updated 10/15/2010 8:29:29 PM ET 2010-10-16T00:29:29

More than 58 million retirees and disabled Americans will get no increase in Social Security benefits next year, the second year in a row without a raise.

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The Social Security Administration said Friday inflation has been too low since the last increase in 2009 to warrant an increase for 2011. The announcement marks only the second year without an increase since automatic adjustments for inflation were adopted in 1975. The first year was this year.

Story: Consumer prices rise in Sept. due to energy

The cost-of-living adjustments, or COLAs, are automatically set each year by an inflation measure that was adopted by Congress back in the 1970s.

To make up for the lack of a COLA, the House will vote in November — after congressional elections — on a bill to provide $250 payments to Social Security recipients, House Speaker Nancy Pelosi said. But even if Pelosi can get the House to pass the proposal, it faces opposition in the Senate.

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The absence of inflation will be of small comfort to many older Americans whose savings and home values still haven't recovered from the recession. Many haven't had a raise since January 2009, and they won't be getting one until at least January 2012. And the timing couldn't be worse for Democrats as they approach an election in which they are in danger of losing their House majority and possibly their Senate majority as well.

"We're a little bit upset because our bills are going up and our Social Security isn't," said Betty Dizik of Tamarac, Fla., a retired tax preparer and social worker.

Dizik, 83, said her only source of income is a $1,200 monthly payment from Social Security.

"I'm like a lot of other people in my predicament who live on Social Security," Dizik said. "It's hard. We cannot make ends meet."

Claire Edelman of Monroe Township, N.J., said she was so hard up that at the age of 83 she applied for a temporary job as a census taker for the 2010 Census. She didn't get the job, so she gets by on a small pension from her job with the state and her monthly Social Security payment of $1,060.

"I just hope there is some way to reconsider that decision (on the COLA) because it is going to affect so many people," Edelman said. "I can't understand why the Congress hasn't seen that there's been an increase in everything."

A little more than 58.7 million retirees and disabled Americans receive Social Security or Supplemental Security Income. Social Security was the primary source of income for 64 percent of retirees who got benefits in 2008.

The average Social Security benefit: $1,072 a month.

Social Security is supported by a 6.2 percent payroll tax — paid by both workers and employers — on wages up to $106,800. Because there is no COLA, that amount will remain unchanged for 2011.

The last increase in benefits came in 2009, when payments went up by 5.8 percent, the largest increase in 27 years. The big increase was caused by a sharp but short-lived spike in energy prices in 2008.

Gasoline prices topped $4 a gallon in the summer of 2008, jolting the inflation rate and resulting in the high COLA for 2009. When the price of gasoline subsequently fell below $2 a gallon, so did the overall inflation rate. Seniors, however, kept the high COLA for 2009.

"They received a nearly 6 percent COLA for inflation that no longer really existed," said Andrew Biggs, a former deputy commissioner at the Social Security Administration and now a resident scholar at the American Enterprise Institute.

"Seniors aren't being treated unfairly, here," Biggs said. "It looks bad, but they're actually not being treated unfairly."

By law, the next increase won't come until consumer prices rise above the level measured in 2008. The trustees who oversee Social Security project that will happen next year, resulting in an estimated 1.2 percent COLA for 2012.

Advocates for older Americans are pushing for some kind of payment to make up for the lack of a COLA.

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"I know everybody's been hurting. I see it everyday. But they are really hurting," said Barbara Kennelly, a former Democratic member of Congress from Connecticut who is now president and CEO of the National Committee to Preserve Social Security and Medicare.

"It's one more thing to be disappointed in," she said.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: No money, more problems for retirees

  1. Transcript of: No money, more problems for retirees

    WILLIAMS: Good evening.

    BRIAN WILLIAMS, anchor: If you depend on Social Security , you will have to live on what you're getting now in a bad economy and wait until 2012 at the earliest for any cost of living increase. The economic meltdown and recession have left some measures of inflation near zero. That prompted the chairman of the Federal Reserve to hint today that the Fed may try to force inflation higher in this country. If that leaves you a bit puzzled, you're not alone, especially since things that make up a large part of a senior's budget -- for example, food, medical care -- are getting more expensive all the while. Our own Tom Costello starting us off from Washington tonight with more on this. Tom , good evening.

    TOM COSTELLO reporting: Hi, Brian. Overall, consumer prices grew at less than 1 percent over the past 12 months; that's the slowest rate of growth in nearly 50 years. Because of that, Social Security checks are not going to increase, and many of the 59 million Americans on Social Security find that hard to believe. Among seniors, it was the talk of the country today. From the Edgewater Point Estates community in Boca Raton ...

    Ms. GLADYS JACOBSON (Retiree): The food that we do buy has gone up, and mostly our medical expenses, our prescriptions are much higher.

    COSTELLO: a cafe in Chicago .

    Ms. JULIA WHITFIELD (Retiree): Every penny makes a difference in your life, especially when you're on Social Security . And prices keep escalating, but our money doesn't keep going up.

    COSTELLO: For a second year in a row, Social Security checks will not go up in 2011 . That means the average monthly benefit checks should stay at $1,071.80. For retirees, it's bad news.

    Mr. DAVID JONES (Former Federal Reserve Economist): They'll hold back spending, and along with many other consumers that are holding back spending, this will mean the recovery continues at a very slow pace. It's bad news for the economy.

    COSTELLO: Today, with unemployment stuck at a stubborn 9.6 percent, the Fed chairman hinted he'll do whatever it takes to kickstart the economy.

    Mr. BEN BERNANKE (Federal Reserve Chairman): There would appear, all else being equal, to be a case for further action.

    COSTELLO: That means the Fed is prepared to flood the economy with more money, buying up government bonds to force interest rates even lower. The Fed is hoping the cheaper money will encourage businesses to borrow from banks to expand and hire new employees along the way. The lower interest rates should also encourage consumers to buy, everything from homes to cars to big

    appliances. The bottom line: The Fed wants to create inflation, because deflation, the continuing drop in wages, home values and prices, can have a devastating effect on the economy.

    STEVE LIESMAN reporting: Why is that a problem? Because if you believe prices are going to be cheaper tomorrow, you won't spend today. And that could really hurt the economy. If people believe prices are going to fall, that would reduce spending and reduce growth and probably reduce jobs more.

    COSTELLO: But interest rates are already at historically low levels, yet consumers aren't spending and businesses aren't hiring. Now, even as millions of families struggle to make ends meet, the Fed is desperate to push prices higher.

    Mr. HERB JACOBSON (Retiree): Inflation is going to kick in momentarily, and when that happens it will really hurt.

    COSTELLO: President Obama and House majority leader Speaker Nancy Pelosi have both said that they will try to increase Social Security checks by $250 a month, but they may have a hard time getting that past Republicans in the

    Senate. Brian: All right. Tom Costello starting us off from Washington tonight.



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