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“Medicare and Social Security are two of the most important federal programs. We must look for honest and direct ways to protect benefits for those currently receiving them, for baby boomers, and for future generations to come without bankrupting the country in the process.”
Social Security touches the lives of virtually every American. However, this important program will experience financial difficulty in coming years. While people are living longer, that also means they are receiving benefits for a longer time than ever before. We are also having fewer children, so there are fewer people paying the taxes necessary to fund the benefits. And in 2010 the baby boom generation will begin to retire, resulting in more people receiving Social Security benefits than ever before.
In only six years, Social Security will start running a deficit. The consequences of these changes in our population must be confronted honestly and directly. We must look for ways to protect benefits for those receiving them now and for those who will turn retirement age over the next several years. At the same time, we must also look for ways to ensure that younger workers can receive benefits without huge tax increases or dramatic cuts in benefits for everyone.
Social Security Cost-of-Living Adjustment (COLA)
I know many of you are concerned with the Social Security cost-of-living adjustments (COLA), and there is some misinformation being circulated on this issue.
To compensate for the effects of inflation, Social Security law provides that recipients receive a COLA in January of each year. In January 2009, Social Security beneficiaries received a COLA of 5.8 percent. The amount of the COLA is determined by the Bureau of Labor Statistics using a formula based on the Consumer Price Index. The formula has been used since 1975. Congress does not vote on the formula or on the COLA for any particular year.
The cost of fuel and other goods was lower in 2009 than in 2008, and the CPI formula went down. Social Security benefits are not reduced when the CPI declines, but there is no COLA increase in 2010. The official determination of the next year’s COLA is made on October 15 each year. There is no way to predict now what the COLA may be for 2011. There have been suggestions that the current formula does not accurately measure the true cost-of-living for senior citizens. I agree that Congress should examine that issue.
Current law also prevents most Medicare beneficiaries from paying higher Part B premiums when there is no Social Security COLA.
Despite what you may have heard, Members of the House and Senate will not receive any pay raise or COLA in 2010.
There is much work to do to ensure that Social Security and Medicare remain strong for years to come.