No Social Security COLA increase for 2010
Filed under: Retirement, Economy
If investors need another sign of the changed economic landscape, they need look no further than Social Security.
For the first time in more than three decades Social Security recipients will not receive a benefit increase, formally known as a cost of living adjustment (COLA), in 2010, federal forecasts show, The New York Times reports.
COLA is determined by a formula set by federal law, and it roughly parallels the consumer price index, though the two formulas are not identical. Senior citizens can get a ballpark estimate of their likely annual benefit increase from the consumer price index's rise.
Once cost increases reach a certain level, or threshold, the COLA is triggered for Social Security. The fiscal 2009 increase was 5.9 percent, and there's been a Social Security COLA every year since 1975.
No inflation, no COLA
However, both the Obama administration and the Congressional Budget Office (pdf) are forecasting that Social Security beneficiaries will not receive any cost of living adjustments in fiscal 2010 or 2011. The reason? The pronounced recession in the United States, which has created pricing pressure -- not pricing power -- for businesses. Pricing power is so weak for firms that the Federal Reserve believes the nation is more likely to experience a bout of deflation -- not inflation -- at least through mid-2010, and perhaps for a longer period.
Deflation -- a protracted, systematic decline in prices and wages -- occurs in pronounced recessions and in other conditions during which demand is nonexistent, and it robs companies of the ability to increase revenue and hurts the economy's ability to grow. If it takes hold, that's another hurdle policymakers will have to grapple with as they attempt to end the U.S. and global recessions.
The lack of a COLA adjustment would represent a net-gain in revenue for the Social Security operation, although there will be some subtractions to revenue, due to the fact that Medicare Part B premium increases are linked to Social Security's COLA and cannot rise more than the COLA. Hence, if there is no COLA, the Part B premium can not increase.
However, the lack of a benefit would also feed fewer dollars into the U.S. economy at a time when it needs all the demand pressure it can get, due to a smaller workforce stemming from layoffs and belt-tightening across the nation, senior citizens included.
Economic Analysis: The net result of no 2010 COLA is that millions of Social Security recipients will see their monthly benefit check reduced for the first time. Though the amount would be small, it represents another incremental reduction in income -- like a small increase in an electric utility rate or a small property tax increase -- that reduces the amount of money Americans have to spend, save, or invest. When combined, these incremental cuts place a substantial drag on the economy and are one major factor cause of the declines in retail sales and discretionary purchases.
Further, there's virtually no chance that Congress will revisit the COLA formula. The COLA stems from a grand political consensus that took years to negotiate and forge, and that fact, combined with the generation redistribution that already occurs under Social Security (the system redistributes income from younger generations to older generations), all point to lawmakers letting the inflation protection work as designed.
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Reader Comments (Page 1 of 3)
5-08-2009 @ 4:37PM
Child of retiree in need of cash said...
My elderly parents have seen masive deterriation in their finances. Food and fuel inflation is definatelly present. Grocery store prices are sligtly up but this masks the decrease in packaging size. Somehow I don't believe the gov has upgraded their software to account for changes in packaging. The elderly are also not buying computers, TV and cell phones. Their property, sales and use taxes are going up. My sisters and I will for the first time need to help suppliment their income. I am certain that we will see an increase in elderly poverty for the first time in many decades.
But as usual the good times are rolling on Wall Street. This must be a bear rally. Watch out for the W.
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5-08-2009 @ 5:02PM
Mike said...
Our government has no problem finding hundreds of billions of dollars for welfare but god forbid they find any money for people that worked their asses off their whole life paying the money that carries these lazy people. You want to stop teenage pregnancy ? Stop rewarding people for it. Let their own families carry the load.
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5-20-2009 @ 5:37PM
Jim said...
Amen!
5-10-2009 @ 1:53PM
Jeanne said...
I find it very hard these days to wrap my brain around all this crazy political no common sense actions of these political D.C. career, out of touch self centered, unrighteous, self serving lying & so called leaders. Are they all on drugs or something? Why do they want to destroy the only great country that is free? Heaven Help Us. Ditto to Mike too. A Wife, Mom, Grandmother and GR8 Grandmom of 10.
