Social Security Raise Is 1.3%

The 44 million Americans getting Social Security checks will see them grow by just 1.3 percent next year, the lowest cost-of-living raise in a dozen years.

The 1999 increase is so small mainly because a healthy U.S. economy has kept inflation firmly in check.

Social Security Commissioner Kenneth S. Apfel said Friday the cost-of-living adjustment, or COLA, means the average monthly check for retirees will rise by $10 to $780 from $770.

The maximum monthly payment for 6.6 million low-income individuals receiving Supplemental Security Income, known as SSI, also will rise 1.3 percent. That will boost the maximum SSI check by $6 to $500. For a couple, the $741 maximum goes to $751.

The increases will begin showing up in checks received in January.

"Inflation remains under control," Apfel said in a statement. "Low inflation is good for America, particularly for many Social Security beneficiaries living on fixed incomes."

Monthly checks from the government's biggest benefit program are adjusted annually to keep rising prices from eroding recipients' buying power.

Since 1975, the adjustment has been automatic, requiring no vote by Congress. It is calculated based on changes in the Consumer Price Index, the government's inflation yardstick, from the third quarter of one year to the corresponding quarter of the next.

Because of low inflation, the yearly benefit boosts have been below 3 percent since 1994. Next year's increase matches a record low of 1.3 percent set in 1987, not counting six months in 1983 when the update was skipped to help Social Security out of a cash crunch.

In contrast, double-digit inflation in the late 1970s drove the cost-of-living increase up to a record 14.3 percent in 1980.

For 147 million working Americans the maximum annual earnings subject to Social Security taxes next year will also rise, to $72,600 from $68,400, though the tax rate remains 6.2 percent. That means a maximum Social Security tax of $4,501 for workers, a figure matched by employers.

Many senior citizens depend heavily on the few extra dollars a month that Social Security's annual cost-of-living raises bring.

"For most of our seniors, their only source of income is a Social Security check, which often leaves them just above or even below the level of poverty," said Mark Andersen, assistant director for outreach at Emmaus Services for the Aging in the nation's capital.

Older peoples' special circumstances can also mean inflation hits them harder than younger Americans, advocates say.

For example, while overall inflation has been low this year, the price of prescription drugs, which the elderly are more likely to need, has been growing by double digits. Medicare, the nation's health insurance program for the elderly, does not cover prescriptions.

"Prescriptions can be through the roof and I know seniors who have had to pay $50 or more for a single botle of pills," said Andersen. "That's where a few dollars can make the big difference."

Even so, some argue the government's measurement of inflation is skewed, making even the comparatively low Social Security cost-of-living updates seen in recent years too generous.

A panel of prominent economists reported to Congress in December 1996 that the Consumer Price Index could be overstating inflation by more than a percentage point, costing Social Security and other government programs unnecessary billions.

Government statisticians have been trying to improve the accuracy of the monthly survey of goods and services bought by typical American households that is used to calculate the CPI. They modernized it this year, for example, by adding products including cellular phones and leased cars and trucks.
Such changes are already beginning to reduce the inflation index, and cost-of-living raises linked to it.

However, some lawmakers suggest additional cuts in the COLAs could be part of the solution to financial crisis expected to face Social Security when baby boomers retire. President Clinton and Republican leaders in Congress have said they want to consider that option, along with others, in bipartisan talks about Social Security's future next year.

By ALice Ann Love, Associated Press Writer