ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, October 17, 1996 TAG: 9610170047
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
Social Security benefits for 44 million Americans will go up 2.9 percent next year, marking the fifth straight year of increases in the government's biggest benefit program.
The change will mean an extra $21 a month for the average Social Security recipient, increasing the monthly check to $745. Social Security cost-of-living adjustments in the 1990s have been rising at the slowest pace since Congress made the increases automatic 23 years ago.
Advocates for the elderly warned Wednesday that even these annual increases could be threatened if government budget-balancers proceed with proposals to cut them by about one-third on the ground that the Consumer Price Index is overstating inflation.
``A loss of that magnitude would permanently plunge millions of older people - particularly long-surviving women - into poverty as they age,'' said Horace B. Deets, executive director of the American Association of Retired People.
Deets said that for one out of four beneficiaries Social Security is their only source of income, and a 1 percentage point cut would mean a $5,000 cut in average benefits over 10 years.
The 1997 raise is seen by some as too small.
``It should be closer to $100 or $150,'' said Paul O'Brien, 35, a Bostonian temporarily living in Washington, who said both of his parents receive Social Security but ``I'm not banking on it for myself.''
``It's not enough,'' said Barbara Dash, 43, of Washington. ``There's not enough to pay for anything on a fixed income.''
Supporters of a balanced budget say the only way to achieve that goal by 2002 and maintain it in the years beyond is to restrain growth in the government's two biggest benefit programs, Social Security and Medicare, which provides health care for the elderly.
A congressional advisory panel headed by Michael Boskin, former chief economist for George Bush, is scheduled to issue its final report on the CPI issue Dec.1. It is expected to closely track a preliminary report issued last year that the CPI overstated inflation by 1 percent.
While President Clinton and GOP challenger Bob Dole have said little about Social Security during the presidential campaign, many believe entitlement reform will have to be faced by the next president.
``The various budget plans won't get to balance in 2002 unless you take on the cost-of-living issue. That is what makes the numbers work,'' said Stanley Collender, director of Burson-Marsteller's federal budget consulting group.
Social Security accountants have said if the cost-of-living increases were trimmed by 1 percentage point annually, it would eliminate two-thirds of the deficit Social Security is currently facing. The Social Security trust fund is expected to be broke by 2029, unable to pay full retirement benefits of the baby boomers.
In addition to the CPI issue, a separate Social Security advisory panel is expected to recommend in December three different ways to divert part of the $400 billion that Social Security collects in taxes each year away from government bonds to the stock market as a way to boost earnings of the trust fund.
Social Security and Supplemental Security Income, the federal program that pays welfare benefits to 6.5 million poor, are adjusted annually based on changes in the CPI, which has been rising at its slowest pace since the 1960s. The changes announced Wednesday will show up in Social Security checks effective Jan.3 and in SSI checks going out Dec.31.
The average monthly Social Security payment will increase from $724 to $745, while the average for a couple will increase from $1,220 to $1,256.
The maximum monthly payment for an individual SSI recipient will increase by $14 to $484, from $470. For a couple, the SSI maximum goes to $726, from $705.
For millions of other Americans, the maximum earnings subject to Social Security and Medicare taxes also will rise in January, although the 7.65 percent rate will not change.
The earnings base will be raised from $62,700 to $65,400 for the 6.2 percent Social Security portion of the tax. That means a maximum annual Social Security tax of $4,055.
There is no ceiling on earnings subject to the remaining 1.45 percent tax that finances Medicare, the health care program for the elderly.
The Labor Department's Bureau of Labor Standards has already made two modifications to the CPI aimed at dealing with measurement problems. Those fixes will trim annual increases by an expected 0.2 percentage point, far short of the 1 percentage point pegged by the Boskin panel.
LENGTH: Medium: 90 lines ILLUSTRATION: GRAPHIC: Chart by AP. color.by CNB