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Social Security Beneficiaries Stiffed Amid Benefits Debate

The Huffington Post The Huffington Post 15/10/2015 Arthur Delaney
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WASHINGTON -- Tens of millions of Social Security beneficiaries will not get a raise in 2016, the government announced on Thursday.

"With consumer prices down over the past year, monthly Social Security and Supplemental Security Income benefits for nearly 65 million Americans will not automatically increase in 2016," the Social Security Administration said in a press release.

The news comes on the heels of a debate between Democratic presidential candidates Hillary Clinton and Sen. Bernie Sanders (I-Vt.), who has advocated changing the way cost-of-living adjustments are calculated so that seniors are more likely to get annual raises.

"My view is that when you have millions of seniors in this country trying to get by -- and I don't know how they do on $11,000, $12,000, $13,000 a year -- you don't cut Social Security, you expand it," Sanders said during Tuesday night's debate.

Clinton, on the other hand, declined to say during the debate if she supported expanding benefits in the way Sanders did. Her campaign has not responded to further requests for comment from The Huffington Post.

Senate Majority Leader Mitch McConnell (R-Ky.), meanwhile, indicated this week that he wanted to make Social Security's cost-of-living adjustments less generous as part of a budget deal with President Barack Obama.

The Social Security Administration provides a cost-of-living adjustment, or COLA, to ensure the value of benefits keeps pace with inflation. If there is a rise in the consumer price index from the previous year to the current one, the government increases benefits by the same rate. 

Since the index the Social Security Administration uses to measure the prices within a "basket" of certain consumer goods did not go up from the third quarter of 2014 to the third quarter of 2015, Social Security benefits will not increase either.

But there is more than one index -- COLAs are currently tied to a consumer price index designed for wage earners and clerical workers, which is known as the CPI-W. The U.S. Bureau of Labor Statistics said Thursday  that that index saw prices fall 0.6 percent over the past year, a decline driven by a nearly 30 percent drop in gasoline prices.

Sanders has introduced legislation that would have the government base COLAs on the CPI-E, an index for the elderly. Many Social Security advocates favor the CPI-E, which is as yet an experimental metric, because it more heavily weighs  the costs of housing and health care that typically make up a bigger share of seniors’ expenses. It also puts less emphasis on transportation costs since retired people are less likely to be driving to work every day.

According to the elderly index, prices rose 0.6 percent in the third quarter of this year compared with the same period last year. That means that if the Social Security Administration had been using the CPI-E, Social Security recipients would theoretically be getting a raise. (The statistics bureau doesn't publish the CPI-E but makes the data available by request.) For the average beneficiary, that 0.6 percent bump would amount to an $88 increase in annual benefits. The average annual payout is $14,691.

Government economists caution that the elderly index is experimental and is formulated from less robust data than what goes into the regular index.

Max Richtman, president of the National Committee to Preserve Social Security and Medicare, said the lack of COLA will be especially harmful, because it is coupled with an increase in Medicare Part B premiums for some seniors. Those premiums are automatically deducted from seniors’ Social Security checks.

“If accurate inflation protection for seniors is truly our goal, Congress needs to adopt a fully developed CPI for the elderly,” Richtman said in a statement . “Until then, we urge Congress to act quickly to mitigate the devastating Medicare hikes headed for millions of Americans who can’t afford them.”

Dean Baker, co-director of the progressive Center for Economic and Policy Research,  wants the government to develop an actual basket of consumer goods modeling seniors’ budgets, not just adjust some costs in the CPI-W to account for seniors’ spending habits. Without a separate basket of consumer goods, Baker argues, the government can't account for the different prescriptions drugs seniors buy, for example.

Baker proposes that if after a few years of studying this more robust CPI-E, economists find that it typically grows 0.2 or 0.3 percent more than the current price index, then it would be worth adopting the CPI-E or at least adding that increase onto the CPI-W.

"People would care. That’s real money," Baker said. "Not a huge sum, but over a number of years, it is not trivial."

Next year will be the first year since 2011 that Social Security beneficiaries have not received a COLA. There was no COLA in 2010 either, though the available CPI-E data suggest the experimental index wouldn't have provided a COLA in those years, either.

Although the COLA is determined automatically through a formula, some Social Security beneficiaries, already struggling on modest benefits, have blamed elected officials when they do not receive one.

Despite the lack of a COLA in 2010, seniors, people with disabilities and disabled veterans benefits did receive a one-time $250 check in May 2009  as part of Obama’s stimulus plan.

At the end of 2010, when it became clear there would be no COLA again in 2011, Obama and congressional Democrats tried to send Social Security beneficiaries another $250 payment , but congressional Republicans blocked the measure.

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