More than 58 million Social Security beneficiaries won't get an increase in their checks in 2011, the second year in a row that low inflation will keep benefits flat, the Social Security Administration announced Friday.
Social Security has been automatically adjusting checks for inflation since 1975, and 2010 was the first year that beneficiaries did not get an increase. Back-to-back years without one will affect people with disabilities, survivors of deceased workers and, mostly, retirees.
A small group of retirees at Catholic Charities' Cherry Hill Senior Life Center in South Baltimore considered the news Friday morning while waiting to play bingo. The price of everything is rising, from clothes to groceries and small indulgences like a scrapple and egg sandwich, they said. Though unhappy about it, the retirees seemed resigned to another year with no increase.
"Two years does make it a little hard on you, but you have to do what you have to do," says Creola Scurry, 85, a retired hotel housekeeper. "There is no need to be upset with anybody because there's nothing you can do."
Social Security calculates increases by comparing third-quarter inflation rates in the current year and the year when a cost-of-living increase was last determined. So Social Security weighed the recent third-quarter inflation to the rate in 2008.
Back then, inflation shot up because of a temporary spike in fuel costs, and beneficiaries saw their checks jump 5.8 percent in 2009, the largest increase since 1982. Recent average prices are still 0.6 percent lower than in 2008.
It's not that prices haven't been going up — they rose on average 1.5 percent in the past year — but inflation hasn't caught up to where it used to be, said Andrew Biggs, former principal deputy commissioner of Social Security and now a scholar at the American Enterprise Institute.
Advocates for seniors complain that the index used to measure cost-of-living adjustments reflects the inflation rate for workers, not retirees.
"Seniors disproportionately spend on health care. Health care is still going up and has been going up significantly faster than overall inflation for years," said Maria Freese, government relations and policy director for the National Committee to Preserve Social Security and Medicare.
"There are problems with all indexes," said Gary Burtless, an economist with the Brookings Institution. Some years, the index overstates inflation for workers or retirees; other years, it underestimates it, Burtless said. Over the long haul, the index is a fair measure, he said.
"It just doesn't seem fair," said Ethel Cornbrooks, 64, a retired administrative assistant from Bel Air.
"You earned it, you paid for it, but you can't get it," she said. Yet, "all the big businesses and the CEOs who got us in this [economic] mess are still getting big bonuses."
The average benefit for a retired worker is $1,172 a month, or $14,064 a year.
About 1 in 5 older Social Security recipients in Maryland receive nearly all of their income from the program, said Rawle Andrews, senior state director of AARP in Maryland. The number of seniors dependent solely on Social Security is even higher in Baltimore, he said.
"In Maryland, it will be tough. In Baltimore City in particular it will be devastating," Andrews said of the flat benefit. "I don't know what kind of planning you can do, but you need to make some arrangements."
Odessa Haynes, 79, had been a hotel service worker in Baltimore until she retired about five years ago. All of her income comes from Social Security checks, which, she said, are a "good deal less than $1,000" a month.
She dipped into her small savings to tide her over this year. "But I don't want to keep digging in" to savings, she said.
Some retirees said they were not surprised that there would be no increase, given the state of the economy, and were not banking on it.
"I never count on those things, because if I do, I'm just liable to spend a little bit more," said Linda Franklin, 69, a Baltimore artist.
Franklin's annual income includes $14,000 from Social Security and about $2,000 from book royalties. Her investment portfolio is down 60 percent from a few years ago, she said.
Franklin acknowledged that she's better off than many her age, but said another year without a Social Security increase would cause her to be more careful with her cash.
"I feel I'm pretty careful now," said Franklin, adding that she keeps her thermostat at 58 degrees in winter. "I never buy anything new except gasoline and food."
Some relief could be on the way. Speaker Nancy Pelosi said Friday that the House would vote after the November elections on legislation to give a one-time $250 payment to Social Security beneficiaries and veterans. President Barack Obama supports it.
Frances Harris, 82, recalled the $250 economic stimulus check retirees received last year and how she spent that money.
"I used the money for the same things I use all of my money. I have to pay bills. My gas and electric and telephone. All that stuff," she said.
But legislation to make up for a lack of a cost-of-living increase failed to pass last year, partly because of the price tag. The estimated cost this year is about $14 billion.
Economist Burtless said retirees would likely save that money or pay off credit card debt, which doesn't create jobs.
Those billions of dollars would be better spent on ways to boost demand for goods and services, which would stimulate hiring, Burtless said. That would create employment for the millions of jobless 18- to 60-year-olds who have been the hardest hit by the recession, he said.
"That's the most urgent need, to put people back to work and get workers back on their feet," Burtless said. "Retirees did not lose their jobs."