Social Security benefits to increase in 2012

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“I believe we can better address the needs of seniors by establishing a consumer price index for the elderly to determine an appropriate COLA that would reflect the spending patterns of seniors who spend a disproportionate amount of their income on health care and prescription drugs,” said Sen. Bernard Sanders, Vermont independent.

The 2009 increase of 5.8 percent was the largest in nearly three decades and outstripped actual inflation, fueled by increases in energy costs. It came just as the recession was beginning to bite, and it has taken several years for actual inflation to catch up to the 2009 projections.

Cost-of-living increases are pegged to the Consumer Price Index for Urban Wage Earners and Clerical Workers — the only such index that existed when Social Security was created in the 1930s. Automatic COLA adjustments began in 1975.

Some policymakers have suggested a “chained” consumer price index that was supported this summer by senators in the bipartisan “Gang of Six” that came up with a budget-cutting plan. A chained index reflects the substitutions made by consumers when the price of a product increases and they respond by switching to a different but similar product — a calculation that analysts agree would lower cost-of-living adjustments.

Mr. Obama and House Speaker John A. Boehner, Ohio Republican, reportedly agreed to a chained CPI during debt-ceiling negotiations last summer. But the idea was discarded after talks collapsed. It could be taken up again by the 12-member supercommittee that is meeting behind closed doors to find $1.2 trillion in savings by Thanksgiving.

“We hear every couple weeks that it is dead or it’s back in the mix,” said Max Richtman, president of National Committee to Preserve Social Security and Medicare, who also offered qualified praise of the adjustment. “[Seniors] are being squeezed everywhere and this COLA is really not keeping up with their cost of living.”

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