Is Social Security COLA anger a preview of things to come?
Posted on 01 October 2009
By Mark Miller
Permanent URL of this article: http://retirementrevised.com/money/is-social-security-cola-anger-a-preview-of-things-to-come
Anger over the disappearing Social Security cost-of-living adjustment (COLA) is just a preview of the nasty battle looming over broader Social Security reform.
Social Security is running out money faster than expected due to the recession and the soaring number of early retirement benefit claims. The Congressional Budget Office says the program will start operating at a deficit next year; earlier projections had Social Security running in the red somewhere around 2016. There’s still plenty of money in the Social Security trust fund to pay benefits, but the accelerating problems underscore the need for reforms to get the program back on track for the long haul.
Update: Odds of a one-time COLA fix are rising
Washington will turn to Social Security reform sometime after health care wraps up. The debate has the potential to become Round Two of the nasty public displays we saw at last summer’s health care town hall meetings. That’s because Social Security reforms inevitably must involve some combination of trimmed benefits and higher taxes. The changes probably would be phased in over time with plenty of grandfathering. And, what we need here is a balanced, reasoned discussion about how to balance the real needs of today’s seniors with the tax and deficit burdens being placed on younger people. Far more likely, I’m afraid, is an ugly round of inter-generational demagoguery.
Here’s the short-term issue with COLAs. For months, it’s been clear that there won’t be a COLA in 2010. But with the news sinking in, anger is growing, as comments posted on my July COLA story indicate.
The automatic COLA–in place since 1975–is determined by averaging inflation rates in the third quarter of every year; the formal measure is the U.S. Bureau of Labor Statistics’ Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W is a broad measure of inflation, based on a survey of consumer prices paid by a big chunk of the U.S. population.
But retirees are impacted disproportionately by a sub-set of prices that tend to rise more quickly than inflation in the broader economy-health care, energy and transportation. Any comparison of prices in these areas and Social Security COLAs shows that retiree buying power has eroded sharply.
Congress is scrambling to respond to the fury being expressed by seniors. One possibility is a one-time cash payment to keep beneficiaries whole. Another proposal addresses the problem by eliminating any Medicare Part B premium increases. Since premiums are usually deducted from Social Security checks, some beneficiaries could see smaller checks if premiums rise. The majority of beneficiaries are protected from reductions by a hold-harmless provision prohibiting premium increases that reduce Social Security payments. Several categories of Medicare recipients aren’t protected under the hold-harmless provision, including high-income people, new enrollees and low-income individuals eligible for Medicaid (in these situations, Medicaid pays the Part B premium). Most Part D prescription drug plan participants also aren’t protected under the “hold harmless” provision.
AARP’s Public Policy Institute sponsored an in-depth forum recently featuring experts on the history of Social Security COLAs, the interplay of Social Security and Medicare, and how the absence of a COLA would impact the states. It’s not short, but if you want to bone up on the issue, it’s worth watching.
Related posts:
- Reader mailbag: Social Security COLAs and spousal benefits
- Lawmakers push Social Security COLA adjustment
- It’s official: 2012 Social Security COLA will be 3.6 percent
- Why Social Security payments will be flat in 2011, and what it means for seniors
- How final numbers on Medicare Part B and Social Security COLA shake out
October 5th, 2009 at 9:15 am
If there is not only no cola for social security recipients but also for Federal retirees who spent most of their careers serving America then there should not be any raises for any current Federal employees including the Military and Congress as well, seeing they are working and drawing quite nice paychecks regularly. This type of discrimination will not be tolerated. If Obama and every member of Congress wants their careers to end on a short note without approving both raises for all retieess they will be on the list of unemployed sooner that they ever imagined.
October 5th, 2009 at 9:29 am
AS FAR AS I’M CONCERNED COLA’S ARE NOT AN ADJUSTMENT, THEY’RE AN OBLIGATION. I FIND MYSELF MIFFED ABOUT THE COLA DELIMA, AS I’M SEVRICE CONNECTED( 80% ), A FEDERAL RETIREE AND A SOCIAL SECURITY RCEIPENT. EXPERIENCING THE COST OF EVERYTHING ESCALATING AND OUR INCOME DORMANT IS A BIT FRIGHTFUL. I’M 68 YEARS OLD AND WORKED HARD FOR MY COMPENSATION THROUGH INVOLUNTARY CONTRIBUTION TO THE SYSTEM. WE REALLY DESERVE BETTER!!!!!
