Social Security Adjusts for Cost-of-Living

Social Security to hand out first raises since ’09

APBy STEPHEN OHLEMACHER – Associated Press | AP – 18 hrs ago

WASHINGTON (AP) — Social Security recipients will get a raise in January — their first increase in benefits since 2009. It’s expected to be about 3.5 percent.

Some 55 million beneficiaries will find out for sure Wednesday when a government inflation measure that determines the annual cost-of-living adjustment is released.

Congress adopted the measure in the 1970s, and since then it has resulted in annual benefit increases averaging 4.2 percent. But there was no COLA in 2010 or 2011 because inflation was too low. That was small comfort to the millions of retirees and disabled people who have seen retirement accounts dwindle and home values drop during the period of economic weakness, said David Certner, legislative policy director for the AARP.

“People certainly feel like they are falling behind, and these are modest income folks to begin with, so every dollar counts,” Certner said. “I think sometimes people forget what seniors’ incomes are.”

Some of the increase in January will be lost to higher Medicare premiums, which are deducted from Social Security payments. Medicare Part B premiums for 2012 are expected to be announced next week, and the trustees who oversee the program are projecting an increase.

Monthly Social Security payments average $1,082, or about $13,000 a year. A 3.5 percent increase would amount to an additional $38 a month, or about $455 a year.

Most retirees rely on Social Security for a majority of their income, according to the Social Security Administration. Many rely on it for more than 90 percent of their income.

Mark Zandi, chief economist at Moody’s Analytics, said the COLA would give a boost to consumer spending next year, amounting to about $25 billion in government support, or 0.2 percent more economic growth, if beneficiaries spend it all. For comparison, last year’s 2 percentage point cut in Social Security payroll taxes was worth $115 billion to U.S. households.

“It is not a magic bullet for the economy, but it will certainly be a positive for households on fixed incomes,” he said.

Federal law requires the program to base annual payment increases on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Officials compare inflation in the third quarter of each year — the months of July, August and September — with the same months in the previous year.

If consumer prices increases from year to year, Social Security recipients automatically get higher payments, starting the next January. If price changes are negative, the payments stay unchanged.

Only twice since 1975 — the past two years — has there been no COLA.

Wednesday’s COLA announcement will come as a special joint committee of Congress weighs options to reduce the federal government’s $1.3 trillion budget deficit. In talks this summer, President Barack Obama floated the idea of adopting a new measure of inflation to calculate the COLA, one that would reduce the annual increases.

Advocates for seniors mounted an aggressive campaign against the proposal, and it was scrapped. But it could resurface in the ongoing talks.

“We’re very concerned about that,” said Web Phillips of the National Committee to Preserve Social Security and Medicare. “I think that what this illustrates is the dangers of trying to make Social Security policy in the context of deficit reduction.”

Social Security payments increased by 5.8 percent in 2009, the largest increase in 27 years, after energy prices spiked in 2008. But energy prices quickly dropped and home prices became soft in markets across the country, contributing to lower inflation the past two years.

For example, average gasoline prices topped $4 a gallon in the summer of 2008. But by January 2009, they had fallen below $2. Today, the national average is about $3.46 a gallon.

“A lot of that increase had to do with energy,” Polina Vlasenko, an economist at the American Institute for Economic Research, based in Great Barrington, Mass., said of the 2009 change.

As a result, Social Security recipients got an increase that was far larger than actual overall inflation. However, they weren’t to get another increase until consumer prices exceeded the levels measured in 2008.

So far this year, prices have been higher than that, Vlasenko said. Based on consumer prices in July and August, the COLA for 2012 would be about 3.5 percent. Vlasenko estimates the COLA will be from 3.5 percent to 3.7 percent.

Advocates for seniors say it’s about time.

“If you’ve been at the grocery store lately and remember what you used to pay for things, see what you’re paying for things today,” Phillips said. “The cost-of-living adjustment makes sure that the Social Security benefit that you qualify for when you retire or you become disabled continues to stay current with prices so that the buying power of your benefit does not decline over time.”

No Social Security in Negotiations

Obama Won’t Include Social Security Reform In Recommendations To Super Committee

Obama Social Security
First Posted: 9/15/11 12:08 PM ET Updated: 9/15/11 12:08 PM ET, Huffington Post

WASHINGTON — Jilted by Republican leadership during the deficit-reduction talks that accompanied the debt ceiling debate, the Obama administration is now pulling back an offer to put Social Security reform on the negotiating table.

