The Elderly Won’t Be Eating Cat Food This Year

by Veronique de Rugy

On Friday, the Washington Post sent this breaking news alert:

For the second year in a row, the nearly 54 million retirees and other Americans who receive Social Security benefits will not get any cost-of-living increase in 2011 in their monthly checks, government officials announced Friday morning.

The absence of any growth in Social Security checks for consecutive years is unprecedented in the 3 1/2 decades that payments have been automatically adjusted according to the nation’s inflation rate.

But the politics surrounding this cost-of-living adjustment (COLA) freeze is interesting. The freeze, we are told, will have dramatic consequences for seniors, forcing them to live in the street and eat cat food. To avoid such an outcome, the administration has endorsed sending a $250 bonus check to each of the nearly 58 million Americans on Social Security.

But, as the Wall Street Journal editorializes this morning, it is not a stretch to assume that the administration’s move is driven by the upcoming elections, especially with polls showing that seniors have turned sharply against the Democrats this year.

So, will seniors really suffer that much from the COLA freeze? Well, obviously they’ll be unhappy if they were expecting to receive larger Social Security checks than they are going to get. But, as my colleague Jason Fichtner explained to me on Friday, it is hard to substantiate the claim that the freeze will result in millions of seniors struggling to pay for food, utilities, and health care. (Fichtner is a great source on all Social Security related issues. Before joining Mercatus a month ago, he served in a variety of positions at the Social Security Administration, including deputy commissioner, chief economist, and associate commissioner for retirement policy.)

According to Fichtner’s data, in January 2009, seniors received a 5.8 percent increase in the cost-of-living adjustment even though the actually cost of living dropped the next two years. That raise was the largest increase in 20 years, and it represented a serious bonus for seniors.

In addition, seniors have already received a $250 check as part of the stimulus. Also, because of the COLA freeze, many retirees will save money on their Medicare Part B premiums, which won’t rise this year. That’s because of the “hold harmless” provision included in the Medicare Modernizations Act of 2003. AP last week:

And Jason Fichtner, a senior research fellow at George Mason University who served as deputy commissioner at the Social Security Administration, pointed to a “hold harmless” provision in law that protects some 93 percent of seniors from paying higher Medicare Part B premiums if they don’t get a Social Security COLA increase.

In other words, this is great news for seniors who will remain ahead of the inflation curve despite a second straight year without an increase in their Social Security benefits.

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