NPR logo

No Social Security COLA In 2010

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
No Social Security COLA In 2010


No Social Security COLA In 2010

No Social Security COLA In 2010

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

The Social Security Administration says there will be no cost-of-living increase next year for more than 50 million recipients of Social Security. The announcement comes a day after President Obama called for $250 payments for seniors, veterans, retired railroad workers and people with disabilities.


This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

Today, on a trip to New Orleans, President Obama spoke about the state of the economy. Mr. Obama said even though inflation is in check, people on fixed incomes are still facing hardship. And he told the New Orleans audience that's one reason he's backing a plan to send out $250 checks next year to more than 50 million Americans. The checks would go to Social Security recipients, veterans and the disabled. Mr. Obama has not said where he'd get $13 billion to pay for that program. NPR White House correspondent Scott Horsley joins us now.

And Scott, the White House announced this idea just as word was coming out that Social Security recipients would not be getting a cost of living increase next year. What's going on here?

SCOTT HORSLEY: Well, Robert, it's pretty simple. Seniors and others who collect Social Security are not getting a cost of living increase because the cost of living has not increased. In fact, according to…

SIEGEL: It decreased.

(Soundbite of laughter)

HORSLEY: That's right. According to the Labor Department's calculations, it went down about two percent in the last year. One could argue, therefore, seniors - even if their checks stayed the same - will have more buying power than they have in the past. But that's not good enough for the White House, and so they want to send a one-time check to all the people who get Social Security and veterans' benefits of $250 some time next year. They point out that other parts of the stimulus package extend into next year. And so, in a way, this is just putting seniors on the same plane as workers.

SIEGEL: Well, is the White House calling this the much discussed second stimulus?

HORSLEY: No, they are pointedly not referring to this as a second stimulus package. The administration has said it supports extending some pieces of the stimulus measure that are due to expire, including unemployment benefits, government subsidies for health insurance. And now they want to provide again a second $250 check to Social Security recipients. But they - and they certainly do hope that retirees will spend that money and use it to stimulate the economy. In a statement yesterday, President Obama said this could be a benefit not only to the recipients, but to their communities and all the people who get that money.

SIEGEL: It's got the language of stimulus…

HORSLEY: That's right.

SIEGEL: …but not using the word stimulus.

HORSLEY: The multiplier effect. But they don't want to call it a second stimulus because that might suggest that the first stimulus is somehow not doing its job.

SIEGEL: Which is what some Republicans are saying in Congress.

HORSLEY: It's exactly what Republicans are saying, yes.

SIEGEL: Now, is the White House saying anything about how it would pay for this round of $250 checks?

HORSLEY: No, the only thing the president said yesterday in endorsing this idea is that the money should not come at the expense of the Social Security Trust Fund. But other than that, he says he's basically willing to work with Congress on a way to pay for this. And in fact, it's possible that the checks won't be paid for at all, that the government would simply borrow more money to send these checks out - $13 billion, as you say. Now, the administration has generally taken the position that new programs ought to be paid for either with additional revenues or compensating spending cuts elsewhere in the budget. But they say when it comes to an economic stimulus measure, that's not really what you want to do, it doesn't make sense…

SIEGEL: Not that this is a stimulus.

(Soundbite of laughter)

HORSLEY: That's right. But you don't want to be pumping money in the economy with one hand and taking it out with the other, so they're willing to let this not be paid for. If that's the way it goes, you know, maybe the senior should give that money to their grandkids because they'll be the ones who have to pay it back.

SIEGEL: What do you think is the political advantage here for the president, to propose this kind of payoff to seniors?

(Soundbite of laughter)

HORSLEY: Well, no one is, of course, would suggest that the affection of seniors can be bought for a measly $250, but it can't hurt. And this is the group where President Obama has the most trouble. There was a Gallup poll that came out this week showing the president's overall approval rating at about 54 percent, that's actually up a little bit.

SIEGEL: Mm-hmm.

HORSLEY: But his approval rating among those 65 and over, just 46 percent. And that's been very consistent. Seniors are the group that are least likely to approve the president's performance. It's the one demographic group he lost in last year's election. And significantly for the White House, it's the one demographic group that can pretty much be counted on to vote in next year's election.

SIEGEL: That's right.

(Soundbite of laughter)

SIEGEL: That's the group that turns out. Thank you, Scott.

HORSLEY: My pleasure.

SIEGEL: That's NPR White House correspondent Scott Horsley.

Copyright © 2009 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Obama Seeks To Ease Pain For Seniors — And Himself

Trays of printed Social Security checks wait to be mailed from the U.S. Treasury's financial management services facility. President Obama has endorsed a congressional effort to give Social Security recipients a one-time payment of $250 in the coming year. Bradley C. Bower/AP hide caption

toggle caption
Bradley C. Bower/AP

Trays of printed Social Security checks wait to be mailed from the U.S. Treasury's financial management services facility. President Obama has endorsed a congressional effort to give Social Security recipients a one-time payment of $250 in the coming year.