The president will not include changes to that program in the series of deficit reduction measures that he will offer to the congressional super committee next Monday, administration officials confirm.

During talks with House Speaker John Boehner (R-Ohio) this past summer, President Barack Obama had discussed changing the way that Social Security benefits were paid so that a lower level of benefits were paid over time. Boehner walked away from that deal, which was part of a much broader package, because of concern over a corresponding tax increase. Now, Obama is putting off support for that idea of changing the inflation formula of Social Security to chained consumer price index (CPI).

“The president’s recommendation for deficit reduction will not include any changes to Social Security because, as the president has consistently said, he does not believe that Social Security is a driver of our near and medium term deficits,” said White House spokeswoman Amy Brundage. “He believes that both parties need to work together on a parallel track to strengthen Social Security for future generations rather than taking a piecemeal approach as part of a deficit reduction plan.”

“There will be no Social Security in the recommendations,” Brundage added.

The White House’s decision to take Social Security reform off the table for the time being, which was first reported by the Wall Street Journal, is largely consistent with the president’s viewpoint that the program is not a contributor to the deficit and should be dealt with in separate discussions. The administration brought it in to the “grand bargain” talks with Boehner, an official relayed, because the president was a party to those talks. With respect to the super committee’s negotiations, he will have no seat at the table and is merely outlining his preferences for reform.

The move also makes obvious political sense. Democrats have long worried that they would upset their base should they be seen as the ones chipping away at retirement benefits, certainly after House Republicans took heat for passing a budget that would convert Medicare into a voucher-based program.

Already suffering from an enthusiasm gap, Obama’s decision to put off Social Security cuts will win him plaudits from his own party. But it still remains to be seen what type of recommendations he will make with respect to Medicare. During the negotiations with Boehner, the White House signed off on a recommendation to increase the eligibility age of Medicare from 65 to 67. Administration officials refused to say whether that recommendation would be part of the president’s proposal to the super committee. On Thursday, the Washington Post reportedthat the White House would call for “at least $340 billion in savings from Medicare and Medicaid” alongside $800 billion in tax increases.

The 12-member committee has no obligation to act on the president’s proposals, though it seems likely that its six Democratic members will hew to the administration’s line. The committee’s recommendations will be unveiled sometime around Thanksgiving, with hopes of a vote in Congress toward the end of December.

Social Security v. A Ponzi Scheme — How Rick Perry Sees It

Democrats Defend Social Programs — Win

How Democrats Win: Defending the Social Safety Net

By RICK PERLSTEIN Thursday, August 18, 2011, TIME | 181 COMMENTS
Charlie Neibergall / AP; Hulton Archive / Getty Images

CHARLIE NEIBERGALL / AP; HULTON ARCHIVE / GETTY IMAGES

I was flattered to learn from Joe Klein’s Aug. 15 column in TIME that Barack Obama is reading my book ­Nixonland. The book is about the “separate and irreconcilable fears” over the past 50 years that have come to define the increasingly acrimonious cohabitation of Americans on the left and on the right. I assume Obama turned to it for insight about how he might help turn down the volume in our political conversation. But there’s also a story inNixonland about how the Democratic Party wins, why it loses and the good things that happen when the party gets the formula right. I surely hope Obama did not miss it.

It concerns the two major axes upon which major national elections get fought. Sometimes they become battles over the cultural and social anxieties that ordinary Americans suffer. Other times they are showdowns about middle-class anxieties when the free market fails. Normally, in the former sort of election, Republicans win. In the latter, Democrats do — as we saw in 2008, when the tide turned after John McCain said “the fundamentals of the economy are strong.”

Consider 1960. Even with all that ­famous 1950s prosperity, 1959 saw a recession. Richard Nixon blamed his defeat on Dwight D. Eisenhower’s failure to use government to subdue it. John F. Kennedy, meanwhile, enhanced New Deal programs like Social Security — and a promise to extend that legacy with ­Medicare was central to his appeal. People remember the U.S.’s first televised presidential debate for the contrast between JFK’s cool and a frantic and sweaty Nixon. What’s forgotten is what made Nixon so frantic: Kennedy’s unanswerable argument that Democrats had created those programs while Republicans opposed them.

