By Mary Johnson, Social Security and Medicare Policy Analyst
(March 5, 2010) The U.S Senate recently rejected not one, but two attempts to provide a modest, one-time $250 emergency Social Security payment to seniors who did not receive a cost-of-living adjustment (COLA) in 2010. President Obama proposed the $250 payments in his annual budget presented earlier this year, and the proposal appeared to have widespread support among Members of Congress.
The fact that the Senate turned down two measures to assist tens of millions of Social Security recipients was not reported in the media, and one gets a skewed idea of what happened if we rely solely what we read in media reports. The Associated Press reported that “Republicans and Democratic deficit hawks combined to reject the idea by a 50-47 vote,” saying that “the plan offered by Senator Bernie Sanders, (VT) would have added $14 billion to the out-of-control budget deficits.”
Would it? The $14 billion cost of Sanders’ proposal would have come from the Social Security Trust Fund. Social Security benefits are paid out of revenues collected from payroll taxes, and the taxes that seniors must pay on a portion of their Social Security benefits. The Congressional Budget Office forecasts that in 2010 the program will collect $21 billion in taxes from seniors on the taxation of Social Security benefits alone — $7 billion more than the estimated cost of the one-time $250 payments.
The deficit is not the sole reason for the failure to pass the emergency payments. If senators really were so worried about the out-of-control budget deficits, they had a chance to vote “yea” for a nearly identical proposal that would have offset the cost. That amendment, by Senator Richard Burr (NC), would have tapped unused money from last year’s stimulus funds. And that’s fair. The government “borrowed” surplus Social Security payroll taxes not needed to pay benefits to fund provisions of stimulus legislation last year. That measure for the $250 payment was defeated by a 59 to 38 vote prior to the Sanders’ amendment.
Take careful note of this vote. It’s the canary in the coalmine as a new Deficit Commission gears up to tackle cutting Social Security, Medicare and Medicaid deficits. The Commission will undoubtedly consider a proposal to switch to a more slowly growing Consumer Price Index to use for determining COLAs and the tax code. That would cut the growth of COLAs for retirees, and result in lower initial retirement benefits for new retirees as well since COLAs are used in the benefit formula. It would also boost everyone’s taxes since the CPI is used to index personal exemptions, the standard deduction, and tax brackets. When these grow more slowly, people pay more in taxes.
“We are disappointed that the Senate failed to pass the $250 emergency Social Security payment,” states Daniel O’Connell, Chairman of The Senior Citizens League (TSCL). “We hear from our seniors every day of some pretty desperate situations,” says O’Connell. “Some of the most acute are from seniors dependent on help from family members who have also lost their jobs. Family members often provide critical help with housing, meals, transportation, prescription drug costs,” O’Connell notes.
TSCL is continuing to lobby hard for an emergency COLA and urges you to join the effort and tell others. The situation for seniors is not likely to get any better in 2011. To the contrary, inflation as measured by the government’s Consumer Price Index for Workers remains so low that it’s quite likely there will be no COLA again next year. However, Medicare costs will continue to rise, and the deductions for premiums will continue to reduce seniors’ benefit payments again next year.
TSCL was the first seniors group to call on Congress to provide an emergency COLA in 2009, and strongly supports legislation that would provide an actual increase to benefits, like that provided by H.R. 3557, legislation introduced by U.S. Representative Walter Jones (NC). The bill calls for an “average” COLA, which would equal about 3%. TSCL also supports legislation that would more fairly and accurately base the annual COLA on a “seniors” CPI and guarantee that beneficiaries receive a minimum COLA of 3% every year — the “Guaranteed 3% COLA for Seniors Act,” (H.R. 4193) by U.S. Rep. Eliot Engel (NY-17).
Sources: “Obama’s $3.8 Trillion Budget Heading To Congress,” Martin Crutsinger, The Associated Press, January 31, 2010. “Senate Rejects Social Security Payment,” Andrew Taylor, The Associated Press, March 3, 2010. “Combined OASDI Trust Funds, January 2010, Baseline,” Congressional Budget Office.