WASHINGTON — The recession is projected to wipe out annual cost-of-living increases for 50 million Social Security beneficiaries for the next three years, something that hasn’t happened since automatic adjustments were adopted in 1975.
The Congressional Budget Office says in its latest budget estimates that inflation will dip so low that Social Security recipients will not qualify for annual increases in 2010, or for two years after that. In 2013 through 2019 — when projections are less reliable — the CBO estimates annual increases of 2 percent each year, which would be among the lowest.
David Certner, director of legislative policy for the senior lobby AARP, said many recipients rely on those increases to help pay for rising health care costs, which tend to outpace inflation.
Many older Americans also have seen the values of their homes and savings decrease because of the nation’s financial crisis. “They are going to feel like they are falling behind,” Certner said.
If the projections hold true, Social Security recipients would forgo a total of $378 billion in increased payments through 2019, according to CBO estimates.
The Social Security Administration will set next year’s cost-of-living adjustment in October, based on inflation over the previous year, spokesman Mark Lassiter said.
The estimates were included in the CBO’s 2010 budget projections issued last week.
In the report, CBO projects that the Social Security trust funds will collect just $3 billion more in cash receipts than they will pay out in benefits in the 2010 budget year that starts in October.
A year ago, before the economy slipped into recession, the CBO projected an $86 billion cash surplus for the same year.
The development will have little practical effect on the program’s short-term operation, thanks in part to an additional $116 billion in interest income, as well as a $2.4 trillion balance in the Social Security trust funds.
The shrinking surplus does highlight future problems for a retirement system that has to accommodate the post-World War II baby boomers reaching retirement age.