October 5th, 2009 at 9:51 am
I fully agree that once a person has worked their career, the government has no right to change the terms of the retirement payments. Having said that,
Does anyone remeber when President Bush warned us that Social Security was running out of money? AARP and the democrats laughed and made fun of him saying that he was making it all up. The seniors that blindly believed them have no one to blame but thenselves.
October 5th, 2009 at 9:56 am
I JOIHN T CLARK 100% VA DISABLE AND OTHER DISABILITIES A ZERO COLA IS NOT FAIR FOR US ALL CHAANGE THE FORMULA SO IT WILL NOT HAVE TO DEPEND OF UNRELIABLE CPI THIS A MUST WE HAVE WORK HARD TO GET THIS FAR AND THE BIG SHOTS DICTATE WHETHER WE GET IT NOT SEARCH YOUR SOULS WASHDC I AM VERY UPSET I AM 76 YEARS AND I NEED MY LITTLE MONEY COMING IN
October 5th, 2009 at 10:06 am
Not only is it unfair to give some a raise and not others but how the COLA if based. Social Security is mostly for the retired. Not to figure in those costs such as health maintenance increases is at best discrimnatory to seniors. Also compounding this is the bases for taxing Social Security income. Those bases for exemption need to be adjusted for inflation too. $25,000/32,000 is not right as is taxing Social Security in the first place. We need true representatives in Congress of the people not the corporations like these banks and pharmaceutical companies who “contribute” to their “campaign/retirement” funds. Limit all to 18 years in Congress.
October 5th, 2009 at 11:36 am
First of all, they get most of my SS benefit with the Windfall Elimination provision, leaving me with pocket change. On top of that, no COLA to up it just a wee bit. And to top it off, they tax my civil service annuity just for good measure. We have a government with an insatiable appetite for money. Lots of it to waste on folks who are not contributors. We really need a different mindset in DC.
October 5th, 2009 at 11:45 am
The problems with Social Security don’t lie with the Retirees but with people getting benefits without paying into the system the full 40 quarters. I believe now in order to get 4 quarters, one only has to pay into the system for 3 months instead of 12. Additionally, some of the immigrant groups such as Cubans automatically qualify for SS benefits without paying into the system. In fact, many immigrants only become US citizens when they need the benefits and don’t pay into the system at all. Yes, it’s screwed up, but let’s fix where the problems really are and not beat on the retirees.
October 5th, 2009 at 11:50 am
No COLA because prices have not increased. Where do these statistics come from. Just learned my health insurance premium increasing 9% for 2010 and many other taxes and increases seem to be on the way. Seems the government has hundreds of billions of dollars to bail out banks, insurance company, car companies,etc. but nothing for seniors on small fixed incomes?? Obama and congress will not get my vote again.
Bob L.
October 5th, 2009 at 11:53 am
I pay taxes on my health benefits (as I retiree)…when I was working as a federal employee I didn’t pay tax on what I paid as my portion ! (What’s wrong here ?)…Now they’ve raised my health ins. another 12%…pretty steep increase…who else am I paying for ? COLa for the federal workers when retirees get zip….I really…really DO NOT UNDERSTAND !
October 5th, 2009 at 1:08 pm
IF costs of other items is actually decreasing to the point health increases can be absorbed…then it would make sense to not have a COLA. I doubt that is the case, though. The CPI formula for computing COLAs really needs to be changed so that health care costs are proportionately represented. My health insurance increased 13 percent this year and will increase another 12+ percent next year. And…considering the economic health (or lack of) of the nation, 2010 would be a good year for a freeze on COLAs for federal employees (and military) who are working. For them to get a COLA in such times only increases the ill will many Americans have toward the government, and government workers.
October 5th, 2009 at 2:40 pm
I did not notice anyone complaining when the COLA increase in January was 5.8%. The raises that current federal employees receive are determined on a different basis, and they received
much less than 5.8% in January.
