Wednesday, October 14, 2009

New paper: “Case For a Social Security Cost-Of-Living Adjustment in 2010 Is Weak”

From the Department of Strange Bedfellows, the Center on Budget and Policy Priorities today released an issue brief titled "Case For a Social Security Cost-Of-Living Adjustment in 2010 Is Weak" that examines argument for paying an ad hoc COLA next year.

Under current law, there will be no cost-of-living adjustment (COLA) in Social Security in 2010 — the first time that has happened since automatic cost-of-living adjustments began in 1975. Several bills before Congress would grant a special increase in Social Security payments for 2010.

The inflation data, however, do not support an increase: overall consumer prices have fallen significantly in the past year and are not expected to return to their earlier peak until mid-2011. In addition, when no Social Security COLA is provided, Medicare Part B premiums — which are deducted from Social Security checks — are frozen for most beneficiaries so that the Social Security checks do not drop (see the box on page 5).

If policymakers nevertheless choose to act, they should grant a flat, one-time payment as an economic stimulus measure rather than an across-the-board percentage increase that undermines the mechanics and purpose of Social Security's indexing provisions

Couldn't have said it better myself. It's a very well presented paper.

My own AEI paper on the COLA came to very similar conclusions.

 

2 comments:

Rob Paris said...

The Social Security cost of living adjustment is messed up!
http://robvstate.com/2009/10/10/social-security-cola/

Jason said...

The Committee for a Responsible Federal Budget has also argued against enacting a one-time payment to seniors or an ad-hoc COLA. The only economic justification for a one-time payment would be if the Administration and Congress believe that the economy needs additional stimulus and the original one-time payments in the 2009 stimulus act were shown to be a particularly successful form of economic stimulus. If neither is true, then CRFB would also oppose the one-time payments because they would be pure political pandering.

Visit http://crfb.org/blog for CRFB analysis on this issue.