Presenting himself as the face of calm in confusing times was essential to JFK’s victory, as it is essential to any President’s victory — which is why the Democrats lost in 1968. Nixon effectively associated them with the protesters in the streets. But even then, Nixon almost lost after his opponent Hubert Humphrey enlisted labor unions in a gargantuan last-minute push concerning which party had created Social Security and Medicare and which seemed indifferent about preserving them.

Two years later, Nixon thought he had another one in the bag — the 1970 elections, in which he campaigned tirelessly for Republican candidates, then gave an ­election-eve TV speech blaming Democrats for the “thugs and hoodlums” in the streets. Only he made a terrible mistake: he sounded just as frantic and ugly as the forces he claimed the GOP would subdue.

In contrast, the Democrats ran a response to Nixon’s hysterical election-eve address from Edmund Muskie, the calm, quiet Senator from Maine, who sat in an armchair and asked Americans to vote against a “politics of fear” that insists “you are encircled by monstrous dangers” and instead choose a “politics of trust.”

You might say Muskie’s was a very Barack Obama sort of speech — but with a difference. It was overwhelmingly partisan. It excoriated Republicans for the way they “cut back on health and education for the many … while expanding subsidies and special favors for the few.” In other words, it was just the kind of speech Obama will not give.

That year, the GOP went bust at the polls. Then, in 1972, the Democrats ran a candidate whose speeches were more frantic than any in history. George ­McGovern, following a then fashionable theory that the middle class was prosperous enough to take care of itself and that unions were pretty much irrelevant, spoke to working-class concerns less than any Democrat had before. He lost 49 states.

McGovern didn’t give what Lyndon B. Johnson used to call “Democratic” speeches — LBJ’s shorthand for talking about which party gave the people Social Security, Medicare and the Tennessee Valley Authority and which one was willing to toss them over the side. LBJ gave such speeches all the time in 1964 — and he won 60% of the popular vote.

Here’s what LBJ knew that ­McGovern didn’t: There are few or no historical instances in which saying clearly what you are for and what you are against makes Americans less divided. But there is plenty of evidence that attacking the wealthy has not made them more divided. After all, the man who said of his own day’s plutocrats, “I welcome their hatred,” also assembled the most enduring political coalition in U.S. history.

The Republicans will call it class warfare. Let them. Done right, economic populism cools the political climate. Just knowing that the people in power are willing to lie down on the tracks for them can make the middle much less frantic. Which makes America a better place. And which, incidentally, makes Democrats win.

America’s Debt Broken Down

Who Owns America? Hint: It’s not China

July 23rd, 2011
By Thomas Mucha
The Global Post

Truth is elusive. But it’s a good thing we have math.

Our friends at Business Insider know this, and put those two principles to work today in this excellent and highly informative little slideshow, made even more timely by the ongoing talks in Washington, D.C. aimed at staving off a U.S. debt default.

Here’s the big idea:

Many people — politicians and pundits alike — prattle on that China and, to a lesser extent Japan, own most of America’s $14.3 trillion in government debt.

But there’s one little problem with that conventional wisdom: it’s just not true. While the Chinese, Japanese and plenty of other foreigners own substantial amounts, it’s really Americans who hold most of America’s debt.

Here’s a quick and fascinating breakdown by total amount held and percentage of total U.S. debt, according to Business Insider:

Hong Kong: $121.9 billion (0.9 percent)
Caribbean banking centers: $148.3 (1 percent)
Taiwan: $153.4 billion (1.1 percent)
Brazil: $211.4 billion (1.5 percent)
Oil exporting countries: $229.8 billion (1.6 percent)
Mutual funds: $300.5 billion (2 percent)
Commercial banks: $301.8 billion (2.1 percent)
State, local and federal retirement funds: $320.9 billion (2.2 percent)
Money market mutual funds: $337.7 billion (2.4 percent)
United Kingdom: $346.5 billion (2.4 percent)
Private pension funds: $504.7 billion (3.5 percent)
State and local governments: $506.1 billion (3.5 percent)
Japan: $912.4 billion (6.4 percent)
U.S. households: $959.4 billion (6.6 percent)
China: $1.16 trillion (8 percent)
The U.S. Treasury: $1.63 trillion (11.3 percent)
Social Security trust fund: $2.67 trillion (19 percent)

So America owes foreigners about $4.5 trillion in debt. But America owes America $9.8 trillion.

Fox News on Fear Mongering [Video]

“America was certainly safe between 2000 and 2008. I don’t remember any attacks on American soil during that period of time.” – Eric Bolling, Fox News.

Fox News vs. Middle Class America [Video]