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No COLA expected for Social Security

June 23, 2009|By ANDREW SCHOTZ

For the first time in at least three decades, federal Social Security payments might not rise next year.

A 2009 Social Security trustees report projects there won't be a cost-of-living adjustment (COLA) in 2010.

The answer won't be known until October, Social Security Administration spokesman Mark Lassiter said.

The Social Security COLA was 2.3 percent in 2008 and 5.8 percent in 2009, according to the Social Security Administration.

The report says "the effects of the recession and a decline in the price of a barrel of oil in late 2008" seem to have caused the overall Consumer Price Index (CPI), a measure of inflation, to decline.

The federal Bureau of Labor Statistics compiles the CPI.

Through 1973 legislation, the Social Security COLA is based on the federal Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

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The CPI-W measures the cost of a fixed basket of goods and services over time, using the third quarter of each year, Lassiter said.

Since the automatic COLA law, there has been an adjustment each year.

Before the link, it took an act of Congress each year to increase Social Security benefits and increases weren't based on a formula, Lassiter said.

The Senior Citizens League, a nonpartisan organization based in Alexandria, Va., put out a news release calling for an emergency COLA to help offset rising Medicare premiums.

Shannon Benton, executive director of The Senior Citizens League, said in an interview that her organization is floating the emergency COLA idea, but she didn't know if there's support in Congress for it.

Benton said it would be better to link the Social Security COLA to the Consumer Price Index for the Elderly (CPI-E), a measure that better fits the spending habits of people likely to get Social Security assistance.

A December 2005 story at AARP's Web site says the CPI-E relies on goods and services "more relevant" to people age 62 or older, a group that "spends more of its money on items -- such as medical care -- whose costs have grown more rapidly than other expenditure items."

If Social Security benefits were indexed by the CPI-E instead of the CPI-W, the 2004 Social Security COLA would have been .39 percent higher, the story says.

Medical care and shelter are weighted more heavily in the CPI-E than the CPI-W.

However, the CPI-E doesn't pertain to Social Security recipients younger than 62, Benton noted.

The CPI-W covers about 32 percent of the population, while the CPI-E covers about 14 percent, according to the Bureau of Labor Statistics.

Even if the CPI-E were used, there still probably won't be a COLA in 2010, Benton said.

"These forecasts from the Obama administration are troubling and are sadly indicative of the overall state of the economy," Jonathan Coffin, press secretary for U.S. Rep. Shelley Moore Capito, R-W.Va., said in an e-mailed statement in response to a reporter's question. "Our seniors and others on fixed income obviously rely on the cost of living increase, but it's also important to remember that at this point these are just projections.

"We need to understand with more certainty whether there will or won't be an increase before we can have any serious discussion about emergency procedures."

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