Bradley C. Bower/AP

When President Obama endorsed a congressional effort to give Social Security recipients a one-time payment of $250 in the coming year, he characterized it as an extension of the government's economic stimulus program.

And, technically, the White House can make that argument: Recipients received an equal amount this year in stimulus funds, though they weren't scheduled to get more.

But Obama's announcement Wednesday came less than 24 hours before the government made official expected but unwelcome news for the nation's seniors: For the first time since 1975, there will be no cost-of-living increase in their monthly Social Security retirement checks in the coming year.

"It's just more bad economic news in a year that's already had enough of it," says Cristina Martin Firvida, director of economic security for AARP.

And clearly the White House recognized that the cost of living announcement would also be bad political news for the president.

A Very Important Interest Group

Though the payment adjustment is tied by law to the Consumer Price Index — which fell 2.1 percent in the third quarter — the lack of an increase would no doubt prove troublesome for Obama with a very important interest group.

And troublesome even though last year the government approved a historically high 5.8 percent cost-of-living increase for seniors, due in large part to rising energy costs that prompted a brief but intense spike in consumer prices at the time the adjustment was calculated.

The index had plummeted by the time the government began to make payments that included the 5.8 percent bump, and it remains below the level at which last year's increase was calculated.

Still, the prospect of tens of millions of senior citizens opening their mailboxes this fall to notices that their retirement checks would not automatically go up in the coming year is not palatable to any politician.

"Seniors are already really upset with the administration over the health reform debate," says Andrew G. Biggs, a resident scholar at the business-oriented American Enterprise Institute. "And fairly or unfairly, they would blame the administration if there is no cost-of-living increase.

"The administration," Biggs says, "is trying to make the best out of a bad situation."

Senior Skeptics

The nation's senior citizens, as a whole, have been skeptical of the young president and, in particular, of his move to overhaul the health care system.

A Gallup Poll released Thursday showed that those aged 65 and older have the lowest opinion of the president of any age demographic.

Forty-six percent of Americans aged 65 and older told Gallup surveyors that they approve of the president, compared with 52 percent overall. And those older Americans comprised the only age demographic that Obama failed to carry in the 2008 presidential election.

Politically speaking, Biggs says, it made sense for the president to get on board with a relatively inexpensive program — if a total $13 billion payout without a revenue offset can be characterized as inexpensive. (The White House has said it won't compromise the Social Security Trust Fund to pay for the program.)

"The plan proposed by the administration is the least bad of a range of bad options," says Biggs, a former Social Security Administration official in the George W. Bush administration. "It's a one-time payment, they've been careful not to link it too closely with COLA [cost of living adjustment], and it's not Cash for Clunkers. "

A Stimulative Effect?

Though the White House has suggested that the infusion of money to Social Security recipients could help stimulate the economy, most experts say the effect is difficult to predict.

"Going forward, it's not clear what the impact will be," says Craig Copeland, a senior research associate at the Employee Benefit Research Institute.

"If a couple relies on Social Security alone for retirement, it could be fairly significant," Copeland says. "The $500 they would get would be about half the average monthly payment for a couple, and that could help them purchase something."

However, with rising health care costs, the money could simply be plowed into paying for the rising costs of existing needs, like prescription drugs, he says.

About 20 percent of the nation's senior citizens rely solely on Social Security for their retirement income. Some 60 percent of seniors report that three-quarters of their retirement income comes from the government program.

Firvida of AARP says that the additional stimulus money will "make a meaningful difference" for seniors facing economic circumstances that many have never encountered in their lifetimes.

Setting A Problematic Precedent?

Still, the administration's decision to endorse the $250 payment to seniors in the face of the COLA announcement has made some squeamish.

The COLA formula, Copeland says, was established so there wouldn't be an annual discussion about what would constitute an appropriate annual adjustment.

"We've done it this way for 36 years, but this year the result, I guess, isn't liked," he said. "There is a formula that's been in effect, and the cost of living didn't go up."

Senior advocates have long argued that the Consumer Price Index doesn't accurately assess the types of expenses — particularly health care costs — that older Americans face.

The American Enterprise Institute's Biggs is among those who question that assertion. He says that over the past year, even taking into account what seniors spend their money on, they should have received no cost of living adjustment.

"It's a bad precedent to not look at facts, not stick with formulas, but to bow to a powerful pressure group that already benefits significantly from government programs," Biggs says. "This is moving in the wrong direction — bending the cost curve upwards."

Though it might be an investment in politics, Firvida and other senior advocates see the president's action as an important step to help the nation's oldest citizens.

"Criticism [of the program] ignores the realities of what senior citizens face today," Firvida says. "Their nest eggs have taken a hit, their home values have plummeted, and they are facing some very tough circumstances."