General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsThe Story of COLAs (and amendments to Social Security)
President Nixon shown relaxing at the "western White House," his estate in San Clemente, California-- July 9, 1972. It was during this vacation that he signed, on July 1st, the bill P.L. 92-336 which authorized a 20% cost-of-living allowance effective 9/72, and which established the procedures for issuing automatic COLAs each year, beginning in 1975.
http://www.ssa.gov/history/Nixon72.html
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President Carter signing the 1977 Amendments into law, December 20, 1977. National Archives & Records Administration.
http://www.ssa.gov/history/77amend.html
Most people are aware that there are annual increases in Social Security benefits to offset the corrosive effects of inflation on fixed incomes. These increases, now known as Cost of Living Allowances (COLAs), are such an accepted feature of the program that it is difficult to imagine a time when there were no COLAs. But in fact, when Ida May Fuller received her first $22.54 benefit payment in January of 1940, this would be the same amount she would receive each month for the next 10 years. For Ida May Fuller, and the millions of other Social Security beneficiaries like her, the amount of that first benefit check was the amount they could expect to receive for life. It was not until the 1950 Amendments that Congress first legislated an increase in benefits. Current beneficiaries had their payments recomputed and Ida May Fuller, for example, saw her monthly check increase from $22.54 to $41.30.
These recomputations were effective for September 1950 and appeared for the first time in the October 1950 checks. A second increase was legislated for September 1952. Together these two increases almost doubled the value of Social Security benefits for existing beneficiaries. From that point on, benefits were increased only when Congress enacted special legislation for that purpose.
In 1972 legislation the law was changed to provide, beginning in 1975, for automatic annual cost-of-living allowances (i.e., COLAs) based on the annual increase in consumer prices. No longer do beneficiaries have to await a special act of Congress to receive a benefit increase and no longer does inflation drain value from Social Security benefits.
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The 1972 & 1977 Amendments
In 1972 two important sets of amendments were enacted. These amendments created the SSI program and introduced automatic Cost-of-Living-Adjustments (COLAs).
The bill creating the SSI program also contained important provisions for increasing Social Security benefits for certain categories of beneficiaries (primarily aged widows and widowers). It also provided: a minimum retirement benefit; an adjustment to the benefit formula governing early retirement at age 62 for men, in order to make it consistent with that for women; extension of Medicare to those who have received disability benefits for at least two years and to those with Chronic Renal Disease; liberalized the Retirement Test; and provided for Delayed Retirement Credits to increase the benefits of those who delayed retirement past age 65.
The separate bill creating automatic COLAs also provided for automatic increases in the earnings subject to Social Security taxes and an automatic adjustment in the wage-base used in calculating benefits. This second adjustment was put in the law as a sort of companion to the COLA. The COLA adjusts for increases in prices, whereas the wage-base adjustment corrects for increases in wages. The purpose of the COLA was to maintain the purchasing power of benefits already awarded. The purpose of the automatic adjustment in the wage base was to maintain the relative value of Social Security benefits for future applicants. Unfortunately, the procedure for adjusting for price and wage increases contained a flaw which resulted in future benefit levels soaring out of control. Indeed, it became apparent that if the trends of the mid-1970s continued, future Social Security beneficiaries could end up receiving more in their monthly retirement benefit than their gross salaries while working. This problem was corrected in the 1977 Amendments. However, the correction led to the appearance of what came to be known informally as "The Notch."
The main purpose of the 1977 Amendments was to address the financing of the program. Shortly after passage of the 1972 legislation, it became apparent that Social Security faced a funding shortfall, both in the short-term and in the long-term. The short-term problem was caused by the bad economy, and the long-term problem by the demographics associated with the baby boom. By their 1975 report the Trustees said the Trust Funds would be exhausted by 1979. This financing shortfall was addressed by the 1977 Social Security Amendments. These amendments raised the payroll tax slightly (from 6.45% to the current 7.65%), increased the wage base; reduced benefits slightly; and "decoupled" the wage adjustment from the COLA adjustment. These fixes restored the long-term balance of the program for the next 50 years (but not the full 75 years used by the actuaries). It was hoped the amendments would prevent an expected short-term financing problem in the early 1980s. This hope would prove elusive as the major amendments in 1983 would be needed to avoid the short-term problem, and to address the remaining long-range program deficit.
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The 1983 Amendments
In the early 1980s the Social Security program faced a serious short-term financing crisis. President Reagan appointed a blue-ribbon panel, known as the Greenspan Commission, to study the financing issues and make recommendations for legislative changes. The final bill, signed into law in 1983, made numerous changes in the Social Security and Medicare programs, including the taxation of Social Security benefits, the first coverage of Federal employees under Social Security and an increase in the retirement age in the next century. (Summary of the provisions of the '83 Amendments)
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Legislative Changes in 1996 & 1997
Contract With America Advancement Act of 1996 (P.L. 104-121).
