Social Security recipients won’t get a raise in 2011 due to the continuing sour state of the economy. This is the first time a two-year drought of increased benefits has occurred since Congress created the cost of living increase in 1972.
The lack of a cost of living adjustment, or COLA, will come as a blow to many retirees who count on the checks to pay their bills, but the bitter reality is this is how the system is designed to work.
Not all of the news is necessarily bad. The stagnant economic growth has continued to keep inflation at or near zero. Because the COLA is meant to keep up with inflation, no increases in benefits are actually due. Plus, many of the workers who are paying into Social Security aren’t getting raises in this economy either, and some have seen pay cuts.
Most recent data shows that the cost of living hasn’t yet swelled enough to raise COLAs for retirees either. In fact, because the cost of living index fell by 2 percent during the worst months of the recession, Social Security’s stable payments meant relative increased buying power for retirees.
Some Medicare premiums also do not rise in years when the COLA remains flat.
Yet Congress, ever fearful of the senior lobby, created within the massive stimulus package a one-time payment of $250 to Social Security’s nearly 53 million recipients. We hope lawmakers will avoid further attempts to offer one-times fixes the nation cannot afford.
Meanwhile, Social Security paid out more in benefits this year than it received in the form of payroll taxes for the first time ever. Structural problems with the plan need to be fixed in coming years if the popular program is to remain solvent.
Given the realities of this economy, seniors will have to swallow this bitter pill and workers need to push Congress to act in order to keep the program solvent in the future.
