In Semi-Defense of Obama’s Social Security Pandering
Recipients of Social Security get automatic cost of living adjustments pegged to the rate of inflation. That makes sense. If there’s a lot of inflation, a retired person might need a lot more money. If there’s a little inflation, then a retired person might need a little more money. And what if there’s no inflation? Well, the logic here is easy enough to follow—no inflation = no COLA. And right now we have no inflation, so the formula that determines the Social Security COLA indicates that there should be no COLA. Well, can’t have that, so instead the Obama administration is proposing a $13 billion one-time bonus payment to seniors.
As public policy this reeks of opportunism. That said, you should read the Center on Budget and Policy Priorities’ detailed case against a 2010 Social Security COLA. They make the point that if congress is determined to do a COLA anyway, it’s much more fiscally responsible to do it as a one-off payment than to make a permanent upward adjustment. If you accept that political reality wasn’t going to allow the no-COLA scenario to happen, having the administration get out in front of a one-time payment may help preempt congressional pressure for a worse idea.
What’s more, the saving grace of this is that if Obama said “we need $13 billion in additional stimulus” then every Republican and the bulk of moderate Democrats would say “no way.” But if Obama says “we need a $13 billion giveaway to Social Security recipients” then the vast majority of Republicans and moderate Democrats are going to say “you betcha.” And judged as economic stimulus, what the administration is proposing isn’t a totally ideal use of $13 billion but it works pretty well.
35 Responses to “In Semi-Defense of Obama’s Social Security Pandering”
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October 15th, 2009 at 12:34 pm
Keep in mind that Medicare Part D premiums will be increasing, so the $250 helps to cover that expense for seniors.
October 15th, 2009 at 12:51 pm
Exactly–this is a stealth stimulus measure, and therefore fine with me.
October 15th, 2009 at 1:09 pm
Lets be honest here, unless you accept the insane idea that food and gas are not a part of your average American’s expenditures, there has been plenty of inflation over the last 30 years that nobody ever got an increases for at all.
October 15th, 2009 at 1:17 pm
A few months California reduced monthly Social Security payments to seniors by around $50.00 and pretty much eliminated Denti-Cal. A friend of mine is now paying for all the dental work his grandmother and great-aunt needs. So, a little check in the mail here is the least that can be done for them.
October 15th, 2009 at 1:24 pm
The Social Security cost of living adjustment is messed up!
http://robvstate.com/2009/10/10/social-security-cola/
October 15th, 2009 at 1:31 pm
Yes, but why not tie the extra money to income level. SS recipients like Dick Cheney and Bill Clinton don’t need the extra 250, but my mom who gets 2/3 of her income from social security does need the bump. Means test this little bonus and send more money to the poor people. Of course, since this is America, no one cares about the truly needy….
October 15th, 2009 at 1:40 pm
You want some good stim? Aid to states!
October 15th, 2009 at 1:52 pm
I don’t think $13,000,000,000 will buy off the group that hates Obama the most out right-wingers. And frankly, I hate almost all baby-boomers anyway.
October 15th, 2009 at 1:54 pm
Yes, but why not tie the extra money to income level.
Because that would instantly kill the idea in Congress.
Not that it is a bad proposal on stimulus or social justice grounds, but that’s politics for you.
October 15th, 2009 at 1:58 pm
By the way, the CPI-W, which is used to determine the Social Security COLA, does in fact include food and gas in its basket of items.
October 15th, 2009 at 2:01 pm
Funny how none of the Olds were complaining in 2008, when they got that extra big COLA.
October 15th, 2009 at 2:33 pm
I agree with DMT. If it buys a few votes fine, but the main reason to push this is that it is effective stimulus spending that the Blue Dogs & Republicans don’t dare oppose.
October 15th, 2009 at 2:57 pm
Who says that there was going to be a COLA anyway?
And who cares if, counting gasoline costs that there’s been significant inflation? Is someone who’s 80 years old doing a lot of driving?
I’m in my thirties, and working, and I don’t get a COLA from my job, in fact my wages once you count increased health care contributions, has been flat or declining over the time period the above posters have been talking about.
And I disagree that this is effective stimulus. If we shovel a whole lot of money at old people, who as a class are the most well-off financially, and they just save it or spend it on Chinese goods at Wal-Mart, the United States will be on the whole worse off because we’ll have the debt but nothing to show for it.
