The Social Security COLA is one tough drink to swallow. That’s why it’s being forced down our throats.
Every year since 1975, Social Security recipients have received a cost of living adjustment. According to the official website of the Social Security Administration,
Legislation enacted in 1973 provides for automatic cost-of-living adjustments, or COLAs. With COLAs, Social Security and Supplemental Security Income (SSI) benefits keep pace with inflation.
The same site goes on to say,
The Social Security Act specifies a formula for determining each COLA. In general, a COLA is equal to the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of one year to the third quarter of the next. If there is no increase, there is no COLA.
The COLA has added up over the years. The following chart shows the annual COLA and the value of $100 in Social Security payments in constant 1975 dollars. A $100 payment in 1974 has increased four-fold, now valued at $407.
According to the Social Security Administration, the COLA is given to ensure that people dependent on Social Security are able to maintain their standard of living. Accordingly, the claim is made that, “If there is no increase, there is no COLA.” That’s their statement and they’re sticking to it. Instead of giving a COLA, Oregon Congressman Peter DeFazio is proposing a one-time payment of $250 in 2010. This one-time payment ignores the $250 one-time payment to Social Security recipients paid as part of the American Recovery and Reinvestment Act of 2009. DeFazio’s new payment is suggested in H.R.3597 – Emergency Senior Citizens Relief Act of 2009. Emergency relief? Will $250 make such a difference that this should be qualified as an Emergency? No. Emergency is just the default first word of any new legislation.
To pay these 50 million Social Security recipients, the legislation is proposing an increased Social Security payroll tax. The tax will include incomes between $250,000 and $359,000 in 2010, instead of the regular, first $106,800. This is another tax on the productive, to pay the unproductive.
According to 68 year old Vermont Senator Bernie Sanders who introduced similar legislation to the Senate.
The bottom line is that seniors deserve a fair increase in benefits to keep up with these added costs and economic hardships
Since in 2009 there is expected deflation of 1.5%, Social Security payments should be cut. In order to maintain the standard of living, Social Security recipients should receive a 1.5% reduction in payments. Instead, they’ll receive no reduction and a one-time two-time stimulus of $250. This is legal.
According to Section 215(i)(1)(B) of the Social Security Act
the term “cost-of-living computation quarter” means a base quarter, as defined in subparagraph (A)(i), with respect to which the applicable increase percentage is greater than zero; except that there shall be no cost-of-living computation quarter in any calendar year if in the year prior to such year a law has been enacted providing a general benefit increase under this title or if in such prior year such a general benefit increase becomes effective
It’s only a matter of time before we see the third one-time Social Security stimulus.
Pingback: Social Security cost of living allowance (COLA) | robvstate.com - Pasarici.NET Blog
#1 by JJ Skittles on October 15, 2009 - 1:32 pm
Quote
Interesting thoughts, and interesting site! I’d like to see your opinions a little more frequently, and I’d be curious to hear your opinion on how Social Security is similar or different than a Ponzi scheme. Are we just using today’s money to pay for yesterday’s workers, praying the money won’t run out, or is it more complicated?
#2 by Scott on October 15, 2009 - 3:00 pm
Quote
SS is not a ponzi scheme for a number of reasons:
1) A ponzi scheme enriches all of the people who pay in an equal return (unless they are the one’s that get nothing back–i.e. they got in too late.) SS will give the highest contributors a lower return (about 1% APR I believe) while giving people with lower contributions much higher returns and people who become disabled huge returns.
2) Ponzi schemes do not force you into them. This is why SS “contributions” should be called taxes, because the correlation between contribution and benefits is poor.
3) Ponzi schemes don’t bet on people dying before they become too much of a burden on the system. The only reason SS is collapsing is because the average life-span has increased more than the people who made it thought it would. Essentially SS was a bet that enough people would die before they collected more benefits than the “contributions” would cover. Ponzi schemes ALWAYS collapse because they don’t last long enough for death to be a significant factor.
4) I doubt SS will die, politicians will find a way to increase “revenue” by stealing more money; and decrease benefits by only reducing to those people they feel don’t “need” their money back. Unless the whole country collapses, SS will just become more and more like welfare, only for the disabled (and that doesn’t take much to qualify for under SS) and the elderly.
#3 by cdg on October 15, 2009 - 5:50 pm
Quote
The annual social security benefits increase (as well as adjustments to various income tax rates) is based on an artificial “cost of living” index, which is NOT representative of true costs. It is particular hurtful to those who rely on social security and disability benefits. Their basic costs (food, utilities, rents, medical) have sky-rocketed this year, while the government reports demonstrably fictitious inflation rates.
The Democratic majority in Congress voted themselves a large raise last year, citing increased costs as their rationalization. Of course, they use a different cost-of-living index than the Social Security Administration and the IRS. The latter two use an index which is much lower than the actual inflation rate, so that Congress can pretend that benefits and tax rates are indexed, without impacting government revenues.
Obama (and others) have acknowledged the inaccuracy of the COLA by suggesting another $250 payment to cover increased costs. It won’t even come close to covering the true increase in the cost-of-living for seniors, but it’s better than nothing. It can be paid for by reducing government spending in other areas (for example, goverment staff including “czars”, endowments for studying porcine flatulence, and $2,000,000 trips to NYC for dinner and dancing.
