President Obama Proposes Social Security Increase

Wednesday President Obama proposed to provide an extra $250 each to about 57 million seniors, veterans and people with disabilities. The President forestalled the Social Security Administration prepared to announce today that there would be no cost-of-living raise in 2010.

Photo: President Obama Proposes Social Security Increase

Social Security benefits are pegged to inflation, which has been negative this year. But by law, benefits cannot decline. This would be the first time benefits have not increased since 1975, when cost-of-living adjustments became automatic.

Obama's proposal calls for a one-time payment sometime next year. It would be equivalent to about 2% of the annual benefit for the average Social Security retiree, senior administration aides said, and would also go to Supplemental Security Income recipients, veterans, railroad retirees and government retirees. Each person would be eligible for just one $250 payment, even if he or she qualified under more than one program, The Los Angeles Times reports.

It was also reported, the Social Security Administration is to announce today that there will be no cost-of-living increase next year. By law, increases are pegged to inflation, which has been negative this year.

The $250 payments also would go to those receiving veteran and disability benefits, railroad retirees and public employee retirees who don't get Social Security, Detroit Free Press reports.

In the meantime, for several last weeks, the White House hasconsidered a wide range of proposals to funnel money to constituencies seen as suffering. Administration officials have also been supportive of extending unemployment insurance benefits that were to expire at the end of the year and are contemplating an extension of an $8,000 tax credit for first-time home buyers due to expire Nov. 30.

An increase in benefit checks each January has been a yearly ritual since the mid-1970s, when the government moved to ensure that its subsidies to retirees, pension recipients and others who receive Social Security benefits kept pace with inflation. Thursday's announcement by the Labor Department will mark the first time that the federal formula used since then, which is tied to the consumer price index, will translate into no increase at all. That is because consumer prices have remained stagnant in the weak economy -- a sharp reversal from this past year, when Social Security checks grew by 5.8 percent, an unusually large amount.

Lobbyists for AARP, the largest advocacy group for older Americans, contended Wednesday that the elderly need extra help even in a time of declining prices because they tend to spend more of their money than younger people on health care, the cost of which has been climbing more rapidly than the rate of inflation.

On the other hand, Andrew Biggs, a resident scholar at the American Enterprise Institute and former deputy commissioner of the Social Security Administration under the Republican administration of President George W. Bush, said: "There is essentially no substantive case for this on policy grounds. . . . This is a case of both Democrats and Republicans bending over backward to do the politically popular thing for seniors," The Washington Post reports.