The absence of a cost-of-living adjustment, calculated under a formula set by law, will be a shock to older Americans and the disabled already hit by plummeting home values, investment losses and rising health costs. More than 50 million people receive some form of Social Security benefits.
Social Security Recipients have received automatic cost-of-living adjustments every year since 1975. The increase this year was 5.8 percent.
The forecasts, by the Obama administration and Congress, indicate that Social Security beneficiaries will not receive any cost-of-living increase in 2010 or in 2011. The COLA is intended to preserve the purchasing power of Social Security, by increasing benefits to keep pace with consumer prices. In the last year, overall inflation has been low, largely because of the economic downturn and a decline in energy prices.
The Congressional Budget Office, predicted that inflation would remain low for several years, so Social Security might not pay a cost-of-living increase until January 2013. President Obama’s budget assumes no increase in 2010 or 2011, then a 1.4 percent COLA in 2012.