$250 Stimulus: Round Twoby Tim Manni
Since the recession has staved off inflation to a great degree, 2010 will be the first year that there will be no cost of living adjustment (COLA) for the some 50 million Americans on Social Security. “Recessions drive down prices by nature,” said HSH VP Keith Gumbinger.
In order “to preserve beneficiaries’ purchasing power,” President Obama has proposed to issue a second $250 stimulus check to America’s “seniors, veterans, retired railroad workers and people with disabilities.”
The COLA of 5.8% issued in January was the largest on record. Officials said that high energy costs in 2008 were the reason for the large increase:
[However,] “Since the purpose of COLAs is to preserve beneficiaries’ purchasing power, the decline in overall prices means that beneficiaries do not need a COLA in January 2010,” Kathy Ruffing, a senior policy analyst at the center, wrote in a report this week.
The proposed “second stimulus” has a few particulars seniors should be aware of:
The lack of a cost of living increase triggers several provisions in the law. Among them, the amount of wages subject to Social Security payroll taxes will remain unchanged. The first $106,800 of a worker’s earned income is currently subject to the tax.
Also, Medicare Part B premiums for the vast majority of Social Security recipients will remain frozen at 2009 levels. However, premiums for the Medicare prescription drug program, known as Part D, will increase.
The main criticism surround the proposal is that it negates the system in which COLA is based on:
“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.”
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