Obama Calls For $250 Payments To Seniors

By STEPHEN OHLEMACHER, Associated Press Writer

WASHINGTON (AP) – President Barack Obama called on Congress Wednesday to approve $250 payments to more than 50 million seniors to make up for no increase in Social Security next year.

The Social Security Administration is scheduled to announce Thursday that there will be no cost of living increase next year. By law, increases are pegged to inflation, which has been negative this year.

It would mark the first year without an increase in Social Security payments since automatic adjustments were adopted in 1975.

“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. “This additional assistance will be especially important in the coming months, as countless seniors and others have seen their retirement accounts and home values decline as a result of this economic crisis.”

Obama’s proposal is similar to several bills in Congress. The $250 payments would also go to those receiving veterans benefits, disability benefits, railroad retirees and retired public employees who don’t receive Social Security. Recipients would be limited to one payment, even if they qualified for more.

The White House put the cost at $13 billion. Obama said he would not allow the payments to come out of the Social Security trust funds, further eroding the finances of the retirement program. Social Security already is projected to pay out more in benefits than it collects in taxes in each of the next two years.

However, Obama did not offer any alternatives to finance the payments. A senior administration official said Obama was open to borrowing the money, increasing the federal budget deficit. The official, who requested anonymity, was not authorized to speak on the record.

Obama also announced Wednesday that the IRS would soon issue tax guidance preventing reductions in contribution limits for certain retirement funds, including 401(k) plans and Individual Retirement Accounts. There has been concern among some in the financial industry that federal law could require the limits to be reduced because inflation will be negative this year.

The $250 payments would match the ones issued to seniors earlier this year as part of the massive economic recovery package enacted in February. Several key members of Congress have said they are open to providing relief to seniors to make up for no increase in Social Security payments.

“We’re looking at a way to address it,” said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, which oversees Social Security. “I’m not sure what the exact answer is yet, but we’re looking at ways to address that.”

Senate Majority Leader Harry Reid, D-Nev., said he supports the $250 payments, as did Rep. Charles Rangel, D-N.Y., chairman of the Ways and Means Committee, which has jurisdiction over Social Security in the House.

Sen. Bernie Sanders, an independent from Vermont, has introduced a bill calling for similar payments.

“I think that the Obama administration and many members of Congress understand that we simply can’t turn our backs on senior citizens,” Sanders said.

Other lawmakers said seniors shouldn’t get the extra payments because the formula doesn’t call for it.

“I think it would be inappropriate,” said Sen. Judd Gregg, R-N.H. “The reason we set up this process was to have the Social Security reimbursement reflect the cost of living.”

Social Security payments increased by 5.8 percent in January, the largest increase since 1982. The big increase was largely because of a spike in energy costs in 2008.

Inflation has been negative this year largely because energy prices have fallen. Gasoline prices have dropped 30 percent over the past year while overall energy costs have dropped 23 percent, according to the Bureau of Labor Statistics.

Social Security payments, however, cannot go down. The average monthly Social Security payment for retirees is $1,160.

Advocacy groups said the payment will be welcomed by seniors hit hard by falling home values and shrinking investment portfolios.

“The likelihood of losing an average annual COLA increase of about $200 to $300 in 2010 may sound like no big deal to some, but for millions of seniors who’ve already seen a third of their Social Security eaten up by health care costs, this proposed COLA relief could truly make the difference” said Barbara B. Kennelly, a former Democratic member of Congress from Connecticut who now heads the National Committee to Preserve Social Security and Medicare.

AARP CEO A. Barry Rand said, “For nearly 35 years, millions of Americans have counted on an annual increase in their monthly Social Security checks to make ends meet.”

(Copyright 2009 by The Associated Press. All Rights Reserved.)