There shouldn’t be a COLA at all, and if there is one because of the political pressure, it should be means tested.
October 15th, 2009 at 2:59 pm
I just wonder how many of these seniors will pocket the $250 and then scream at their Congressman to keep the government’s hands of their Social Security.
October 15th, 2009 at 3:16 pm
Means test this little bonus and send more money to the poor people.
Because once you means test it, it no longers becomes a program to help the elderly, it becomes a program to help the poor, and that means that the radical centrists and right-wingers will dilute it. In this country to help the poor you also have to sweeten the pot for the rich.
October 15th, 2009 at 3:20 pm
I would be surprised if the true cost of living for Seniors has *declined* in the past year.
Their food costs are almost certainly up.
It’s highly unlikely that their housing costs have gone down:
* If they are a long term renter, it’s not like landlords are cutting theirrent. Decreases in rent, where they exist, are to unfilled inventory rather than fill inventory.
* if they have a mortgage, their monthly isn’t less and if bought with an ARM runs the risk of going up.
* if they life in a retirement home, the costs there haven’t gone down and are likely going up
* even if paid for in cash (as is my folks), their Association Costs and other related cost such as cable/internet for their community (they’re in Laguna Woods, one of the former Leisuer Worlds) are going *up*.
* Energy cost are pretty dynamic. It depends on what date where using. If we comp against the high, it looks like “less”. If we comp against a couple of years back, energy costs aren’t cheap.
* other living things such as clothes, books, entertainment, etc are largely going up
* dining out, which is a favorite of seniors, continues to go up
* costs of health and care aren’t going down
I frankly haven’t thought COLA and other inflationary numbers for a long time have been tired to what people are really seeing.
I’m somewhat lucky that my own rent hasn’t gone through the rest, though it’s likely due for an increase coming at the end of the year. It *won’t* be a 1% increase, or a decrease. But setting that one aside, my largest cost is food and I cringe everytime make a trip to the super market and see the bill for a Single Guy who is dieting which cuts way back on all the crap I use to shove down my grill. Overall, I’m spending less on food because I’m eating less and rarely eat out anymore. But when I look at my bill, and then project it on a Normal Family Of Four where the kids eat all that crap I use to eat, the bill is frightening.
We wrap ourselves up in COLA and Inflation, but I don’t think we get how expensive things are for most, “normal” folks out there.
$13B is a prety cheap “bribe” when, as others point out, it’s largely stimulous. This money will hit the economy far more than what we shoved down the mouths of the Banksters.
John
October 15th, 2009 at 3:21 pm
It seems to me that Social Security is a model that government should emulate and build around.
Anybody know what Social Security is up, lifetime? You know, 70 yrs of revenues taken in vs 70 yrs of payments to old people? I read somewhere that SS was $17 trillion in the black -all the excess used elsewhere, of course. Is this possible? I believe it was from a Canadian source, and as we know, Canadians are not to be trusted.
Still, even if the figure is way high, Social Security has been doing good work over the years filling the government’s register. In fact, where we be without it? Much deeper in the hole, I suspect.
October 15th, 2009 at 3:49 pm
Any ‘bonus’ will be little enough compared with the costs of increasing Medicare Part D premiums and rising fuel costs. Because drug rices have been going up so fast, more people are hitting the ‘doughnut hole’ for Medicare Part D. I could see this the last time I went to pick up a prescription. Instead of just ringing it up, the druggist stood back from the counter and let me know it was no longer covered by Part D. As she expected, I couldn’t afford to pick it up. She said she’d been seeing a lot of that lately.
As for food, I go through the grocery store looking at stuff I used to eat and wondering how I ever afforded it. Fortunately, cooking from scratch is still affordable, and if you need a reason to learn, hard times would be just such a reason. Even then you have to be as cunning as a wolf or you’ll end up paying $2 for a pound of beans or some such insanity.
Well, we do what we can, and certainly the people who were so worried about ‘death panels’ don’t seem to have any qualms at all about letting the electric company turn off the heat. Could be our life expectancy is poised for another lurch downwards.
