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Congress may provide Social Security hike

Congress is beginning to look at ways to send some extra money to Social Security recipients who otherwise won't be getting a raise next year.

Several bills have been introduced in recent weeks that aim to make up for the fact that the automatic inflation-based formula that determines Social Security cost-of-living increases dictates that there will be no raise in 2010.

Rep. Brian Higgins, D-Buffalo, of the powerful House Ways and Means Committee, said Monday that it is likely that the committee and Congress will take up the issue.

"I don't know this with any finality, but I do know that several members want to do something to provide for an increase," Higgins said. "There's serious discussion about doing something this year into next."

The alternatives being proposed include a 3 percent raise or a small onetime payment of $150 or $250 to every Social Security recipient.

Without congressional action, the nation's 50 million Social Security recipients -- including approximately 237,000 in Erie and Niagara counties -- would go without a raise next year, the first year without a raise since automatic cost-of-living adjustments were added to Social Security in 1975.

For a minority of seniors -- those on Medicaid as well as Medicare and those with incomes of more than $86,000 for an individual or $170,000 for a couple -- Social Security take-home pay could shrink next year.

That's because their Medicare premiums are deducted from their Social Security payments, and those premiums are expected to increase next year.

However, most Social Security recipients are protected by a "hold-harmless" provision that means they will never take a pay cut, even if Medicare premiums increase.

The Social Security pay freeze is happening because of a quirk in the law that governs those cost-of-living increases, which are based on a comparison of consumer prices for workers from the third quarter of one year to the third quarter of the next.

That figure soared from 2007 to 2008 primarily because of last summer's spike in gasoline prices, meaning seniors on Social Security got a 5.8 percent raise this year. That's the largest since 1982. But gas prices have fallen dramatically in the past year, meaning inflation has dropped, too.

Seniors would be seeing about a 2.7 percent Social Security pay cut this year if not for the law's stipulation that benefits not be reduced even if prices fall, said Stephen C. Goss, chief actuary at the Social Security Administration.

And while the third quarter is not yet over, Goss said one thing is clear. "It's virtually rock-solid that we will not have any increase in the CPI [Consumer Price Index] in an amount that matters," he said at an AARP forum on the issue Monday. "Therefore we will not have a COLA [cost-of-living) adjustment."

Current inflation trends indicate that seniors won't get a raise in 2011, either, and government projections show a 1.2 percent increase for 2012.

Faced with that prospect -- and angry calls from the nation's seniors -- lawmakers have introduced several proposed fixes.

Rep. Walter Jones, R-N.C., has proposed a 3 percent raise for Social Security recipients next year, while Rep. Rodney Alexander, R-La., is pushing a 2.9 percent increase.

"Although the annual adjustment is a small increase, it is a much-needed benefit for our nation's seniors to help them compensate for inflation and to sustain the skyrocketing prices of health care and prescription drugs," Alexander said.

The trouble is, a raise of 3 percent or so is not so small in terms of its budgetary impact, since it would essentially be a permanent increase in Social Security payments above their current level. For that reason, Alexander's proposal could cost upwards of $200 billion over the next decade, Goss said.

One-time bonuses -- like the $250 stimulus check Social Security recipients got last year -- would be a cheaper alternative.

Rep. Carolyn McCarthy, D-Garden City, is proposing a one-time $150 payment that would cost $7.5 billion, Goss said. And Sen. Bernie Sanders, I-Vt., and Rep. Peter DeFazio, D-Ore., suggest a $250 payment that would cost $14 billion.

Higgins said the Democrats on the Ways and Means Committee will sort through various options for a fix at a meeting Wednesday.

Congress also may eventually want to change the inflation index upon which Social Security pay increases are based, said John Rother, AARP executive vice president. The raises are currently based on the Department of Labor's Consumer Price Index for workers, rather than the experimental Consumer Price Index for seniors.

Using the workers' index "certainly under-registers the importance of rising health care costs on seniors," which are included in the seniors' index, Rother said.

While Rother and other panelists noted that the lack of a Social Security pay hike raises several complex issues, Goss joked that there would be one sure-fire way to solve the problem of a guaranteed cost-of-living increase for seniors.

"If you want to go back to $4 gasoline, we can get there," he said.

e-mail: jzremski@buffnews.com

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