Social Security What's Buzzing

2020 Social Security benefits should rise, but checks may not

The twins Social Security cards arrived today...
Written by Diane Archer

Social Security transformed the nation, providing working families a basic measure of economic security when wages are lost in the event of old age, disability that prevents substantial gainful employment, or death.  One of Social Security’s most important features is that its benefits are adjusted every year automatically to offset increases in inflation, so that the modest but vital benefits do not erode over time. As a result, 2020 Social Security benefits should rise.

It is crucial to understand that Social Security cost-of-living adjustments are not increases.  They are intended simply to allow people to tread water, to maintain their purchasing power. Unfortunately, the government’s cost-of-living adjustment for Social Security is based on inflation experienced by urban wage earners and clerical workers. That is because in 1972, when the automatic adjustments were enacted into law, the Bureau of Labor Statistics, the agency that keeps track of inflation, only prepared that one index.

Of course, retirees and people with disabilities who are unable to work full-time have very different expenditures from urban workers and even from the general population.  On average, they have higher health care and prescription drug costs, which have been going up much more rapidly than general inflation. Overall, they spend less of their fixed incomes on the latest smart phones and flat screen televisions, where cost increases tend to be lower than general inflation.

Consequently, retirees and people with disabilities tend to experience higher increases in their cost of living than younger workers do. Because they generally experience higher increases in their cost of living than workers, their Social Security adjustments are more often than not inappropriately low. As a result, Social Security beneficiaries are not even treading water, but rather losing ground. Nevertheless, even inadequate adjustments are better than none.

The actual adjustment that will take effect this January cannot be calculated precisely until October, because it is based on the inflation rate of the third quarter of this year, which runs from July 1 to September 30, compared to the third quarter of last year.  Obviously, inflation during the month of September will not be known until this month ends.

Until the size of the automatic adjustment is announced in the second half of October, we won’t know the precise percentage increase of Social Security benefits.  However, it is possible to provide a quite accurate estimate now of what the adjustment is likely to be.

In April, Social Security’s actuaries projected that the  cost-of-living adjustment beneficiaries would receive in January, 2020 would be 1.8 percent, or about a $24 monthly increase for an average benefit, which  is $1,353.68. However, we have now completed two of the three months of the third quarter and so can make a more accurate estimate of the size of the adjustment.

In recent months, thanks in large measure to President Donald Trump’s trade war with China, the economy is slowing and inflation has been lower. Consequently, 1.8 percent is likely to be the highest the January increase will be. Depending on what happens in September, it is likely to be closer to 1.5 percent, or about $20 more a month for an average benefit.

Moreover, millions of people will not experience that full increase.  Indeed, some may see no increase at all.  That is because of rising health care costs. Most people with Medicare who receive monthly Social Security benefits have their Medicare Part B premiums deducted directly from those Social Security payments.  For these people, Congress has provided that the annual increase in the Medicare Part B premium must be no larger than the Social Security cost-of-living adjustment. But it can be as large. They can’t go below zero and lose some of their Social Security benefits, but they can certainly see their cost-of-living adjustment go completely to rising health care costs.

It is long past time to enact a more accurate cost-of-living adjustment for Social Security. More than three decades ago, in 1987, Congress directed the Bureau of Labor Statistics to develop a cost-of-living increase that measured inflation experienced by older adults. The Bureau complied and now each year publishes the Consumer Price Index for the Elderly, or the CPI-E. Congress should complete what it started and enact legislation that utilizes the CPI-E to adjust Social Security’s benefits.

Fortunately, Democrats are squarely in favor of this change. Bills authored and co-sponsored by Democrats in both the House of Representatives and the Senate have been introduced that do just that. Indeed, one of those bills, the Social Security 2100 Act, authored by Rep. John Larson (D-CT), the chairman of the House Social Security Subcommittee, and cosponsored by 210 of his Democratic colleagues, is likely to be voted out of the House this fall. The bill also expands benefits across the board, while ensuring that all benefits can be paid in full and on time through the year 2100 and beyond.

And they should go one big step more. A solid majority of House Democrats support improving Medicare and extending it to everyone. They should pass that legislation, as well.

After a lifetime of work, Americans should have enough guaranteed Social Security to maintain their standards of living. And they should have expanded Medicare so no one is one illness away from bankruptcy.

The good news is that Social Security beneficiaries will receive a cost-of-living increase this January, small though it will be. The better news is that Democrats are fully behind not only improving the cost-of-living adjustment, but also expanding Social Security and Medicare. When that happens, all of us will be able to keep our heads well above water.

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1 Comment

  • …it’s not just rising medical costs. it’s everything, particularly rent. Last year’s adjustment went to a rent increase that hit after the new year. Food prices also keep rising, yet my EBT keeps getting reduced to the point I now have to shell out of pocket for groceries on average about 12 days a month. Utilities go up too. The only thing I don’t have to be concerned with is petrol (which oddly is one of the criteria used) as I do not drive.

    With rents out of control in many cities this need to be considered as part of the equation (it is not). Many like myself who were at the tail end of the boomer generation never had the chance to own a home thanks to a the transition in the late 1970s through the 1980s from good paying industrial/manufacturing jobs to low wage service occupations and the war on unions. I am in what is classified as “low income housing” yet 51% of my monthly benefit goes to rent alone. As I am disabled I have no other source of income and no savings due to living “paycheque to paycheque” while I was working. Where I live the market rent for a 1 BR flat is between 1,500$ and 1,700$ a month, A studio can be as much as 1,300$ and even a single room in a shared situation is going for between 700$ – 800$ a month or more (to contrast this I had a large 1 BR apartment back in the 90s, in a nice central area of town which was only 345$ a month, half what a single room in a shared house in the outskirts today goes for).

    Of course we are hearing rumblings that the Republicans are looking to gut Social Security benefits (along with Medicare and Medicaid) SNAP and housing assistance we depend on to survive. All primarily to offset that 1.7$ trillion in tax breaks (so far, with more coming) which primarily benefited the wealthy and corporations, along with the recent 1.48$ trillion approved for the “War Department.” Conservative Republicans keep griping about “tax and spend liberals”, but they are no better, only instead of new taxes they “tax” those like us who can least afford it by gutting the social safety net to compensate. I cannot believe that so many of my generation still support the current administration which doesn’t give a feral urban rodent’s behind about us, even though they are going to get stung by it as well.

    All I can say say is that with their policies, the homeless issue is only going to get worse and it’s going to be seniors and the disabled who will be kicked out on the streets and to the curb.

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