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Social Security Increase Only 2.1% Recipients Complain, But Some Say It’s Too High

Along with 44 million other Americans who receive Social Security benefits, Rufus Clayton will see his monthly check grow next year by just 2.1 percent - in his case, $10.50 - the lowest cost-of-living raise in a decade.

“They give you a little increase,” said Clayton, 77, a retired bricklayer who helped build the Pentagon. “But you can believe me, you don’t have … extra money on Social Security. I mean, you have to watch your budget and watch it close.”

Like about 15 percent of retirees, Clayton’s only income is from Social Security. Next year’s cost-of-living increase, announced Thursday, will push his monthly check to about $514.50 from this year’s $504.

Clayton, who lives in a subsidized apartment for low-income elderly, still won’t be able to afford market-rate rents in the nation’s capital. And Clayton also will have to forgo buying any more of the snappy hats and ties he likes to wear.

“That’s the way you get through,” Clayton said.

Checks from the government’s biggest benefit program are adjusted annually to keep inflation from eroding their buying power.

For 1998, the adjustment means that starting in January the average monthly check for retirees will rise by $16 to $765, said Commissioner Kenneth S. Apfel. The maximum check for retirees will rise to $1,342 from $1,326, based on a combination of factors including the cost-of-living adjustment.

That’s the second-lowest cost of living increase since the adjustment became automatic in 1975. The low was 1.3 percent in 1987.

“It is low, but that’s the direct result of low inflation,” Apfel said. “This low inflation is very good news.”

The cost-of-living adjustments are based on changes in the Consumer Price Index from the third quarter of one year to the third quarter of the next.

Because of low inflation, Social Security’s yearly boosts have been below 3 percent since 1994. In contrast, in the late 1970s high inflation drove the increase to a record 14.3 percent in 1980.

Some officials, economists and even retirees argue that even at recent low levels, the yearly increases are too high.

George Fairley, 79, is among the majority of senior citizens who have other income in addition to Social Security. The retired engineer from Pacific Grove, Calif., said the taxes he must pay on his private pension, earned through 39 years work for the same company, more than wipe out Social Security cost-of-living raises.

“Sure I’m glad to have them, but if you’re turning around and taking some of it away, it’s just chasing money around,” he said. “I suspect that it’s sort of a political gimmick.”

Some economists also estimate the Consumer Price Index overstates inflation by as much as 1.1 percent a year. That rate of error would cost the government $1 trillion over 12 years in too-generous benefits and lost tax revenue, since the CPI also is used to adjust tax brackets.

Some members of Congress propose reducing the CPI, and therefore cost-of-living adjustments, as a possible solution to the financial crunch Social Security faces when the baby boom generation retires.

“I would say they haven’t been in our shoes,” said Pauline Armes, 75, of Suitland, Md. Her $613 a month next year would have been only $607 if the 1998 cost-of-living adjustment had been reduced as some politicians propose.

Graphic: Social Security


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