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Social Security increases look iffy

Stephen Ohlemacher Associated Press

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 – CBO estimates annual increases of 2 percent each year, which would be among the lowest.

David Certner, director of legislative policy for the AARP, said many recipients rely on those increases to help pay for rising health care costs, which tend to outpace inflation. Many older Americans have also 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 the CBO estimates.

The Social Security Administration will set next year’s cost-of-living adjustment in October, based on inflation over the previous year, as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers, spokesman Mark Lassiter said.

The Congressional Budget Office projects that consumer prices will drop this year by 0.7 percent, a slightly bigger drop than projected by the Obama administration, but smaller than some private projections.

Since 1975, when automatic increases were adopted, the smallest cost-of-living increase for Social Security was 1.3 percent, in 1986 and 1998. In 2008, the increase was 5.8 percent, according to the Social Security Administration.

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.