October 15th, 2009 at 5:11 pm
The real reason you can’t means-test it is that the poorest Social Security recipients don’t file income tax returns at all. We have no real way of knowing the income of people in this category without making them go through an application process.
October 15th, 2009 at 5:18 pm
Max @ 17: I believe the average return on SS contributions is 2.3x.
John @ 16: Numerous errors in your analysis:
1) Old people are the greatest beneficiaries of rent control in the country. In San Francisco, the maximum rent increase is 2.2%. If you’re a long-time renter, you are receiving a massive subsidy from the rest of the rental market. It’s difficult to justify a cost-of-living increase here.
2) Old – retired – people have ARM mortgages? Presumably they bought homes a long time ago, so that’s horrendous money management to a) still owe anything; b) have re-financed into a product that has only existed for a few years. Most old people have so much equity in their homes that they’re eligible for reverse mortgages – somebody buys the house from them and pays them a mortgage while they live there.
3) Dining out budgets took a huge hit across the US in the last year. You expect a federal subsidy for going out to eat?
If you want to argue that Medicare premiums went up and that the government should offset a portion of that, fine. But to ask for additional government subsidies to cover restaurant meals and bad financial decisions?
October 15th, 2009 at 5:21 pm
Inflation has not been negative this year for seniors. For them, the steep increase in the cost of food is not balanced by the price drop for flat screen TVs and iPods.
October 15th, 2009 at 5:26 pm
I think this sets a bad precedent. If the cost of living has not increased, why should seniors get extra money. Lets look at what has happened to the median income over the past 8 years: adjusted for inflation it is lower than it was at the beginning of the decade (thank you President Bush).
Seniors are one of the the wealthiest segments of the population, and have not seen their income decline over the past 8 years thanks to those COLA adjustments. Why are we constantly rewarding them with even more largess?
The health care mandate is really a big subsidy taking from those who are young and healthy and giving to those that are relatively old and infirm (via subsidizing their health care premiums). We keep transferring more income from those that have not to those that have. It’s enough to make this progressive start thinking about becoming a libertarian.
October 15th, 2009 at 5:28 pm
soullite says:
This is incorrect. The price index used for the COLA has always included food and fuel. There is an index called “core inflation” that excludes food and fuel, but that index is used primarily by the Fed for forecasting purposes, NOT for cost of living adjustments.
October 15th, 2009 at 5:46 pm
Why isn’t this an ideal stimulus measure? Old people getting Social Security don’t save squat. They’re on fixed incomes, and it’s not like they’re saving up for some big future expense.
They’re going to spend it, and pass it along to their grandkids, who will spend it. Plus, it’s instantaneous. That sounds an awful lot like an ideal stimulus measure to me.
October 15th, 2009 at 5:52 pm
From Rob @ #5’s link:
Slightly OT: the very next line from that link is:
Remind me again, who is it that wants to starve old people of the resources they need on the grounds that they aren’t, at that stage in their life, economically productive?
October 15th, 2009 at 5:59 pm
I wanna see all those senior teabaggers protesting this.
October 15th, 2009 at 7:18 pm
As long as we are spending money, how about an extra $250 in the spring disbursements of Pell Grants. It would help the students and many small time entrepreneurs.
