In September, Esther Lenette, 91, of Montgomery County, is applauded after delivering remarks at news conference to urge Congress to pass the Social Security $250 one-time Cost-of-Living Adjustment (COLA) for 2010. Lenette gets by on $13,400 a year from Social Security.
(Roll Call/Newscom)Photos (1 of 1)
ECONOMIC SCENE: Social Security pensioners deserve a $250 ‘raise’
With no COLA adjustment this year, the Obama administration is right to give seniors a $250 boost.
By David R. Francis | November 12, 2009 edition
Congress is likely to give Social Security pensioners a raise of sorts next year.
President Obama has proposed a $250 payment per pensioner, which is expected to pass Congress, speculates Andrew Biggs, a scholar at the American Enterprise Institute in Washington. Such a one-time payment is cheaper than conjuring up a cost-of-living-adjustment (COLA), which is unjustified since prices are falling, not rising. It also makes sense politically.
Relatively more seniors vote than those under age 65. Facing an election next year, it will be difficult for members of Congress, Democrat or Republican, to vote down a modest boost to Social Security benefits.
Mr. Obama made his $250 proposal the evening before the Social Security commissioner announced there would be no COLA in 2010, the first time there’s been no rise in 35 years. If Obama had done nothing, many seniors “would hold that against his administration, even if the administration had nothing to do with it,” says Mr. Biggs. Because healthcare reform might affect Medicare, Obama’s political standing among seniors has been suffering.
It’s not only necessary politics but proper policy that Washington heeds the needs of its 39.5 million senior citizens.
The US Social Security system is less generous than those in much of Western Europe. The American system assumes most seniors will have corporate pensions and perhaps personal savings and investments to help their retirement finances. But many companies have had trouble keeping up on pensions and 401(k)-type plans for their current or retiring workers. Moreover, with so much income moving to the richest 1 percent and middle incomes stagnating in the past decade or so, many of the elderly and near elderly are facing financial difficulties.
For example: Debt levels of those in or near retirement are heading up. In 2007, 63 percent of American families headed by someone 55 or older had some level of debt, up nearly 10 percentage points from 1992, according to a new study by the Employee Benefit Research Institute in Washington. Their average debt: $70,000, more than double the 1992 level even after adjusting for inflation.
Of course, any boost in Social Security payments would be a further strain on the system. A $250 payment would cost billions, although as a one-time event it would not add to costs in subsequent years. Also, the number of seniors applying for Social Security jumped a large 19 percent in the 2009 fiscal year. Some of these applicants retired earlier than age 66, the minimum age for a full pension. So their monthly benefits are scaled down. Thus, the impact on the system’s finances is not expected to be large.
Utilizing payroll tax revenues plus money in the Social Security trust fund, the system is presently seen as able to provide full benefits until 2040. Thereafter, relying on payroll tax revenues alone, benefits would decline 25 percent.
The recession, however, is also prompting many seniors to work beyond normal retirement age. They are subject to payroll tax on some of those earnings and, says Biggs, get only 50 cents back in Social Security benefits on every dollar of tax. That should delay any revenue shortfall.
Stay cool, prospective pensioners. Forecasts decades into the future are shaky, to say the least. And if the president and Congress can come up today with an extra $250 for most of the 51 million Social Security beneficiaries, when the rules don’t call for it, imagine the political pressure to fix the system a decade from now when millions more baby boomers will have retired.
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Comments
2. Marc | 11.12.09
Robin hood at it again…. If I wanted to live in France I would move to France !!!
3. Mike | 11.12.09
Trust funds hold no money and benefits are not paid from the trust funds, according to the Congressional Research Service, look it up.
According tho the GAO the meaning of the term trust “differs significantly” from its private sector usage.
So the “trust fund” is just an accounting device.
Social Security has paid out more than it receives in taxes for 5 or 6 of the last 12 months.
4. Denis K | 11.13.09
It seems to me that until current and future social security pensioners can look for and, yes, admire sound management of the funds they entrust to their political leaders they will continue to get these political shenanigans played on them. Oh, how I would admire a leader willing to come out and say that gaining political favor is not worth the price of passing out funds that will sorely be needed to meet future obligations.
5. Louis | 11.13.09
he provides us with a long presentation why the special payout should be made, and then his last paragraph clearly states that it is a craven bribe to a definable political group which presages the cynical response of the future. Unlike the eskimos, we puts our children on the ice flow for the benefit of the aged.
6. Patti C | 11.13.09
I am Soc Sec disability, and if I spend all my money, it’s my fault. However, if Obama authorizes the payments, the national market will get a cash boost at the end of the year. That’s an issue that the naysayers never point out.
Yes, pricesa are falling, but there are other issues behind the stimulus suggestion.
The Medicare drug programs are increasing their monthly fees. That’s the only change. Yet, many drugs get cheaper all the time, like the $4 ones. So why this price gouging?
There are many sides to any issue. Entitlements get spent back in the market. Food stamps exist to help the food growers and grocers, not the recipients.
We recently paid to bomb the moon. I did not like that.
Now, I have worked in public welfare and also for the IRS. Low income famllies can get large Earned Income Credits, %3000 to $4000 a year. Even Ronald Reagan supported the work-based EIC credits. Personally, I think EIC is pure dee welfare, and issuing it through the IRS disguises it. It’s more politically acceptable that way.
I always say the average life on an EIC psyment is 10 days. The poor blow that money in 10 days. Guess what? It stimulates the economy.
If Soc Sec recipients get another $250, most of it will be spent, not saved. That stimulates the economy. Retail is in trouble. What a boost for Christmas spending!
It would be better for the recipients to dividee the $250 over 12 months, but that won’t happen.
7. James Corbin | 11.13.09
“Prices are falling, not rising . . .” Of course, this is by government statistics and we know that they tilt the table in favor of themselves. They will never report the true rate of inflation. I personally would like to know where all these falling prices are so I could take advantage of them.
Social Security was never meant to be the sole source of retirement funds, so stop the hanky waving that these poor old folks deserve a break. Everyone deserves a break but who is going to pay the massive national debt we keep raising into the stratosphere? When interest rates have to rise because the dollar is dropping in value, where is to the help to seniors in that? Virtually everything is imported and when the dollar drops, the prices of imported goods rise. Prepare to have your living standards dropped with a resounding thud because our illustrious potentates inside the Beltway can’t seem to rein in their free spending ways or say a resounding NO to every Johnny-come-lately with their hand out.
8. ann powell | 11.18.09
Seniors have to pay taxes on social security so alot of the money is returned to the government. Congress owes social security over a trillion dollars. if they hadn’t borrowed from it, it would pay its own way with interest. they try to blame the victim. also, the “law” is the law they make so congress can change the law and give social security a 1 percent raise. also, medicare will go up in january 2010 so that is more money taken from social security so with the taxes and medicare, people will receive less money next year, not the same.
9. marilynarlene | 11.19.09
I am a woman who mainly lives on social security for about 861 dollars a month. I am unable to survive on this amount…I was deeply waiting for the raise in social security….now I have to just lower my heating bill to 58 degrees. and use one lamp…the rest of my money goes to health, medication not paid by my insurance co. I am unable to go to work for my health is not what would me be able to do so….Now. how can an administration when wanting votes for the election, saying the would help the elderly, take away the one income they have coming in. where are all the promises.
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1. Illieana Burton | 11.12.09
I thought they were against socialism. Now they want another socialist handout.