WASHINGTON — President Obama urged Congress to provide an extra $250 each to about 57 million seniors, veterans and people with disabilities as the Social Security Administration prepared to announce today that there would be no cost-of-living raise in 2010.
Social Security benefits are pegged to inflation, which has been negative this year. But by law, benefits cannot decline. This would be the first time benefits have not increased since 1975, when cost-of-living adjustments became automatic.
Obama's proposal, announced Wednesday, calls for a one-time payment sometime next year. It would be equivalent to about 2% of the annual benefit for the average Social Security retiree, senior administration aides said, and would also go to Supplemental Security Income recipients, veterans, railroad retirees and government retirees. Each person would be eligible for just one $250 payment, even if he or she qualified under more than one program.
Altogether, the program would cost about $13 billion. White House officials didn't say how it would be funded, but said it would not hurt the solvency of the Social Security trust fund.
"Even as we seek to bring about recovery, we must act on behalf of those hardest hit by this recession," Obama said in a statement. He noted that countless seniors had seen their retirement accounts and home values shrink during the economic slump.
Groups representing seniors welcomed the proposal, especially in light of the Social Security news. No increase would be a marked contrast from last year, when surging oil prices boosted inflation and helped lead to a 5.8% raise in January 2009.
The extra $250 "is sort of in lieu of COLA," or cost-of-living adjustment, said Richard Fiesta, director of government and political affairs at the Alliance for Retired Americans in Washington. "We hope it will be enacted soon."
Senate Majority Leader Harry Reid (D-Nev.) told the Associated Press that he supported the payments, as did Rep. Charles B. Rangel (D-N.Y.), chairman of the Ways and Means Committee, which has jurisdiction over Social Security in the House.
But Sen. Judd Gregg (R-N.H.) objected. "I think it would be inappropriate," he said. "The reason we set up this process was to have the Social Security reimbursement reflect the cost of living."
A falling inflation rate also could reduce the maximum amount that workers can contribute to IRAs, 401(k)s and other retirement systems in 2010. But the White House said the IRS and Treasury would ensure that did not happen.
Although the White House characterized the $250 as an "economic recovery payment," officials insisted it was not the first step toward a second stimulus program. The original $787-billion Recovery Act, approved in February, included payments of $250 to seniors, veterans and people with disabilities. Republicans have sharply criticized the economic stimulus for driving up the deficit without bringing down unemployment.
Economists said a second round of $250 checks to those largely on fixed incomes would give a measurable but relatively small and temporary boost to the economy. Many analysts worry that sluggish consumer spending could derail the recovery next year.
With unemployment continuing to rise, also threatening the fragile recovery, Obama met with top congressional Democratic leaders last week to discuss ways to continue key elements of the stimulus package next year.
Administration officials said they supported extending benefits and a subsidy for health insurance for workers who lost their jobs, both of which are set to expire this year. The White House also is considering other ideas, such as tax credits or payments to businesses that create jobs.
Mark Zandi, chief economist at Moody's Economy.com, said the president's endorsement carried symbolic importance. "It suggests the administration will work to extend different provisions of the stimulus plan," he said.
How quickly the $250 proposal could be enacted is uncertain. Partisan wrangling in Congress has been intense, holding up even relatively uncontroversial bills, such as the proposal to extend jobless benefits for three more months.
The stopgap measure passed the House more than three weeks ago, and Senate Democrats last week offered a version that would extend benefits another 14 weeks for the long-term unemployed in every state, plus six more weeks for those in the hardest-hit states. But legislative aides said Senate Republicans, concerned about adding to the deficit with short-term borrowing to fund the measure, were still working on amendments to the bill.
Meanwhile, more than 300,000 jobless workers saw their benefits expire last month, and a similar number are expected to receive their final checks this month.