Social Security makes it official: No COLA

updated 6:39 p.m. ET Oct. 15, 2009

WASHINGTON - Social Security recipients won't get a cost-of-living increase next year for the first time in more than a third of a century, and that could boost President Barack Obama's plan to send seniors another round of $250 payments before the congressional elections.

Democratic leaders in Congress have signed onto the plan, greatly improving its chances, even as some budget hawks say the payments are unwarranted and could add to the federal budget deficit. Republican leaders said they, too, favor the payments but don't want to increase the deficit to pay for them.

More than 50 million Social Security recipients will see no increase in their monthly payments next year, the government said Thursday, the first year without an increase since automatic adjustments were adopted in 1975.

Blame it on falling consumer prices. By law, cost-of-living adjustments are pegged to inflation, which is negative this year because of lower energy costs. Social Security payments do not go down, even when prices drop.

Social Security recipients at a senior center in Pembroke Pines, Fla., a suburb of Fort Lauderdale, took it in stride that come January they won't see an increase in their benefits.

"At my age, I've got a nice bedroom, I have clothes, I have anything I want, I got a walker, what else do I need?" said Marie Arrasate, 83, who ran a restaurant and candy shop with her husband in Washingtonville, N.Y., and now lives with her daughter in Pembroke Pines.

"You have to make do with whatever you get. What are you gonna do? You can't do nothing about it," said Ed Nunez, 69, a retired truck driver from Miami.

The White House said the stimulus payments would cost $13 billion, though a congressional estimate put the cost at $14 billion. Obama didn't say how the payments should be financed, leaving that up to Congress. The president is open to borrowing the money, increasing the federal deficit, just as Congress did with the first round of stimulus payments.

Government analysts have been forecasting for months that there would be no increase next year in monthly Social Security payments because of falling consumer prices. In anticipation of Thursday's announcement, Obama said Wednesday he supported $250 payments to about 57 million senior citizens, veterans, retired railroad workers and people with disabilities.

Seniors groups applauded the proposal, saying the recession has reduced home values and diminished retirement funds. Recipients would be limited to one payment, even if they qualified in more than one category.

"Without relief, millions of older Americans will be unable to afford skyrocketing health care and prescription drug costs, as well as other basic necessities," said Tom Nelson, chief operating officer for AARP.

The payments would match the ones issued to seniors earlier this year as part of the government's economic recovery package. They would be equal to about a 2 percent increase for the average Social Security recipient.

Social Security has been the backbone of the nation's safety net for older Americans since it was enacted in the 1930s. Together with Medicare, the government health insurance program for the elderly, it helps keep millions of seniors out of poverty.

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