Someone decided that going through with an obviously insultingly low $1 increase was a good idea.

As someone who has worked with the US government I doubt that person had a choice.

The calculation of benefits is required by law/regulation. The government can’t just say “yeah this is small, let’s skip it this year”.

to play devils advocate, if that person had decided to go with $0 instead that there would be equally bad headlines/interpretations of "Instead of allocating the formulaic $1 we are entitled to inline with all other changes over X years, they squandered it on Y"?

I think many people would see no increase and assume there was some special mechanism needed to enact increases which hadn't happened in that particular year. Whereas a $1 increase clearly says "someone evaluated this and adjusted it up only $1". The analogy of a 10 cent tip vs. not tipping is a good one; the person who doesn't tip for a full meal is being a cheap asshole, but the person who leaves 10 cents is being a mean-spirited cheap asshole.