Many people commented on the $250 payment that Obama now backs for seniors. Since there was no inflation this year, there will be no cost of living adjustment (COLA) for Social Security. The $250 check is supposed to "make up" for the non-COLA.
Let's just say that a lot of the comments have been along the lines of "What is the government thinking!" "$250 is not enough to keep up."
Some perspective:
From Medicare: Based on the bids submitted by Part D plans, it is estimated the average monthly premium that beneficiaries will pay for standard prescription drug coverage in 2010 will increase $2.
Under federal law, three our of four seniors will not see an increase in their Part B Medicare Premiums, because they are tied to the Social Security COLA.
Also, wages for most workers are DOWN 1.4% this year.
And yes, to answer one comment, this $250 payment appears to be going to all Social Security recipients, even those working and those making hefty incomes. Now, how Congress decides to pay for this is an open question. Some want to raise payroll taxes on upper-income taxpayers to offset the cost of this program.
But I doubt that Congress will go along. Raising taxes in a recession does not seem popular.
The average Social Security benefit is just over $1000 a month. So the $250 check -- up front -- amounts to a 2% increase. In some ways this is better than a COLA, since a COLA would be paid monthly. That means it would take 8 months of a 3% COLA to save up the $250.
That is a better deal than most workers are getting this year.
Comments
The Old Age Survivor Insurance was put in motion by FDR as a "compulsory savings" for wage earners when they retired at age 65. Even in 1935 this huge reserve was borrowed from by the government and the purchasing power was also diminished...sound familiar!! The Social Security Trust Fund has never been truly stable and the government has taken on the attitude that the funds belong to them and not the wage earners. With the dollar so flat the current social security concept is not sustainable and the $250.00 stimulus is simply an insult to injury.
I think there are more important points than the $250 value.
One is that of establishing a new expectation, namely that increases in payments are to be expected regardless of actual changes in CoL. The payment schedule was not designed to function that way, and a disequilibrium is introduced (or magnified) between payroll tax receipts, which are headed down, and Social Security payments, which will be headed up. Introducing yet another new payment expectation is probably not wise when Social Security already has looming solvency issues.
The second, where I'll strongly counter the first, is that the CPI has recently removed food and fuel from the core index. I _believe_ that COLA is indexed to core inflation. In the real world, where seniors most eat food and drive cars, prices have been trending up. Overall CPI is slightly up this year anyway, but looking over the last several years, people will notice that fuel and food prices are both significantly up, probably on the order of 10% per year, after normalizing out the relatively short-term spike of fuel prices to $4/g, and food spike from ethanol mandates. Many of the statements of inflation rather, IMO, disingenuously compare current prices for food to the recent corn driven spike, and gasoline to the recent $4/g spike, and say both are down, while ignoring that the spikes were steep (both upward and downward), while the long term trendlines remain significantly upward, and have been trending up at a rate higher than is usually stated for core inflation, though with significant day-to-day volatility (that volatility being the stated reason for removal from the index; despite that, a trendline can still be plotted and it isn't headed down).
Short version, I think in real terms the cost of living is not down, particularly when looking at the things most needed by seniors on fixed incomes, like food, transport, and medicine.