For the first time since benefits were linked to the Consumer Price Index in 1975, Social Security recipients will not get an automatic increase because of a cost-of-living adjustment.
That’s because since this time last year the CPI has actually fallen by 2.1 percent, with energy prices, a key part of the index, falling by almost one-fourth. Since benefit levels by law never go down, even if the CPI does, that means retirees’ purchasing power has undergone a modest increase.
Last January, thanks to the index, Social Security benefits increased by 5.8 percent. This January, according to the law, there should be no increase and none until January 2012. But it also means there will be no increase in the Medicare Part B premiums.
Social Security benefits aren’t the only ones indexed. So are veterans’ benefits, railroad retirement and disability benefits. In all, about 57 million people will not get an increase they have come to see as almost automatic.
But President Barack Obama is asking Congress to approve a second round of $250 payments to the beneficiaries, and lawmakers seem sympathetic to the idea. The payments are being justified as stimulus. But, unlike the Cash for Clunkers program, the amount is too small to cause people to go out and buy something they otherwise wouldn’t. The effect on the sector of the economy struggling the hardest, the job market, would be negligible.
The single payment in lieu of an inflation-triggered benefit increase also goes to the integrity of the cost-of-living adjustment. It was intended to relieve Congress of the task of raising benefit levels, which it tended to do at times the seniors’ votes were needed.
Congress should consider carefully whether we can afford this well-intended gesture. The cost, $13 billion, all of it borrowed, suggests we cannot.