October 5th, 2009 at 6:05 pm
Is there anyone out there who, like me, was already working for the federal govt after having compiled the required 40 qtrs for SS eligibility only to have the Congress then pass the GPO/WEP law and apply it retroactively to us? This seems like a breach of contract to me, if not an ex post facto law, which is prohibited by the Constitution. My Congress person doesn’t appear to agree that this point of view has any validity and, instead, relies on what the Social Security folks tell her. Is it time for a revolution or what?
October 5th, 2009 at 11:17 pm
I will be hurt by no COLA just like everybody else, but I just don’t understand the whining. It’s COST-OF-LIVING and it is (and always has been) based on an accepted (albeit imperfect) index. When inflation was high, federal retirees and social security recipients receieved substantial COLAs. This year, inflation has been virtually zero so there’s no COLA. Now all that said, we’re going to take a hit on health insurance premiums in 2010. I’m no more happy about that than anybody else but I understand that those increased health insurance costs will contribute to inflation in 2010 and be reflected in whatever COLA I might receive in January 2011.
As far as our representation in Congress, there isn’t any. Mark Twain was spot on when he said: “Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself.”
October 6th, 2009 at 12:09 am
As a retired employee of the Social Security Administration, I have to provide correct information regarding quarters of coverage and entitlement to benefits without paying into the system. See the 11:45 a.m. post for Oct 5.
Since 1978, a quarter of coverage is acquired based upon annual earnings and not actually working in a calendar quarter. In 2008, one quarter was awarded for each $1000 earned up to the maximum of four per calendar year.So, you could earn 4 quarters last year in only one month if you earned $4000 in that one month. The amount per quarter goes up annually based upon inflation. So, I suppose in 2010 it will remain the same as this year.
The only persons who can receive benefits without paying in their forty quarters are dependents of workers who did pay in e.g. wives, husbands, widows,widowers, dependent children (spouses and widow(ers) are limited by the Governement Pension Offset provisions). Aliens who acquire citizenship may qualify for Supplemental Security Income (SSI). This is a welfare type benefit administered by the Social Security Administration under Title 16 of the Social Security Act, but the money for it comes not from trust funds but from general tax revenue. It is a very limited payment.
October 6th, 2009 at 7:20 am
I have no issue with the no Cola as I remember times retirees got a higher COLA( just last year) then those currently working. That seemed insane.What I don’t think is fair is many under Social Security will not pay a health benefit cost while I in retirement do not carry medicare part B since my wife is not old enough will have to pay the increase. Why does one federal retirement system get protection and not the other. Oh, I know those of S.S. whine the loudest.
October 7th, 2009 at 2:29 pm
It kinda seems like people forget that the sss sytems and the va were only getting a 2% raise for inflation and to be a example for the rest of the country. But as usual we were the only ones the others received bonus plus higher pay checks. Plus the 5.8 was a catch up for all these people who were supposed to be the examples. What a rip for sss retirees plus the VA and now another joke no colas. what another example. lol
October 15th, 2009 at 8:44 am
The Social Security cost of living adjustment is messed up!
http://robvstate.com/2009/10/10/social-security-cola/
October 16th, 2009 at 10:41 am
If Washington can bail out the banks and car companies, then why why can’t they put some stimulus into the Social Security System if they are running out of money. What is wrong in Washington???? Retirees need a raise more than anyone else, the Federal employees are making salaries out of this world and they sure do not need the raise. Why is there so much discrimination in Washington. And why do people who never pay into the Social Security System get the benefits? What is wrong with the USA, certainly they are not FAIR with the elderly, other countries take better care of the elderly than this country ever has. I am just mad because of all other systems work better than this good old USA
October 17th, 2009 at 7:42 pm
The government cuts our cola for social security and then they have a pay raise for the house and senate .
The retired government employees still get their cola along with retired house and senate members that retired or were voted out of office . they serve one term and have life time retirement . Does not seem a fair to me that a short time in Government earns lifetime retirement.
December 18th, 2009 at 2:20 pm
The U.S.A…land of rampant discrimination, violated rights, oppression, and double standards…God Bless America..pfft