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5-14-2009 @ 6:20PM
Mariann Pepitone said...
I agree with Mike. We are giving too much money on Link cards and I have seen young people using them. If they are getting an SSI check for nothing they don't need a like card. And how about the people with disabled children who are getting an SSI check plus a Link card plus their husband's check and the disabled child cannot use that check. We are giving too much money away where it is not deserved. Obama needs to look into the welfare system and make some drastic changes. There are people living off the fat of the land plus selling their Link card for drugs. The Link card should be banned altogether and add $50 more to their check.
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5-14-2009 @ 6:21PM
Mariann Pepitone said...
If Obama can give the auto industry, AIG and Wall Street billions of dollars to bail them out he can give the seniors another increase at the rate of 6.5%. After all he is making $400,000 per year making some of the wrong changes. And he wants to give millions to Pakistan. What about the poor people in this country that need all the help they can get. He should pull the troops out of Iraq and end the war like Nixon did with Vietnam. Who cares who wins or loses. Lives are at stake. Let these countries fight their own battles.
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6-17-2009 @ 1:49AM
Mark said...
He said "Change Change Change"!!! That is all you retires will have left! What a joke, your generation is getting the shaft. Ever since the libs took congress in 206, this country has gone to hell in a hand basket. We get what we deserve, he made it abundantly clear his agenda and most of your generation voted for him, so stop whining. Just wait till your told your not worth expensive health care and are made "comfortable" until you die. They kill babies, why not old people?!!! I live in CT and see tons of old people with Obama stickers on their cars....you guys are a bunch of old fools.
7-08-2009 @ 1:18AM
donna jean akers said...
Amen to that and I am proud to say I did not vote for Obama. I have heard nothing but lies come from his lips. I began working and paying taxes at the age of 15. I am now 47 yrs. old, divorced and raising an 8 yr. old alone. No child support at all and on top of that I have had 3 back surgeries in less than 2 yrs. My back is deteriorating rapidly and I am now unable to work. I do recieve social security disability. A total of 637.00 a month. I am so angry and saddened about the cost of living increase being taken away from people like myself and others. To some that small amount of money may seem like nothing but to myself and my daughter it may have put a little more food on the table or help with other neccessities. I guess it's easy for some people to have no care for the little people, especially when they are living more than well on a monthly income that would take me a couple of years to earn. I truly worry about how much longer I will be able to keep a roof over our heads. Seriously, at this rate we may be living in the car or on the street before long. How many people out there actually think they can pay rent, utilities and the other neccessities with 637.00 a month. It's almost impossible. Could Obama and his family survive off that amount a week much less a month? I am losing faith in our government and may God forgive me for this.
7-11-2009 @ 5:26PM
Granny C said...
The truth behind no COLA for the next two years:
Obama funds $20M in tax payer dollars to immigrate Hamas Refugees to the USA
Barack Obama has ordered the expenditure of $20.3 million in "migration assistance" to the Palestinian refugees and "conflict victims" in Gaza .
that the order provides a free ticket replete with housing and food allowances to individuals who have displayed their overwhelming support to the Islamic Resistance Movement (Hamas) in the parliamentary election of January 2006.
To verify this for yourself: www.thefederalregister.com/d.p/2009-02-04-E9-2488
5-14-2009 @ 7:53PM
wayne said...
i voted for mccain sounds like you schould of also.
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5-21-2009 @ 1:41PM
Pat said...
We are some of those SS recipients who've worked and saved for years only to see our savings disappear into the greedy Wall Street abyss. Social Security has become our major source of income now, and we haven't noticed the price of anything going down or even remaining stable, so why is our income going to be put in a holding pattern for two years? We can't wait until Congress tries to give itself another raise--bet they won't have to wait two years for an increase! Maybe we should vote all incumbents out of office and start over!!
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5-23-2009 @ 2:11PM
Tamara W said...
I have written a letter to my congressmen and senators, we all need to make noise and let these representatives know we are watching their voting records ...come election time we can work hard to see they aren't reelectedl
5-22-2009 @ 9:59AM
Connie said...
