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Social Security recipients see 3.5 percent raise

Social Security recipients have not received a raise since 2009. That is set to change in 2012, when Social Security checks will be about 3.5 percent more than the last two years.

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

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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."

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