlier, if it was a priority for that party.

And Rep. Dave Camp (R-Mich.), the ranking Republican on Ways and Means, said: "It will be difficult for many seniors to deal with the lack of a COLA for a second year in a row, but that will pale in comparison to the actual hardships future Social Security recipients will experience if Congress continues to ignore the program's underlying financial problems."

In addition to the nation's 38 million retirees age 65 and older, the lack of a cost-of-living adjustment will affect several other groups of people. They include family members of workers who died prematurely who receive Social Security survivors' benefits, as well as people who qualify for Social Security disability payments.

The formula that determines whether Social Security payments go up also is applied to benefits paid to retired and disabled veterans and retired railroad workers.

The typical retiree receives a Social Security payment of nearly $1,200 per month, or roughly $14,400 a year. A $250 payment would amount to a 1.7 percent increase.

© 2010 The Washington Post Company