October 15th, 2009 at 7:33 pm
Social Security benefits are not paid only to seniors, they’re also disbursed to those who, as I am, are disabled. However the government calculates COLA’s, let me tell you that in these times of “zero or negative inflation” my cost-of-living has risen steadily. Landlords raise rent no matter who you are or what your income source is. Energy costs rise nowadays with astonishing dependability – which, for those of you who may think that cooking from scratch saves money, means I’ve had to learn to cook by the means which consumes the least energy, which has proved quite limiting to menu variety; it also means that I don’t switch on the a/c or the furnace until in summer I can’t take any more clothes off and in chill weather I can’t put enough clothes on; there have, in the last three years, even been months where I daren’t switch on the TV, a fan, a lamp, or the radio for fear of driving my electricity bill beyond the affordable. Sure, I get health care from the VA, but because the VA divides vets into bureaucratic classifications, this means that my SS benefit is just above the very low co-payment threshold, so I have monthly to pay a small fortune for an assortment of vital meds, and most often this sum greatly exceeds the cost of Medicare Part B. The cost of food has continued to rise – every week I go to the grocer’s and find I must choose cheaper items of lower quality, and those cheaper items are almost always the ones that contain the least healthy ingredients – you’d be surprised at how quickly one accommodates a low-protein, high-fat, abundant carbohydrate diet; it also means that I must take advantage of sales and coupons to stock up on on-sale and coupon-time-sensitive tinned and frozen foods and other items with long shelf-life, which means I don’t enjoy the option of eating healthier, tastier fresh selections. Dine out? – are you kidding? – I don’t even dine in fast food joints where I don’t have to tip: all my meals are prepared and taken at home, but that never feels monotonous or depressing, does it? Car insurance keeps rising too, and so does renter’s insurance, and so do car maintenance costs. Also, being disabled at well below retirement age means that one’s choice of home is affected, which usually means that people in circumstances such as mine have no option but to take the least desirable digs (which have little or no insulation, energy-haemmhoraging windows and doors, and astonishingly inefficient HVAC systems and appliances – which mean uncommonly high energy bills) in the least desirable neighborhoods. Then people ask, “If you’re so depressed, why don’t you get out more and socialize?” Well, going out, in case you hadn’t noticed, costs money – even if it’s just for the gas it takes to get the car to reach the park or my American Legion post for monthly meetings – and, no, I can’t afford to attend Legion bingo night, and I can’t afford cable-or-sat-TV either so I don’t have it. Vacation? – wow, what’s that? Even a weekend getaway lies in the realm of dreams. Dental care? – sure, when I hit the PowerBall or score one of those hyper-compensated extravagantly-bonused CEO or corporate board member cushy jobs; meanwhile my teeth and ancient fillings either slowly or suddenly disintegrate, turn colors I hope you can’t imagine, or just hurt like hell until they fall out. Twenty years ago I’d never have imagined that I’d have today to live on nothing but Social Security disability – but there I’ve wound-up, and it isn’t a freebie bonanza picnic.
And for the would-be humorist commenter who said he (or she) hates boomers, I have just six words: You just wait, Mister Smarty Pants.
October 15th, 2009 at 10:56 pm
Only sellouts believe the COLA index includes food and fuel. I hate you people with the fury of a thousand suns.
October 15th, 2009 at 10:56 pm
Joe is apparently ignorant of the fact that the demographic group receiving the bribe has the highest median net worth.
October 16th, 2009 at 10:05 am
The main problem I have is that prices have actually fallen over the past year. We have experienced deflation, so every dollar of income is worth more than it was a year ago. Basically, in real terms, seniors would still be better off this coming year than they were year ago without any COLA increase. They’d actually be just as well up with a modest COLA decrease, but no-one can go there.
Meawhile, a lot of working Americans have taken pay cuts over the past year, or lost their income entirely. Shouldn’t we be giving these people the aid? Instead, when they go back to work their taxes will have to be raised to pay for a giveaway to people that are already doing relatively well. It makes no sense from a progressive perspective.
I don’t deny that there are seniors who are strapped, just like there are individuals in all age groups who are strapped. But generally speaking, the median senior has done better over the past decade than the median working age person. It is working age families that need extra help – this money should be chanelled into pell grants, unemployment benefits, and other programs that would help those who lost their jobs or have been driven into poverty by pay cuts.
October 16th, 2009 at 10:11 am
Matt mentions that Obama will have to sign the bill or veto it. Is this not a good time to bring in the line item veto that Republicans promised but did not deliver on? What is Matt’s position on the line item veto?
October 16th, 2009 at 2:48 pm
And you gathered that from the fact that I referred to the surtax being proposed?
Wow. That’s pretty impressive.
Here’s a hint, chief: if you find yourself thinking I’m not aware of something as obvious as the fact that Social Security has almost completely eliminated poverty among the elderly, YOU PROBABLY MISSING THE POINT.
October 16th, 2009 at 11:15 pm
[...] even on a one-time basis, but you can construct a partial defense of the policy (here is Matt’s semi-defense). Think of it as a helicopter drop of money, a’la Scott Sumner. If the helicopter drop [...]
October 17th, 2009 at 11:11 pm
[...] even on a one-time basis, but you can construct a partial defense of the policy (here is Matt’s semi-defense). Think of it as a helicopter drop of money, a’la Scott Sumner. If the helicopter drop [...]