I worked all of my life up until 1999 when I became disabled. I now receive SS disability,needless to say I am just making it now in regards to paying my house payments in addition to all of my other bills and trying to have enough money left over to buy food.
I am trying to survive on $1000 of alimony ( I am divorced after being married for 26years) that money plus what I receive in my SS disability equals a little over $2000/month. I wonder how many people reading this could survive on a little over $2000 per month.
Instead of stopping the COL for people trying to survive on their SS start taxing the people who have more money then they know what to do with,like my EX ,he is living like a millionare while I am slowly being billed to death. Now no COL next year?? how is a person on a fixed income supposed to survive when everything but their monthly SS check is increasing.
Go after the higher income people, make them give up some of their toys,boats, cars, million dollar homes, well I guess the saying is true,"the rich get richer". I would like to see the president survive on $2000/month.
BIG BIG mistake to stop the COL for people getting social security,how are we supposed to survive??
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5-23-2009 @ 1:17PM
Tamare W said...
Connie, wealthy folks are not to blame nor should they be "punished" because of the mess that Social Security is in. We have to put the blame where it belongs, our government. Through the years SS has been tapped and drawn down by government for other projects and the money was never replaced. SS is only in trouble because it was a very appealing pie that could accessed without the public knowing what was going on. We are suffering now because of years of mismanagement.
8-05-2009 @ 8:12PM
Sheila said...
I retired early, 62, due to my illness, I receive ony 233.00 social s. retirement off my ex work record, he is a gov. employment, over 45 years, still working.............. I receive 900. in alimony...........try living on that , for the lady that receives 2000. plus disability.................
we need our cola for 2010, maybe aarp can help or write your senator.............
5-22-2009 @ 9:19PM
Connie said...
Hey Mr. President,,Wheres MY bail out. wheres the bail out for all of the poor people who have worked all of their lives and are now trying to survive on their monthly SS only to learn now that your not going to allow a cost of living increase next year???
WHERE IS OUR BAIL OUT???? people trying to survive on a fixed income need HELP not cut backs on their yearly cost of living?? WHere can I send all of my bills so YOU can pay them for me,, lets swap incomes, yours $400 thousand per year, Mine 23thousand per year. I want to see you make ends me on MY income.
Go after the millonaires of the world, HELP US,the people who have no money now and now we might see out monthly SS check decrease?? THIS IS WRONG!!!
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5-27-2009 @ 11:53AM
Donna said...
I am very disturbed about the no cola for the people who live on Social Security that is my only means of income and I barely have anything yet our government can dish out to all the other countries, it just sickens me! WHERE IS ALL THE HELP FOR THE POOR AMERICANS!!!!!
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6-01-2009 @ 12:06AM
Jean Montgomery said...
Living on a fixed income with no adjustment for a cost of living adjustment will mean I have to cut back on something.
Food and gas prices increase all the time. My income won't?
I guess the telephone and tv, or extra channel programs will have to end. and perhaps the PC.? I'll have to decide which one. Or maybe two.
I voted for McCain. :)
Jean
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6-08-2009 @ 3:23AM
Jeff said...
I live on SSDI. I cannot afford a romantic date in NYC. I cannot afford a date, period. Medical and pharmaceutical costs continue to go up. So do other expenses, not least of which is gasoline. Where's my bailout?
The administration and congress spend hundreds of billions to bail out Wall Street, GM, the unions and maybe even states -- led by California.
I have long suspected that when the New Left and their progeny got power, they would throw the poor, the disabled, and the elderly under the bus. Now it is happening!
I hope the Republicans and the conservative media pound this point home during the next election cycle.
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6-08-2009 @ 2:53PM
Mary Houser said...
We are so sick of hearing how much more taxes we will have to pay and less benefits we will be getting.
The government is screwing us....the American People. We retired thinking we could live comfortable....comfortable meaning we could now go out to dinner twice a month. We can have some money to actually buy the grand children clothes instead of having to rob Peter to pay Paul to do so.
Keep on taxing us....keep on pouring it on.....now we also have to pay more in our health care premiums to support the people on welfare and illegal aliens who get everything in this country.
What a joke. When is it going to be our turn? Just give one million dollars for each person.....what a bargain.
Mary
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