This bill, signed by the President on March 29, 1996, made a change in the basic philosophy of the disability program. Beginning on that date, new applicants for Social Security or SSI disability benefits could no longer be eligible for benefits if drug addiction or alcoholism is a material factor to their disability. Unless they can qualify on some other medical basis, they cannot receive disability benefits. Individuals in this category already receiving benefits, are to have their benefits terminated as of January 1, 1997. Previous policy has been that if a person has a medical condition that prevents them from working, this qualifies them as disabled for Social Security and SSI purposes--regardless of the cause of the disability. Another significant provision of this law doubled the earnings limit exemption amount for retired Social Security beneficiaries, on a gradual schedule from 1996 to 2002. In 2002, the exempt amount will be $30,000 per year in earnings, compared to $14,760 under previous law.
The Personal Responsibility and Work Opportunity Reconciliation Act of 1996.
This "welfare reform" legislation, signed by the President on 8/22/96, ended the categorical entitlement to AFDC (Aid to Families with Dependent Children) that was part of the original 1935 Social Security Act by implementing time-limited benefits along with a work requirement. The law also terminated SSI eligibility for most non-citizens. Previously, lawfully admitted aliens could receive SSI if they met the other factors of entitlement. As of the date of enactment, no new non-citizens could be added to the benefit rolls and all existing non-citizen beneficiaries would eventually be removed from the rolls (unless they met one of the exceptions in the law.) Also effective upon enactment were provisions eliminating the "comparable severity standard" and reference to "maladaptive behavior" in the determination of disability for children to receive SSI. Also, children currently receiving benefits under the old standards were to be reviewed and removed from the rolls if they could not qualify under the new standards.
Omnibus Consolidated Rescissions and Appropriations Act of 1996.
Requires that all federal payments (including Social Security and SSI) be made by electronic funds transfer (no more paper checks) effective January 1, 1999, unless a waiver is granted by the Secretary of the Treasury.
The Department of Defense Appropriations Act, 1997
This massive omnibus spending bill contained SSA's budget as well as numerous legislative changes relating to the SSI program and to issues involved in fighting fraudulent documents in connection with obtaining Social Security numbers. The major SSI provision makes sponsorship agreements legally enforceable for the first time. In the area of identification-related documents, the law requires the establishment of federal standards for state-issued birth certificates and requires SSA to develop a prototype counterfeit-resistant Social Security card.
The Balanced Budget Act of 1997
This bill passed the House on 7/30/97 by a vote of 346 to 85, and passed the Senate the next day on a vote of 85 to 15. This law restored SSI eligibility to certain cohorts of non- citizens whose eligibility otherwise would be terminated under the "welfare reform" of 1996. It also extended for up to one year the period for redetermining the eligibility of certain aliens who may ultimately not be eligible for continued benefits.
- more -
http://www.ssa.gov/history/briefhistory3.html#colas
Fact, the current COLA is inadequate:
http://robertreich.org/post/38349329185
ProSense
(116,464 posts)the year Clinton increased the portion of Social Security benefits subject to taxes.
Q3. Which political party started taxing Social Security annuities?
A3. The taxation of Social Security began in 1984 following passage of a set of Amendments in 1983, which were signed into law by President Reagan in April 1983. These amendments passed the Congress in 1983 on an overwhelmingly bi-partisan vote.
The basic rule put in place was that up to 50% of Social Security benefits could be added to taxable income, if the taxpayer's total income exceeded certain thresholds.
The taxation of benefits was a proposal which came from the Greenspan Commission appointed by President Reagan and chaired by Alan Greenspan (who went on to later become the Chairman of the Federal Reserve).
The full text of the Greenspan Commission report is available on our website.
President's Reagan's signing statement for the 1983 Amendments can also be found on our website.
A detailed explanation of the provisions of the 1983 law is also available on the website.
Q4. Which political party increased the taxes on Social Security annuities?
A4. In 1993, legislation was enacted which had the effect of increasing the tax put in place under the 1983 law. It raised from 50% to 85% the portion of Social Security benefits subject to taxation; but the increased percentage only applied to "higher income" beneficiaries. Beneficiaries of modest incomes might still be subject to the 50% rate, or to no taxation at all, depending on their overall taxable income.
This change in the tax rate was one provision in a massive Omnibus Budget Reconciliation Act (OBRA) passed that year. The OBRA 1993 legislation was deadlocked in the Senate on a tie vote of 50-50 and Vice President Al Gore cast the deciding vote in favor of passage. President Clinton signed the bill into law on August 10, 1993.
(You can find a brief historical summary of the development of taxation of Social Security benefits on the Social Security website.)
http://www.ssa.gov/history/InternetMyths2.html
Let's see, under Reagan benefits of $1,500 would see about $750 of that taxed. At 15 percent, that would be about $112.
Under Clinton, the taxable amount rose to $1,275. At 15 percent, that would be about $191, an increase in taxes of about $78.
Bluenorthwest
(45,319 posts)nt
ProSense
(116,464 posts)Proud Liberal Dem
(24,402 posts)What was the story behind that?