Social security is a Ponzi scheme, but we still owe something to those who were forced by the government to participate.
#4 by Denise on October 16, 2009 - 12:12 am
Quote
Scott.
I work for SS and you are a selfish know-it-all, who DOESN’T know it all when it comes to SS. There are tragic disability stories, and people who only have SS to live on. You sound like the elderly and the disabled are in your greedy way. But I guarantee you that if YOU find yourself in a very bad situation, you will be the first to come running for benefits. And it is NOT easy to get SS; it is often too difficult at times. There is abuse in any program and also A LOT of abuse in private business, (who caused the economic crash?!)but don’t try to taint the whole program.
#5 by robparis on October 16, 2009 - 7:15 am
Quote
Type your comment here
Denise,
Thank you. Selfishness is a virtue. I’ve never claimed to know it all when it comes to SS (neither did Scott). At no point did I condemn people who are on disability – I never said that they shouldn’t be able to receive some sort of aid. If I find myself in a “very bad situation”, I would not turn to the government for help. I would turn to my savings, my family or charity. It must be extremely difficult to get on SS considering there are only 50 million people on it. There is plenty abuse in the program, just as there is in any government run program, both on the inside and outside. I agree that there is also a lot of abuse in private business, but when that happens, those businesses fail (unless the government wrongfully bails them out). When government programs are abused or are wrong, they don’t fail; quite the opposite, they grow. Without the ability to fail, and a fuctioning profit-loss system, an organization will fail long-term. And as to who caused the economic crash. THe answer is the government.
- Rob
#6 by Larry on October 16, 2009 - 7:46 am
Quote
My biggest gripe is that the dummies that make the decisions on SS do not even pay into it. Check and see how much you reps and sens. get for their retirement after they have milked the system, then talk about the SS system?? Fire these dummies and get some people in gov. with some common sense. This eill reduce gov. crap and maybe we can get our republic back, instead of the socialists we have now.
#7 by robparis on October 16, 2009 - 8:25 am
Quote
Larry,
That used to be the case, but it isn’t true anymore. "All members of Congress, the President and Vice President, Federal judges, and most political appointees, were covered under the Social Security program starting in January 1984. They pay into the system just like everyone else. Thus all members of Congress, no matter how long they have been in office, have been paying into the Social Security system since January 1984.” Previously, these employees were covered by the Civil Service Retirement System (CSRS).
In 1983, Congress passed H.R.1900 changing the system. You can read more
about that here. I love the title of the bill: A bill to assure the solvency of the Social Security Trust Funds, to reform the medicare reimbursement of hospitals, to extend the Federal supplemental compensation program, and for other purposes. “Assure the solvency”? – Sure, that worked. “And for other purposes” – Very transparent!
- Rob
#8 by John DeFlumeri Jr on October 26, 2009 - 10:21 am
Quote
Millions of people would already have starved to death, become homeless, or died from lack of medicine were it not for Social Security. It is the only system we have for our older citizens. COLA helps them.
#9 by Rob on October 26, 2009 - 10:26 am
Quote
John – that’s not the case. Before Social Security came along, people weren’t starving in the streets. There are more homeless now as a percent of population than there were before SS was enacted. There were always churches and charities to help the less fortunate. We don’t need the state to help. Even when they claim to help, they’ve proved unable to. If you’re interested in this subject, you can read more here.
#10 by jkaminsky on December 10, 2009 - 6:05 pm
Quote
The majority of SocSec payments are at around $500/month,period.Worked &paid in for 50 yrs.no real meaningful cola has been paid,and the amt was set back in 1985.Every year Congress manipulates the figures to keep it low,so they can vote themselves raises.Hope you don’t have a heart attack that kills off half your heart and have to live on $500/mo.It does not cover rent,util,transp,food,and prescriptions.several are not covered,and copays add up big time.Good luck to you.
#11 by Ken Monnett on December 18, 2009 - 11:52 pm
Quote
the big problem with the $250 check is after you take out the increase in our mounthly oayment to medicare which will be $30 a month a $11 increase, means you will get a wopping $118 extra for the year for a average of $9.83 per month, thats 10 $1 hambergers for 10 days, who are they kidding , we are now the new american indians, they belive we are so stupid that we have no comon sence , give us a few beads, the military is getting a 3% increace, ours averages out to .075 % increace,im betting the senate and congress will get fair increase , if they have not already gave themselfs one already. we where promised that in no way would either party would touch our social security, or medicare, yet they jump in and take our biggest benifit away, and they knew it was comeing when they lied to us, i blame both parties.we should get at least a 3% increase atleast, poeple on food stamps, and unemployement got a far bigger increase, but there mind set is we can be calmed down with a little $250 once a year , once you loose a benifit it is harder to get it back, what scares me is if by chance the republicans get back both houses we will never see a cost of liveing again since they don’t like what we get any way. this country has gone down hill in the last 10 years, we where the top rated country for 100 years ,now where rated about 5-6th. my idea is to take all lobbiest out of goverment,the are the money changers of our time and need to be casted out, then set term limits ,no matter what no senator or congressman will be in office long enough to set up extra money comeing in, as my father once said who would spend millions of dollars to get a $200,000.00 a year job, there are a handful who do it for the poeple but they are not very many ,no matter what partie they are, when 1 man can control the goverment, then its time to make big changes. ken