Social Security to announce no COLA for 2011

[October 15, 2010]  WASHINGTON (AP) -- The Social Security Administration is set to announce that more than 58 million retirees and disabled Americans will have to go a second straight year without a cost-of-living increase in benefits.

The government will make it official Friday morning when the inflation numbers for September are released.

It will be 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 set automatically each year by an inflation measure that was adopted by Congress back in the 1970s. Because consumer prices are still lower than they were two years ago, the last time a COLA was awarded, the trustees who oversee Social Security project there will be no benefit increase for 2011.

To make up for the lack of a COLA, the House will vote in November -- after congressional elections -- 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 lack of inflation will be small comfort to many older Americans whose savings and home values still haven't recovered from the economic 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.

"We're a little bit upset because our bills are going up and our Social Security isn't," said Betty Dizik of Tamarac, Fla., a retired tax preparer and social worker.

Dizik said her only source of income is a $1,200 monthly payment from Social Security. At 83, she said she applied for a temporary job as census taker but didn't get it.

"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."

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 is $1,072 a month.

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.

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.

"For over three decades, millions of older Americans have counted on annual Social Security benefit increases to help them afford their basic needs," said Nancy LeaMond, AARP's executive vice president. "AARP is asking Congress to provide relief to millions of older Americans in the postelection session."

[Associated Press; By STEPHEN OHLEMACHER]

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