Q: You recently wrote a column in which you called the "notch" a hoax and a scam. I want you to know that you are wrong. At one time, there were millions of us who were cheated out of Social Security benefits that were rightfully ours. There aren't so many of us left, because the government is willing to let us slowly die off without ever compensating us. But there still are enough of us out here who demand justice. Why don't you help us get what's coming to us rather than mock us?
A: I wasn't mocking you in that recent column. Instead, I was doing what I always try to do — take on all the rumors and myths about Social Security and set the record straight.
I've discussed the so-called "notch" issue dozens of times over the past 15 years I've been writing this column. But I guess it's time to trot out my arguments one more time to help people understand this perplexing subject.
For those readers who don't have a clue what we are talking about, the "notch" refers to a time period when corrections were made to the Social Security benefit formula — corrections that were necessary to ensure that all Social Security recipients were paid properly but corrections that were misconstrued by many to be a way of cheating them out of benefits they felt they were due. Here's the story.
In 1972, Congress passed a law mandating automatic annual cost-of-living adjustments, or COLAs, to Social Security checks. Those COLAs were to be based on increases in the consumer price index, which is the government's official inflation measuring stick. (Before 1972, COLAs were not automatic. They were sporadic and happened only if Congress specifically authorized a yearly increase.)
As part of the new process, the Social Security Administration had to come up with a formula for calculating increases to people's Social Security checks — which it did. But after COLAs were paid for a couple of years, someone noticed the formula was wrong. Social Security beneficiaries were getting increases that were slightly higher than intended.
Once the mistake was discovered and the SSA notified Congress, several decisions had to be made. For one, they had to figure out what to do about all of the Social Security beneficiaries who had received the overly generous COLA adjustments. Congress decided to let them keep the money. (It would have been political suicide to send "overpayment" letters to every senior citizen in the country demanding repayment of the incorrectly paid funds.)
The second choice members of Congress had to make was to decide where to draw the line — to figure out which people would have their benefits figured using the proper COLA formula. And they drew that line at 1918. In other words, they said everyone born in 1918 or later would have his or her Social Security benefit figured using the corrected formula.
Sounds simple enough, doesn't it? But sometimes Congress can't leave well enough alone. In this case, Congress bowed to pressure from senior groups that demanded a transition period from the old (incorrect) formula to the new (proper) formula. After lots of haggling, it eventually was decided that everyone born between 1918 and 1921 would have his or her benefit figured using a special formula that wasn't quite so generous as the incorrect one but that paid a higher COLA adjustment than everyone born from 1922 onward would get.
You'd think everyone would be happy, right? Well, what happened next was pretty bizarre. Social Security recipients born in 1918 or later started to complain that they weren't getting quite so much as folks born in 1917 or earlier. Someone should have splashed some cold water in their faces and said, "Duh, you are being paid correctly. It's the folks born before 1918 who are getting overly generous benefits."
Instead, mobs of angry seniors across the country started to form into groups demanding "justice." They mistakenly thought they were singled out for lower benefit adjustments than everyone else. In truth, they were getting slightly lower benefits than people born in 1917 or earlier, but they were getting higher benefits than everyone born in 1922 or later.
So, to repeat: People born after 1921 have their benefits figured using the proper COLA formula; people born before 1918 have their benefits figured using the incorrect (and slightly more generous) formula; and people born between 1918 and 1921 have their benefits figured with a special formula that is not quite so generous as the one the pre-1918 crowd enjoys but is more generous than the one the post-1921 crowd gets.
Then lobbying groups got into the mix and really muddied things. They sent letters to folks born in the so-called "notch years," which they expanded to include everyone born between 1918 and 1926, telling them they were being cheated out of Social Security benefits and asking for donations to "fight this injustice." Seniors sent in tens of millions of dollars — money that paid for many overpriced lobbyists and some pretty nice office space on K Street in Washington but money that accomplished nothing else. After all, there really was no "injustice" to fight.
Sadly, millions of seniors born between 1918 and 1926 went to their graves bitter and disappointed. Those still alive believe to this day that they are being cheated out of Social Security benefits. Shame on all those folks who perpetrated and perpetuate this dishonorable scam.