DATE: Friday, October 17, 1997              TAG: 9710170635

SECTION: FRONT                   PAGE: A1   EDITION: FINAL 

SOURCE: FROM WIRE REPORTS 

DATELINE: WASHINGTON                        LENGTH:   75 lines

SOCIAL SECURITY CHECKS TO RISE 2.1 PERCENT NEXT YEAR

With inflation barely rearing its head, Social Security beneficiaries next year will receive a 2.1 percent cost-of-living adjustment, the lowest in a decade, the Social Security Administration said Thursday.

Checks from the government's biggest benefit program are adjusted annually to keep inflation from eroding recipients' buying power.

For 1998, the adjustment means that starting in January the average monthly check for retirees will increase by $16 to $765, Commissioner Kenneth S. Apfel said. The maximum check for retirees will rise to $1,342 from $1,326, based on a combination of factors, including the cost-of-living adjustment.

The average monthly payment to disabled workers will rise to $722 from $707. And the maximum monthly Supplemental Security payment for 6.5 million elderly or disabled individuals with low incomes also will rise 2.1 percent, or $10, to $494.

That's the second-lowest cost-of-living increase since the adjustment became automatic in 1975. The low was 1.3 percent in 1987.

``It is low, but that's the direct result of low inflation,'' Apfel said. ``This low inflation is very good news.''

Separately, the agency said that for 144 million working Americans, the maximum annual earnings subject to Social Security payroll taxes next year will increase to $68,400 from $65,400. Because the rate at which earnings are taxed remains at 6.2 percent, the maximum Social Security tax will be $4,241.

The cost-of-living adjustments are based on changes in the Consumer Price Index from the third quarter of one year to the third quarter of the next.

Union contracts guarantee about 5 million working Americans similar raises tied to inflation, the AFL-CIO says. For most workers, however, raises are not a sure thing, and wages grow at a lesser rate - a seasonally adjusted 0.8 percent during the 12 months that ended June 30 for all civilian employees, the Bureau of Labor Statistics says.

Because of low inflation, Social Security's yearly boosts have been below 3 percent since 1994. In contrast, in the late 1970s, high inflation drove the increase to a record 14.3 percent in 1980.

Some officials, economists and retirees argue that even at recent low levels, the yearly increases are too high.

George Fairley, 79, is among the majority of senior citizens who have other income in addition to Social Security. The retired engineer from Pacific Grove, Calif., said the taxes he must pay on his private pension, earned through 39 years of work for the same company, more than wipe out Social Security cost-of-living raises.

``Sure I'm glad to have them, but if you're turning around and taking some of it away, it's just chasing money around,'' Fairley said. ``I suspect that it's sort of a political gimmick.''

Some economists also estimate that the Consumer Price Index overstates inflation by as much as 1.1 percent a year. That rate of error would cost the government $1 trillion over 12 years in too-generous benefits and lost tax revenue, since the CPI also is used to adjust tax brackets.

Some members of Congress propose reducing the CPI, and therefore cost-of-living adjustments, as a possible solution to the financial crunch Social Security faces when the baby boom generation retires next century.

``I would say they haven't been in our shoes,'' said Pauline Armes, 75, of Suitland, Md. Her $613-a-month next year would have been only $607 if the 1998 cost-of-living adjustment had been reduced, as some politicians propose.

GOP attempts to adjust the index were dropped from the budget deal negotiated last spring, but the issue is likely to resurface again next year as attention focuses on ways to ensure the long-term solvency of Social Security and other federal entitlement programs. MEMO: This story was compiled from reports by The Associated Press and

Cox News Service. ILLUSTRATION: Graphic

Examples of benefits:

Average monthly check for retirees: $765, up $16.

Average monthly payment to disabled workers: $722, up $15.

Maximum monthly Supplemental Security payment:$494, up $10.

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