Reagan Won’t Oppose Social Security Raise : Cost-of-Living Boost Despite Low Inflation Likely in Election Year

The Reagan Administration today signaled that it will not resist congressional efforts in this election year to grant 37 million Social Security recipients cost-of-living increases next January even if inflation falls below the current 3% threshold.

“We’ve had a significant savings from the lowering of inflation and people on Social Security should have some sharing of that,” Budget Director James C. Miller III told reporters.

Miller’s comments came after a speech to the U.S. Chamber of Commerce in which he cited “strong sentiment in Congress to pay a COLA (cost-of-living adjustment) at the level of inflation.”

“That’s the likely outcome,” Miller said.

No Specific Endorsement

Another official, who spoke on condition of anonymity, said the Administration “is not going to oppose” legislation that would suspend the trigger mechanism--even if it doesn’t specifically endorse it.

Because of this year’s plunge in oil prices, economists do not expect the consumer price index used to determine cost-of-living increases to rise above 2%.

A 1972 law provides for cost-of-living adjustments in Social Security retirement benefits whenever the inflation rate is 3% or more. If inflation falls below 3%, the increase is to be delayed until it does rise above that level--even if it takes several years to do so.

Social Security beneficiaries have received a raise every year since the law was enacted--3.1% this year--although in 1982, Congress had to vote to waive the trigger when inflation dipped below 3%.

Action Anticipated

In this election year, the same action is widely anticipated on Capitol Hill.

Both the House and Senate have passed budget resolutions providing for a 2% increase next January but restoring the 3% trigger in subsequent years.

A Social Security Administration spokesman, Jim Brown, said every percentage point of inflation costs $2 billion in additional benefit payments.

Thus, leaving the trigger in place could save the government about $4 billion--assuming a 2% inflation rate.