Social Security recipients are in for some good news. Looks like they’ll be getting a cost-of-living adjustment that will increase their benefits next year, the first since 2009.
Coincidentally, the cynic in us demands that we note the COLA for seniors is making its return in an election year.
The adjustment is expected to be an increase of 3.5 percent over what recipients are being paid this year. That number will be officially determined sometime today when a government inflation gauge that the annual adjustment is tied to is announced.
Federal officials have said that the reason the Social Security adjustments have been non-existent over the past two Januarys is the inflation rate has been too low to trigger an increase. The federal government has a funny way of deciding how much it costs to live when food, fuel, medical and other expenses can increase, but the “rate of inflation” doesn’t. Anyone who lives outside the Washington, D.C., beltway knows full well that the costs of fuel, groceries, going to the doctor, medicine and other essentials have risen steadily.
Fortunately for the members of Congress seeking re-election in 2012, however, it looks like the index compilers have found enough cost hikes this time to reflect a need for more money for Social Security recipients, most of whom are in the senior age group that is more likely to vote. Politicians have a particular talent for having their hands tied when it comes to bad news — such as the inflation rate killing increases in 2010 and this year — but taking credit for good news. And facts often get lost in the fiction of campaign rhetoric.
The reasoning for the two years of flat benefits has been placed on the recession and the high cost of energy in the third quarter of 2008, which is the quarter that is measured against the same quarter of the previous year for the following year’s adjustment. Social Security recipients saw a big 5.7 percent hike in 2009 because gas was at the $4 per gallon mark that quarter of 2008, then dropped into the low $2s. With fuel back in the mid-$3s, the formula paid off for seniors this time.
The Social Security payments comprise 90 percent of many seniors’ total income, and certainly most of those folks are in positions where they desperately need the extra cash. Social Security checks total an average of $13,000 a year for the 55 million Americans who receive them, and a 3.5 percent increase would bring that average to just over $13,450 a year.
One thing Congress should do is take another look at the gauge it uses to determine COLAs and make sure the formula accurately reflects the expenses that affect them the most. Seniors who rely on this income, in the two years of “no inflation,” saw their personal wealth fall sharply as the housing market and their nest eggs took crushing blows. Meanwhile, the cost of gasoline might have been down, but the costs of food, health care and medicine rose — costs that impact many seniors much more than pump prices.
And that trend will continue next year. While some experts expect the increase in Social Security benefits to translate into more economic activity, the extra $35 or so dollars a month won’t go as far as it could. Premiums from Medicare, which are deducted from those Social Security checks, will be going up as well in the coming year.
What’s the old saying? “I can’t get ahead for getting behind”?