Thurs. 10:45 a.m.: Social Security to get a boost in 2019
WASHINGTON (AP) — Tens of millions of Social Security recipients and other retirees will get a 2.8 percent increase in benefits next year as inflation edges higher. For the average retired worker, it amounts to $39 a month.
After a period of low inflation, the increase for 2019 is the highest in 7 years.
The cost-of-living adjustment, or COLA, affects household budgets for about one in five Americans, including Social Security beneficiaries, disabled veterans and federal retirees. That’s about 70 million people, enough to send ripples through the economy.
Automatic inflation protection has been a standard feature of Social Security since 1975. Social Security recipients also gain from compounding because COLAs becomes part of their underlying benefit, the base for future COLA increases.
Nonetheless many retirees and their advocates say the Social Security COLA is too meager and doesn’t reflect higher health care costs for older people. Federal budget hawks take the opposite view, arguing that annual increases should be smaller to reflect consumers’ penny-pinching responses when costs go up.
With the COLA, the estimated average monthly Social Security payment for a retired worker will be $1,461 a month next year. Other Social Security beneficiaries include disabled workers and surviving spouses and children. Low-income disabled and elderly people receiving Supplemental Security Income also get a COLA.
By law, the COLA is based on a broad index of consumer prices calculated by the government. Advocates for seniors claim the general index doesn’t accurately capture the rising prices they face, especially for health care and housing. They would like the government to switch to an index that reflects the spending patterns of older people.
“What the COLA should be based on is still a very real issue,” said William Arnone, CEO of the National Academy of Social Insurance, a research organization not involved in lobbying. “Older people spend their money in categories that are going up at a higher rate than overall inflation.”
The COLA is now based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which measures price changes for food, housing, clothing, transportation, energy, medical care, recreation and education.
Advocates for the elderly would prefer the CPI-E, an experimental measure from the government that reflects costs for households headed by a person age 62 or older. It usually outpaces general inflation, though not always.
COLAs can be small or zero, as was the case in several recent years. People often blame the president when that happens. However, the White House can’t dictate the COLA, which is determined by nonpolitical experts. If there were to be any revisions, President Donald Trump would have to persuade Congress to change the underlying law.
Trump has repeatedly vowed not to cut Social Security or Medicare. But the government is running $1 trillion deficits, partly as a result of the Republican-led tax-cut bill the president claims as one of his main achievements. Mounting deficits will revive pressure to cut Social Security, advocates for the elderly fear.
“The revenue loss in the tax bill contributes to much higher deficits and debt, and that is where the threats begin to come in,” said David Certner, policy director for AARP. “Social Security, and in particular the COLAs, have been the target.”
Beyond federal budget woes, Social Security faces its own long-term financial problems and won’t be able to pay full benefits starting in 2034.