ProSense
(116,464 posts)It's one of the reasons for the stimulus payment to seniors.
By Mike Ervin,
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The first is a one-time additional payment of $250 to people who receive Supplemental Security Income (SSI) and other selected Social Security benefits. Many SSI recipients live on less than $10,000 a year, and so this additional income will make a significant difference.
Second, the stimulus package also allocates $500 million to help the Social Security Administration reduce the processing time for claims and appeals decisions. During the Bush years, the number of people awaiting final determination on their Social Security disability claims more than doubled to 755,000. Many were waiting two years or more for determination, without income. Obamas allocation should help end this disgrace.
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More creatively, Obama provided $140 million to support centers for independent living. These nonresidential centers are run by people with disabilities and are focal points for services and advocacy. There are hundreds of these centers throughout the United States, providing thousands of good jobs for people with disabilities and others in their communities.
The stimulus package will also invest in the future by providing $540 million for vocational rehabilitation programs, which assist people with disabilities in obtaining higher education and jobs.
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http://progressive.org/mag/mpervin030509.html
The Act included $500 million to help the Social Security Administration reduce its backlog in processing disability applications;
The Act supplied $12.2 billion in funding to the Individuals with Disabilities Education Act (IDEA);
The Act also provided $87 billion to states to bolster their Medicaid programs during the downturn; and,
The Act provided over $500 million in funding for vocational rehabilitation services to help with job training, education and placement.
The Act provided over $140 million in funding for independent living centers across the country.
http://www.whitehouse.gov/issues/disabilities
jazzimov
(1,456 posts)The COLA is only based on the 3rd Quarter. During both those years, there were no increases in inflation during the 3rd fiscal quarter even though there were increases during the entire fiscal year.
shraby
(21,946 posts)disabled shouldn't be an excuse to screw over them every chance they get...while they sit in the lap of luxury with benefits that we the people provide them, not because we voted for their benefits, but because they were able on their own to set up a cushy lifestyle for themselves.
"Just because people are retired or disabled shouldn't be an excuse to screw over them every chance they get"
...some really good proposals out there, like Senator Harkin's.
Strengthening Social Security
Social Security has proven to be an incredibly efficient means of delivering retirement security to millions of Americans. Therefore, one of the most effective ways to address the retirement crisis and reduce the retirement income deficit is to improve Social Security by enhancing benefits in a fiscally responsible way. The Rebuild America Act (the Act), introduced in March 2012, contains a comprehensive plan to improve Social Security.22 That plan would improve benefits to help reduce the retirement income deficit, ensure the cost of living adjustment (COLA) better corresponds to the typical expenses for seniors, and improve the long-term financial condition of the trust fund by gradually lifting the cap on wages subject to payroll taxes.
Improved Benefits
To improve benefits for current and future Social Security beneficiaries, the Act changes the method by which the Social Security Administration calculates Social Security benefits. Social Security benefits are based on a progressive formula that replaces a set percentage of income called a replacement factor at three different income levels. The replacement factor for a persons first $767 of Average Indexed Monthly Earnings (AIME) is 90%. The replacement factor drops to 32% for AIME between $767 and $4,624 and 15% for AIME between $4,624 and $8,532.
The Act improves Social Security benefits by expanding by 15% over a 10 year period the amount of earnings covered under the first replacement factor. In other words, it would increase the amount of AIME that receives the 90% replacement rate. That change will boost benefits for most beneficiaries by approximately $60 a month. Although the increase is modest, it will have an especially profound effect for those in the middle and at the bottom of the income distribution for whom Social Security has become an ever greater share of their retirement income.
Improved COLA
The Act changes the way the Social Security Administration calculates the COLA so that it more accurately reflects the change in seniors cost of living. Currently, the annual adjustment is tied to the Consumer Price Index for all Urban Wage Earners (CPI-W) for the purposes of calculating inflation. The CPI-W is based on a basket of goods that does not adequately track the purchases of seniors such as medical care. The Act moves from using the CPI-W to the Consumer Price Index for the Elderly (CPI-E), an index that is specifically tailored to more closely track costs for seniors. Making this change ensures that Social Security benefits keep pace with the rising costs of essential items for seniors, including health care.
Improved Financing
Social Security is not in crisis, but it does face a long-term deficit. According to the most recent Social Security Trustees report, the trust fund will be able to pay full benefits through 2033.23 In order to improve benefits and improve the solvency of the trust fund, the Act would phase out the cap on wages subject to the payroll tax, which is currently $110,100. In other words, income above $110,100 would be subject to the payroll tax, bringing more revenue into the Social Security system. The change would be phased in over a 10 year period to minimize the burden on employers and employees. Moreover, to ensure that people receive a benefit for every dollar they pay into the system, the Act creates a new replacement factor of 5% for income over the current wage cap. Together with the benefit increases in the Act, these steps will significantly extend the life of the Trust Fund.24
- more -
http://www.harkin.senate.gov/documents/pdf/5011b69191eb4.pdf