Today, the Administration released the news that there would be no cost of living adjustment for Social Security for the first time since 1975. Inflation is negative (down 2.1% year-over-year), and the COLA is pegged to inflation.

To make up for this, and also to help seniors bear the brunt of a still-weak economy, yesterday the President proposed extending the $250 economic recovery payments from the stimulus package, which would go to 57 million Americans, including those receiving Social Security, veteran’s or disability benefits. This amounts to a de facto 2% COLA increase, and would cost the government $13 billion dollars.

Speaker Pelosi said today in her press conference that a benefit like this makes sense, because while core inflation hasn’t risen, we have seen inflation in products that are used disproportionately by seniors, in particular health care and prescription drugs. Harry Reid has called this “the right thing to do” as well.

The Administration and Congress haven’t figured out where the money will come from to pay for this. The President doesn’t want it coming from the Social Security Trust Fund. John Boehner wants it to come from unspent stimulus funds, which would be foolish. Maybe we can just garnish Goldman Sachs’ wages, they appear to have plenty. More seriously, there are ways to capture $13 billion, a pittance compared to the overall budget.

This is now at least the third item from the stimulus that the President wants to extend, joining unemployment insurance and the 65% COBRA benefit. They may not be calling these things a second stimulus, but that’s the essential effect. And while this $250 benefit may look like pandering to seniors, there’s no question that this money will be spent and not saved, making it effective stimulus, and furthermore there’s no question, with unemployment rising, that more stimulus is desperately needed. The one-time payment is in line with recommendations from the Center on Budget and Policy Priorities, and called “inappropriate” by Judd Gregg, so you do the math.