Social Security stop-gap debate revs up

WASHINGTON — President Obama's plan to send $250 checks to more than 50 million Social Security recipients who won't get cost-of-living adjustments in January is gathering support in Congress, but outside experts and budget watchdogs say the payments are unjustified.

The Social Security Administration announced as expected Thursday that there will be no adjustment, or COLA, for the first time since automatic boosts were instituted in 1975. That's because inflation was negative for the past 12 months.

Obama's proposal would include seniors, people with disabilities, veterans and retired railroad workers, bringing the total cost to between $13 billion and $14 billion.

Experts on Social Security blasted the plan, both as a replacement for the COLA and as a way to stimulate the economy. Seniors don't deserve the money without inflation, they said, and don't need it as much as those laid off in the recession.

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"We've gotten so used to dispensing hundreds of billions of dollars that we don't think now before spending $13 billion," said Alicia Munnell, director of the Center for Retirement Research at Boston College. "I see no intellectual reason for this payment."

Seniors' groups argued the one-time payments are justified because, although inflation has been flat, medical costs have risen by more than 3%. "Seniors aren't buying iPods," said Barbara Kennelly, president of the National Committee to Preserve Social Security and Medicare. "They're staying healthy by buying prescription drugs."

Thursday's announcement came as no surprise. By law, cost-of-living adjustments are tied to inflation, which declined as fuel costs dropped. Last year's COLA was 5.8%.

Social Security Commissioner Michael Astrue defended the payments as a wedge against medical costs that he said have risen "at a rate of inflation much higher than any other commodity."

The $250 would equal what was sent to Social Security beneficiaries in spring as part of the two-year, $787 billion economic stimulus law. Workers got $400 tax credits — $800 for couples — for 2009 and 2010, but seniors got one-time payments.

Obama has been seeking other ways to stimulate the economy short of a second major stimulus package, and Astrue said this is one way to do it. "Both in theory and in practice, you send money out to this group, they are going to spend it," he said.

Democratic leaders such as House Speaker Nancy Pelosi endorsed the payments. Republicans such as House GOP leader John Boehner said the funds should be paid for rather than added to the deficit.

That scenario is unlikely, said Sen. Judd Gregg, top Republican on the Budget Committee: "It's a terrible idea if it's not paid for, because it goes right toward the debt."