Social Security cancels COLAs
posted at 9:30 am on August 24, 2009 by Ed Morrissey
Barack Obama already has had a tough time with seniors on the health-care reform initiative, and for good reasons. The latest news from Social Security won’t make them any happier about it. The Social Security administration has canceled cost-of-living adjustments (COLAs) for the next two years, which means the fixed income on which these seniors rely will freeze at current levels. However, their Medicare premiums will still increase, which means they will get less money over the next two years, the first declines in SSA in more than 30 years:
Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise. The trustees who oversee Social Security are projecting there won’t be a cost of living adjustment (COLA) for the next two years. That hasn’t happened since automatic increases were adopted in 1975.
By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly. …
Advocates say older people still face higher prices because they spend a disproportionate amount of their income on health care, where costs rise faster than inflation. Many also have suffered from declining home values and shrinking stock portfolios just as they are relying on those assets for income.
“For many elderly, they don’t feel that inflation is low because their expenses are still going up,” said David Certner, legislative policy director for AARP. “Anyone who has savings and investments has seen some serious losses.”
Inflation has been low enough that the cost of living has remained flat. Canceling COLAs might make sense with that in mind, except that the SSA’s increase in premiums are predicated on inflation in health care costs. If that’s true, then the COLAs should remain in place. Right now, it looks like the government wants to eat its cake and have it, too. Even those who agree with canceling COLAs when inflation stops have to answer for the premium increases.
Why are the premiums going up? Health care costs continue to go up — but SSA’s beneficiaries all use Medicare, which is a single-payer government program. The federal government has never solved the cost problem in Medicare, but now it wants to expand it for all Americans, either now or in the future. Anyone who has paid attention to the Medicare entitlement crisis understands that the government has no ability to contain costs even within its own existing systems, and the premium increases that will slam SSA recipients will eventually become the norm for everyone in ObamaCare.
Last week, I wrote about the corrosive effect that ObamaCare would have on wage growth, and the impact that would have on solvency for SSA. The AARP has relentlessly ignored the connection between this policy and the hastened bankruptcy of a system on which their entire membership relies. Perhaps this will serve as a wake-up call to the AARP, which finally decided to get off the sidelines for this issue, but apparently only to cheerlead slightly less for the Obama administration. Meanwhile, their members get squeezed in both directions.